UNITED STATES
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 (date of earliest event reported) October 14, 1997
Berkshire Realty Company, Inc.
Delaware 1-10660 04-3086485
(State or other jurisdiction of (Commission (IRS employer
incorporation or organization) file number) identification no.)
470 Atlantic Avenue, Boston, Massachusetts 02110
(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code (617) 423-2233
<PAGE>
Item 1. Changes in Control of Registrant
On September 25, 1997, Berkshire Realty Company, Inc. (the "Company")
issued 2,737,000 shares of its Series 1997-A Convertible Preferred Stock (the
"Series 1997-A Preferred") in a private placement to Westbrook Real Estate Fund
II, L.P. ("Westbrook") and Morgan Stanley Asset Management resulting in gross
proceeds of approximately $68.4 million (the "Westbrook Transaction"). The
Series 1997-A Preferred will pay a preferred dividend of 9% based on the
purchase price of $25 per share of Series 1997-A Preferred and are convertible
in the aggregate into 5,643,420 shares of Common Stock. Holders of the Series
1997-A Preferred are entitled to vote on an as converted basis, together with
the holders of Common Stock, as one class, on all matters on which the holders
of Common Stock are entitled to vote. Further, the holders of the Series 1997-A
Preferred are entitled to elect one director to the Board of Directors of the
Company. Paul D. Kazilionis, a managing principal and co-founder of Westbrook
Real Estate Partners, L.L.C, the general partner of Westbrook, has been elected
to the Company's Board of Directors by direction of the holders of the Series
1997-A Preferred.
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On September 26, 1997, the Company acquired four multifamily apartment
communities from Citibank for an all-cash purchase price of approximately $60.3
million (the "Citibank Portfolio"). The Citibank Portfolio consists of 1,269
apartment units located within the greater Dallas/Fort Worth, Texas area. The
Company used a significant portion of the proceeds from the Westbrook
Transaction to fund the acquisition. The four properties consist of garden-style
apartment complexes ranging from 232 units to 405 units. Three of the apartment
communities were built in 1984. The fourth property was built in 1996. The
Company is not related to any of the parties involved in this transaction.
The Company has entered into a definitive agreement with the Questar
Companies ("Questar") to acquire 18 existing apartment communities containing
approximately 3,700 apartment units located in the greater Baltimore area from a
like number of affiliated partnerships and four apartment communities under
development from Questar Builders, Inc. ("Questar Builders"), a company owned by
Stephen M. Gorn but which will remain unaffiliated with the Company following
the acquisition. The Company will also acquire the Questar property management
companies which manage the properties to be acquired as well as certain other
third-party properties and enter into a Development Acquisition Agreement with
Questar Builders, giving the Company the exclusive right to acquire all
apartment projects developed by Questar Builders which meet the Company's
acquisition and development criteria (the foregoing transactions with Questar
collectively, the "Questar Transaction"). Stephen M. Gorn, the President and
Chief Executive Officer of Questar, will become President of the Mid-Atlantic
Division of the Company. The aggregate consideration for the 18 Questar
properties, property management companies and the acquisition of one development
property to be acquired in late 1997 is approximately $181.5 million, comprised
of $20.6 million in operating units of limited partnership of BRI OP Limited
Partnership ("Units"), $4.7 million in common stock of the Company ("Common
Stock"), assumption of $131.7 million in debt and $24.5 million of cash to be
funded by proceeds from the proposed public offering of common stock (the
"Offering"). The Company is not related to any of the parties involved in this
transaction.
Each of the 18 apartment communities to be acquired from Questar is
presently owned by a single purpose entity (each a "Questar Partnership"). The
holders of interests in the Questar Partnerships (the "Questar Partners") shall
receive Units. The number of Units to be issued to the Questar Partners shall be
determined at the closing of the Questar Transaction based on a formula whereby
a predetermined equity value of an applicable property is divided by the average
of the closing price per share of the Common Stock for the period from August 1,
1997 through the date of closing of the Offering; provided that, in any event,
the amount shall not be less than $10.50 and not greater than $11.75 (subject to
certain adjustments at the date of closing). The Units issuable to certain
members of Stephen Gorn's family shall be restricted as to distributions for a
one-year period from the date of issue. The closing of the Questar Transaction
is contingent on the completion of the Offering. Certain of the contribution
agreements limit the ability of the Company to sell (subject to like-kind
exchanges), refinance or repay existing mortgages (subject to refinancing on
terms which would not affect the tax basis of such Unit recipient(s)) on the
applicable properties for a period of seven years.
As part of the Questar Transaction, BRI OP Limited Partnership, (the
"Operating Partnership") will make a five-year loan to an entity owned and
controlled by Messrs. Stephen Gorn, Morton Gorn and John Colvin (the "Questar
Borrowers"), in the principal amount of $7.5 million or such lesser amount as
the Questar Borrowers may elect at closing (the "Questar Loan"). The interest
rate shall be determined at the closing by mutual agreement and shall not be
less than prevailing market rates. The Questar Loan shall be secured by the
pledge of Units to be received by the Questar Borrowers and with respect to
Common Stock received by Stephen M. Gorn, a pledge of such stock. Further, the
Operating Partnership is under contract to acquire four apartment development
projects in the greater Baltimore area which are being developed by Questar
Builders or an affiliated entity.
The Company will acquire the management companies owned by the Gorn family
which manage the 18 apartment communities to be acquired as well as certain
third-party properties for $4.7 million payable in shares of Common Stock based
on the average closing price of such Common Stock for the period August 1, 1997
through the closing of this Offering. The Company expects to enter into separate
five-year employment agreements with each of Stephen M. Gorn and John B. Colvin
and a consulting agreement with Morton Gorn to be entered into at closing. At
closing, the Company expects to execute a five-year lease from the Gorn family
owners, Messrs. Morton Gorn, Stephen Gorn and Colvin, for the approximately
6,900 square feet of space currently occupied by the management companies for a
gross rent of $140,240 per year.
At closing, Questar Builders and the Operating Partnership expect to enter
into a Development Acquisition Agreement pursuant to which, for a period of five
years, Questar Builders shall grant to the Operating Partnership an exclusive
right to acquire all apartment projects developed by Questar Builders in the
Mid-Atlantic Region which meet the Company's acquisition and development
criteria.
<PAGE>
Item 5. Other Events
On October 15, 1997, the Company filed a prospectus supplement to its Form
S-3 Registration Statement (No. 333-32565) with the Securities and Exchange
Commission pursuant to which it proposes to offer 10,000,000 shares of common
stock.
Press release dated September 22, 1997:
Berkshire Realty Company, Inc. (NYSE-BRI)
NEWS RELEASE
================================================================================
BERKSHIRE REALTY TO REVISE INTERIM FINANCIAL STATEMENTS WITH
NO IMPACT TO FUNDS FROM OPERATIONS, DIVIDENDS OR CASH FLOWS
Boston, MA - September 22, 1997 - Berkshire Realty Company, Inc. (NYSE;BRI),
will revise certain interim financial statements for the first six months of
1997 related to the accounting treatment for the issuance of additional
Operating Partnership (OP) Units in conjunction with its March 1, 1996
acquisition of the Company's advisor. The changes will not impact Funds from
Operations (the REIT industry's reporting standard), dividends, liquidity or
cash flows.
The revisions are the result of recent discussions between the Company and
the staff of the Securities and Exchange Commission, whereby it has been
determined that the assets arising from the acquisitions of the Company's
advisor and property management company are more appropiately reflected as
intangible assets associated with the acquisition of an assembled workforce
rather than goodwill associated with the acquisition of a business. Such
intangible assets will be amortized over a short time frame, generally three
years. A change in the amortization period will occur prospectively beginning in
the third quarter of 1997.
As a result of the change in the character of the assets acquired, the
Company concluded that the issuance in the first quarter of 1997 of the
additional 109,091 OP Units for the advisor, representing value of $1.2 million,
should be recorded as a non-cash expense rather than an increase in goodwill.
The Company, in revising its financial statements for the periods ended June 30,
1997, will reflect an additional non-cash expense of $1.2 million which will
decrease net income by approximately $962,000 or $.04 per share. There is no
change in Funds from Operations as reported by the Company.
Berkshire Realty Company, Inc. is a self-administered and self-managed
multifamily equity real estate investment trust. The Company's portfolio
consists of 41 apartment communities with 13,509 apartment units (located
primarily in Texas, the Southeast, Florida and the mid-Atlantic), and a small
remaining retail portfolio.
<PAGE>
Berkshire Realty Company, Inc.
Item 7. Financial Statements and Exhibits
a) Financial Statements Under Rule 3-14 of Regulation S-X
Citibank Portfolio combined statement of revenue over certain operating
expenses for the year ended December 31, 1996 and for the six months ended June
30, 1997 (Unaudited)
Questar Portfolio combined statement of revenue over certain operating
expenses for the year ended December 31, 1996 and for the six months ended June
30, 1997 (Unaudited)
Merit Portfolio combined statement of revenue over certain operating expenses
for the year ended December 31, 1995 and for the period January 1, 1996 through
dates of acquisitions (Unaudited)
Westchester West Apartments statement of revenue over certain operating
expenses for the year ended December 31, 1996
Sunchase/Polos West Apartments combined statement of revenue over certain
operating expenses for the year ended December 31, 1996 and for the period
January 1, 1997 to May 12, 1997 (Unaudited)
Emerald Portfolio combined statement of revenue over certain operating
expenses for the year ended December 31, 1996 and for the six months ended
June 30, 1997 (Unaudited)
b) Pro Forma Financial Statements
Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997
(Unaudited)
Notes to Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1997
(Unaudited)
Pro Forma Condensed Consolidating Statement of Operations for the Year Ended
December 31, 1996 (Unaudited)
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended December 31, 1996 (Unaudited)
Pro Forma Condensed Consolidating Statement of Operations for the Period
Ended June 30, 1997 (Unaudited)
Notes to Pro Forma Condensed Consolidating Statement of Operations for the
Year Ended June 30, 1997 (Unaudited)
c) Exhibits
Exhibit
10. The Questar Transaction
10.1 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Third Rolling Road
Associates Limited Partnership (Third Rolling Road/Coventry) and
Questar Investment Corporation dated as of August 25, 1997
10.2 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Williston Associates and
Questar Investment Corporation dated as of August 25, 1997
10.3 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Ridgeview Chase
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.4 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Kingswood Common
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.5 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Rolling Road
Associates (Kingswood Common I) and Questar Investment
Corporation dated as of August 25, 1997
10.6 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Frederick Road Associates
(Jamestown) and Questar Investment Corporation dated as of August
25, 1997
10.7 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Gorn Properties, Inc.
(Hilltop) and Questar Investment Corporation dated as of August
25, 1997
10.8 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Rolling Road Associates
(Heraldry Square) and Questar Investment Corporation dated as of
August 25, 1997
10.9 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Tremaine Associates
Limited Partnership (Henley/Rolling Wind) and Questar Investment
Corporation dated as of August 25, 1997
10.10 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Plainfield Associates
(Hazelcrest) and Questar Investment Corporation dated as of August
25, 1997
10.11 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Fourth Rolling Road
Associates Limited Partnership (Fourth Rolling Road/Courtleigh),
19 West Lexington Street Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.12 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Purnell Associates
(Fairway Ridge) and Questar Investment Corporation dated as of
August 25, 1997
10.13 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Stratton Associates
Limited Partnership, Fairbrook Associates Limited Partnership
(Fairbrook/Stratton Meadows) and Questar Investment Corporation
dated as of August 25, 1997
10.14 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Diamond Ridge Associates
Limited Partnership and Questar Investment Corporation dated as
of August 25, 1997
10.15 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Citadel Associates
Limited Partnership, Calvert's Walk Associates Limited
Partnership and Questar Investment Corporation dated as of August
25, 1997
10.16 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Caliber Associates
Limited Partnership, Arborview Associates Limited Partnership and
Questar Investment Corporation dated as of August 25, 1997
10.17 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Estates II Funding
Corporation, The Estates Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.18 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Warren Park Associates and
Questar Investment Corporation dated as of August 25, 1997
10.19 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Property Management Corporation and its Shareholders
dated as of August 25, 1997
10.20 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Management Company and its Shareholders dated as of
August 25, 1997
10.21 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Kingswood Management Company and its Shareholders dated as of
August 25, 1997
10.22 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Vector Property Management Company and its Shareholders dated
as of August 25, 1997
10.23 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Gorn Management Company and its Shareholders dated as of
August 25, 1997
10.24 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Arborview Management Company and its Shareholders dated as of
August 25, 1997
*10.25 Form of Development Acquisition Agreement among Questar
Properties, Inc. Stephen M. Gorn, John B. Colvin and BRI OP
Limited Partnership
*10.26 Development Contribution Agreement (Avalon, 1,3,4) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.27 Development Contribution Agreement (Liriope) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
*10.28 Development Contribution Agreement (Granite Run) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.29 Development Contribution Agreement (Avalon 2) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
10.30 Form of Registration Rights Agreement among Berkshire Realty
Company, Inc. and certain partners of BRI OP Limited Partnership
*10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C.
dated as of August 25, 1997
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
- ----------------
*To be filed by amendment.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BERKSHIRE REALTY COMPANY INC.
/s/ Marianne Pritchard
-----------------------------
Marianne Pritchard
Senior Vice President and
Chief Financial Officer
Date: October 14, 1997
<PAGE>
Citibank Portfolio
Combined Statement of Revenue
Over Certain Operating Expenses for the Year Ended
December 31, 1996
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
CREEF Sweetwater Ranch, Inc.,
CREEF H. Brook Corp.,
CREEF H Ridge Corp.
The Partners DMC Huntington Lakes Apartments, L.P.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Citibank Portfolio (the "Properties") for the year
ended December 31, 1996. This financial statement is the responsibility of the
Properties' management. Our responsibility is to express an opinion on this
combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue and certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses, described in note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenue and expenses.
In our opinion, the combined statement referred to above presents fairly, in all
material respects, the revenue over certain operating expenses (as described in
note 2) of the Citibank Portfolio for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
F-2
<PAGE>
CITIBANK PORTFOLIO
Combined Statement of Revenue Over
Certain Operating Expenses
(dollars in thousands)
For the For the
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
----------------- -------------
(Unaudited)
Revenue:
Rental $7,860 $4,518
Other 283 188
------ -----
8,143 4,706
------ -----
Certain operating expenses (note 2):
Repairs, maintenance, and
contract services 751 404
General and administrative 891 406
Real estate taxes 1,071 625
Utilities 579 255
Insurance 172 95
----- -----
3,464 1,785
----- -----
Excess of revenue over certain
operating expenses $4,679 $2,921
====== ======
The accompanying notes are an integral part of this combined financial
statement.
F-3
<PAGE>
CITIBANK PORTFOLIO
Notes to Combined Statement of Revenue
over Certain Operating Expenses
(1) Description of Properties
The accompanying financial statement includes the combined operations of
four multi-family properties (collectively, the "Properties" or "Citibank
Portfolio") which were acquired on September 26, 1997 by Berkshire Realty
Company, Inc. ("Berkshire") from an unrelated third-party. Berkshire
acquired each of the following properties:
Property Name Location Number of Units
- ------------- -------- ---------------
Huntington Lakes Apartment Dallas, TX 249
Huntington Brook Apartments Dallas, TX 320
Huntington Ridge Apartments Irving, TX 232
Sweetwater Ranch Apartments Dallas, TX 312
-----
1,113
=====
(2) Basis of Presentation
The combined statement has been prepared on the accrual method of
accounting. The Properties were previously owned by Citibank, an unrelated
party.
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
Properties after acquisition such as amortization, depreciation, property
management fees, corporate expenses and other costs not directly related to
the future operations of the Properties.
(3) Significant Accounting Policies
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through June 30, 1997 is unaudited. In the
opinion of management, all adjustments consisting only of normal recurring
adjustments, considered necessary for a fair presentation for such period
has been made. Results for interim periods should not be considered or
indicative for results for a full year. Footnote disclosure normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted herein with
respect to the interim financial data. The interim information herein should
be read in conjunction with the annual financial information presented
herein.
F-4
<PAGE>
QUESTAR PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Questar Portfolio (the "Properties") for the year
ended December 31, 1996. This statement is the responsibility of the Properties'
management. Our responsibility is to express an opinion on this combined
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenues and expenses.
In our opinion the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Questar Portfolio for the year ended December
31, 1996 in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
F-6
<PAGE>
QUESTAR PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
<TABLE>
<CAPTION>
For the For the
Year Ended Six Months
December 31, Ended
1996 June 30, 1997
------------ -------------
(Unaudited)
<S> <C> <C>
Revenue:
Rental $ 25,311 $ 12,689
Other 1,228 691
--------- ---------
26,539 13,380
--------- ---------
Certain operating expenses (Note 2):
Repairs and maintenance 4,513 2,459
Real estate taxes and insurance 3,130 1,645
Utilities 1,032 563
General and administrative 3,430 1,865
Interest 10,323 5,180
--------- ---------
22,428 11,712
--------- ---------
Excess of revenue over certain operating expenses $ 4,111 $ 1,668
========= =========
</TABLE>
The accompanying notes are an integral part of the
combined financial statements.
F-7
<PAGE>
QUESTAR PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER OPERATING EXPENSES
1. Description of Properties:
-------------------------
The accompanying combined statement of revenue over certain operating
expenses (the "Combined Statement") includes the combined operations of 18
multi-family apartment communities and the related property management
companies which manage the apartment communities (collectively the
"Properties" or "Questar Portfolio") which are to be acquired by Berkshire
Realty Company, Inc. ("Berkshire") from the Questar Group, an unrelated third
party. The apartment communities to be acquired are summarized as follows:
<TABLE>
<CAPTION>
Number of
Property Name Location Units
------------- -------- ---------
<S> <C> <C>
Arborview Apartments Belcamp, MD 288
Calvert's Walk Apartments Belair, MD 276
Diamond Ridge Apartments Baltimore, MD 92
The Estates Apartments Baltimore, MD 208
Stratton Meadows Apartments Baltimore, MD 268
Jamestowne Apartments Baltimore, MD 335
Courtleigh Apartments Baltimore, MD 280
Rolling Wind Apartments Baltimore, MD 280
Hilltop Apartments Baltimore, MD 50
Hazelcrest Apartments Baltimore, MD 48
Fairway Ridge Apartments Baltimore, MD 274
Ridgeview Chase Apartments Westminster, MD 204
Heraldry Square Baltimore, MD 270
Kingswood Common II Baltimore, MD 203
Kingswood Common I Baltimore, MD 203
Coventry Apartments Baltimore, MD 122
Williston Apartments Baltimore, MD 98
Warren Park Apartments Baltimore, MD 200
------
3,699
======
</TABLE>
2. Basis of Presentation:
---------------------
The Combined Statement has been prepared on the accrual basis. The Properties
were substantially owned by investors of the Questar Group and were under
common control. All significant intercompany transactions including
management fee revenue and expense have been eliminated in combination.
Continued
F-8
<PAGE>
QUESTAR PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties' after acquisition such as amortization, depreciation, certain
interest expense (Note 4), corporate expenses and certain other costs not
directly related to the future operations of the Properties.
3. Significant Accounting Policies:
-------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through June 30, 1997 is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of
such combined statement have been included. The results of operations for the
period are not necessarily indicative of the Properties' future results of
operations.
Risks and Uncertainties
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. Debt Assumption:
---------------
Debt to be Outstanding Subsequent to Acquisition
In connection with the acquisition Berkshire will assume certain mortgage
notes encumbering certain of the Properties of approximately $132,079 at
December 31, 1996. Berkshire's assumption of these mortgage notes does not
provide for any modification to the original terms; therefore, interest
expense incurred prior to Berkshire's assumption of the respective mortgage
Continued
F-9
<PAGE>
QUESTAR PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
notes is representative of future interest expense. Accordingly, interest
expense of $10,323 for 1996 and $4,712 for the six months ended June 30, 1997
(unaudited) is recognized in the accompanying Combined Statement. The
mortgage notes are generally due in monthly installments and mature at
various dates through 2035. Interest rates on the notes vary from 6.37% to
9.50%. Certain mortgage notes payable are subject to prepayment penalties of
varying amounts in the event of an early principal repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $10,840
1998 1,019
1999 1,095
2000 1,177
2001 1,268
Debt to be Repaid or Modified
Berkshire, as part of the acquisition of certain properties, will pay off
certain mortgage notes encumbering certain of the Properties with a balance
of approximately $15,708 at December 31, 1996. Therefore, on a continuing
basis, interest expense will not be incurred related to these mortgage notes.
Accordingly, interest expense related to these mortgage notes is not
recognized in the accompanying Combined Statement.
F-10
<PAGE>
MERIT PORTFOLIO
STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
F-11
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of Berkshire Realty Company, Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Merit Portfolio (the "Properties") for the year ended
December 31, 1995. This financial statement is the responsibility of the
Properties' management. Our responsibility is to express an opinion on this
combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue and certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses, described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenue and expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Merit Portfolio for the year ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 14, 1996
F-12
<PAGE>
MERIT PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the period
For the January 1, 1996
Year ended through dates
December 31, of acquisitions
1995 (Note 1)
------------ ---------------
(unaudited)
Revenue:
Rental $ 7,536 $ 4,359
Other 303 5
--------- ---------
7,839 4,364
Certain Operating Expenses (Note 2):
Repairs and maintenance 1,573 711
General and administrative 735 375
Interest 623 515
Real estate taxes and insurance 887 575
Utilities 782 409
--------- ---------
4,600 2,585
--------- ---------
Excess of Revenue over Certain
Operating Expenses $ 3,239 $ 1,779
========= =========
The accompanying notes are an integral part of the combined financial statement.
F-13
<PAGE>
MERIT PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Properties:
--------------------------
The accompanying combined statement of revenue over certain operating
expenses ("the Combined Statement") includes the combined operations of
five multi-family properties (collectively, the "Properties" or "Merit
Portfolio") which were acquired by Berkshire Realty Company, Inc.
("Berkshire") from an unrelated third-party. The apartment communities
which were acquired are summarized as follows:
Property Name Date Acquired Location Number of Units
- ------------- ------------- -------- ---------------
Benchmark 6/27/96 Irving, TX 250
Golf Side 6/6/96 Ft. Worth, TX 402
Pleasant Woods 6/6/96 Dallas, TX 208
Prescott Place II 11/12/96 Mesquite, TX 336
Providence 6/27/96 Dallas, TX 244
---
1,440
=====
2. Basis of Presentation:
----------------------
The Combined Statement has been prepared on the accrual basis.
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties after acquisition such as amortization, depreciation, asset and
property management fees, corporate expenses and other costs not directly
related to the future operations of the Properties.
Continued
F-14
<PAGE>
MERIT PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE
OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
3. Significant Accounting Policies:
-------------------------------
Rental Revenue
--------------
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
-----------------------------
The combined statement of revenue over certain operating expenses for the
period from January 1, 1996 through dates of acquisition is unaudited. In the
opinion of management all adjustments necessary for a fair presentation of
such combined statement have been included. The results of operations for the
period are not necessarily indicative of the Properties' future results of
operations.
Risks and Uncertainties
-----------------------
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
4. Debt Assumption:
---------------
In connection with the acquisition, Berkshire will assume certain mortgage
notes encumbering the Merit Portfolio of approximately $12,106. The
assumption of these mortgage notes does not provide for any modification to
the original terms, therefore, interest expense incurred prior to Berkshire's
assumption is representative of future interest expense. Accordingly,
interest expense of $623 for 1995 and $515 for the period January 1, 1996
through dates of acquisition (unaudited) is recognized in the accompanying
Combined Statement. The mortgage notes are generally due in monthly
installments and mature at various dates through 2005. Interest rates on the
notes vary from 5.775% to 7.695%. Certain mortgage notes payable are subject
to repayment penalties of varying amounts in the event of an early principal
repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1996 $299
1997 326
1998 331
1999 336
2000 342
F-15
<PAGE>
WESTCHESTER WEST APARTMENTS
STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying statement of revenue over certain operating
expenses of Westchester West Apartments (the "Property") for the year ended
December 31, 1996. This statement is the responsibility of the Property's
management. Our responsibility is to express an opinion on this statement based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenue over certain operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue over certain operating expenses was
prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Property's
revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue over certain operating expenses (as described
in Note 2) of Westchester West Apartments for the year ended December 31, 1996
in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 3, 1997
F-17
<PAGE>
WESTCHESTER WEST APARTMENTS
STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
Year Ended
December 31,
1996
------------
Revenue:
Rental $ 2,586
Other 65
-------
2,651
-------
Certain operating expenses:
General and administrative 123
Repairs and maintenance 576
Real estate taxes and insurance 217
Utilities 354
Interest 944
-------
2,214
-------
Excess of revenue over certain operating expenses $ 437
=======
The accompanying notes are an integral part of the financial statement.
F-18
<PAGE>
WESTCHESTER WEST APARTMENTS
NOTES TO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Property:
------------------------
The accompanying statement of revenue over certain operating expenses (the
"Statement") includes the operations of a 345-unit apartment community (the
"Property") which was acquired on January 1, 1997 by Berkshire Realty
Company, Inc. ("Berkshire") from an unrelated third party. The Property is
located in Silver Spring, Maryland.
2. Basis of Presentation:
----------------------
The Statement has been prepared on the accrual method of accounting.
The Statement has been prepared in accordance with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission for real estate properties
acquired or to be acquired. Accordingly, this statement excludes certain
historical expenses not comparable to the operations of the property after
acquisition such as amortization, depreciation, property management fees,
certain interest costs, corporate expenses and certain other costs not
directly related to the future operations of the Property.
3. Significant Accounting Policies:
--------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Risks and Uncertainties
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. Debt Assumption:
----------------
In connection with the acquisition, Berkshire will assume certain mortgage
notes encumbering the Property of approximately $11,360 at December 31,
1996. The assumption of these mortgage notes does not provide for any
modification to the original terms. Therefore, interest expense incurred
prior to Berkshire's assumption is representative of future interest
expense. Accordingly, interest expense of $944 is recognized in the
accompanying statement. The mortgage notes are
Continued
F-19
<PAGE>
WESTCHESTER WEST APARTMENTS
NOTES TO STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
being amortized over a term of 25 years and bear interest at 8.25%. A
balloon payment of $10,515 is due on February 1, 2001. The mortgage notes
payable are subject to prepayment penalties in the event of early principal
repayment.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $ 186
1998 202
1999 219
2000 238
2001 10,515
F-20
<PAGE>
SUNCHASE/POLOS WEST APARTMENTS
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-21
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the SunChase Apartments and Polos West Apartments (the
"Properties") for the year ended December 31, 1996. This statement is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this combined statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenues and expenses.
In our opinion the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Sunchase Apartments and Polos West Apartments
for the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
September 25, 1997
F-22
<PAGE>
SUNCHASE/POLOS WEST APARTMENTS
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
<TABLE>
<CAPTION>
For the For the period
Year Ended January 1,
December 31, 1997 to
1996 May 12, 1997
------------ --------------
(Unaudited)
<S> <C> <C>
Revenue:
Rental $ 2,539 $ 974
------- -----
2,539 974
------- -----
Certain operating expenses:
Repairs and maintenance 170 65
Real estate taxes and insurance 446 164
Utilities 303 118
General and administrative 435 157
Interest 121 36
------- -----
1,475 540
------- -----
Excess of revenue over certain operating expenses $ 1,064 $ 434
======= =====
</TABLE>
The accompanying notes are an integral part of the
combined financial statement.
F-23
<PAGE>
SUNCHASE/POLOS WEST APARTMENTS
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
1. Description of Properties:
--------------------------
The accompanying combined statement of revenue over certain operating
expenses (the "Combined Statement") includes the combined operations of
SunChase Apartments and Polos West Apartments (collectively the
"Properties") which were acquired by Berkshire Realty Company, Inc.
("Berkshire"), from an unrelated third party on May 12, 1997. The apartment
communities are summarized as follows:
Property Name Location Number of Units
------------- -------- ---------------
SunChase Bradenton, FL 168
Polos West Winter Garden, FL 200
---
368
===
2. Basis of Presentation:
----------------------
The Combined Statement has been prepared on an accrual basis.
The Combined Statement been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties' after acquisition such as amortization, depreciation, certain
interest expense (Note 4), corporate expenses and certain other costs not
directly related to the future operations of the Properties.
3. Significant Accounting Policies:
--------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Continued
F-24
<PAGE>
SUNCHASE/POLOS WEST APARTMENTS
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
(dollars in thousands)
Unaudited Combined Statement
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through May 12, 1997 (date of acquisition) is
unaudited. In the opinion of management, all adjustments necessary for a
fair presentation of such combined statement have been included. The
results of operations for the period are not necessarily indicative of the
Properties' future results of operations.
Risks and Uncertainties
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
4. Debt Assumption:
----------------
In connection with the acquisition, Berkshire will assume a mortgage note
encumbering Polos West Apartments of approximately $5,719. The assumption
of this mortgage note does not provide for any modification to the original
terms, therefore, interest expense incurred prior to Berkshire's assumption
is representative of future interest expense. Accordingly, interest expense
of $435 for 1996 and $157 for the period January 1, 1997 to May 12, 1997
(unaudited), is included in the accompanying combined statement. The
mortgage note, which has an interest rate of 7.45%, is due in monthly
installments and matures in December 2003.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $144
1998 155
1999 167
2000 180
2001 193
F-25
<PAGE>
EMERALD PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
F-26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Berkshire Realty Co., Inc.:
We have audited the accompanying combined statement of revenue over certain
operating expenses of the Emerald Portfolio (the "Properties") for the year
ended December 31, 1996. This statement is the responsibility of the Properties'
management. Our responsibility is to express an opinion on this combined
statement based on our audit.
We conducted an audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenue over certain operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
The accompanying combined statement of revenue over certain operating expenses
was prepared for the purpose of complying with Rule 3-14 of the Securities and
Exchange Commission, and excludes certain expenses described in Note 2, and
therefore is not intended to be a complete presentation of the Properties'
revenues and expenses.
In our opinion the combined financial statement referred to above presents
fairly, in all material respects, the revenue over certain operating expenses
(as described in Note 2) of the Emerald Portfolio for the year ended December
31, 1996 in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 9, 1997
F-27
<PAGE>
EMERALD PORTFOLIO
COMBINED STATEMENT OF REVENUE OVER
CERTAIN OPERATING EXPENSES
(dollars in thousands)
For the For the
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
----------------- -------------
(Unaudited)
Revenue:
Rental $4,755 $2,411
Other 22 6
------ ------
4,777 2,417
------ ------
Certain operating expenses (Note 2):
Repairs and maintenance 841 497
Real estate taxes and insurance 356 151
Utilities 304 171
General and administrative 542 298
Interest 1,447 712
----- ------
3,490 1,829
----- ------
Excess of revenue over certain
operating expenses $1,287 $ 588
====== ======
The accompanying notes are an integral part of the
combined financial statements.
F-28
<PAGE>
EMERALD PORTFOLIO
NOTES TO COMBINED STATEMENTS OF REVENUE OVER CERTAIN OPERATING EXPENSES
1. Description of Properties:
--------------------------
The accompanying combined statement of revenue over certain operating
expenses (the "Combined Statement") includes the combined operations of
four multi-family apartment communities (collectively the "Properties" or
"Emerald Portfolio") which were acquired by Berkshire Realty Company, Inc.
("Berkshire") from an unrelated third party. The apartment communities
which were acquired are summarized as follows:
<TABLE>
<CAPTION>
Number of
Property Name Date of Acquisition Location Units
- ------------- ------------------- -------- -----
<S> <C> <C> <C>
The Cove July 23, 1997 Glen Burnie, Maryland 181
Lighthouse July 23, 1997 Glen Burnie, Maryland 120
Berkshires by the Chesapeake July 23, 1997 Millersville, Maryland 144
Lamplighter's Ridge Apartments September 23, 1997 Glen Burnie, Maryland 168
---
613
===
</TABLE>
2. Basis of Presentation:
----------------------
The Combined Statement has been prepared on an accrual basis.
The Combined Statement has been prepared in accordance with Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission for real estate
properties acquired or to be acquired. Accordingly, this statement excludes
certain historical expenses not comparable to the operations of the
properties' after acquisition such as amortization, depreciation, property
management fees, corporate expenses and certain other costs not directly
related to the future operations of the Properties.
3. Significant Accounting Policies:
--------------------------------
Rental Revenue
Rental income attributable to residential rental agreements is recorded on
the accrual method as earned. Apartment units are generally rented under
lease agreements with terms of one year or less.
Unaudited Interim Information
The combined statement of revenue over certain operating expenses for the
period from January 1, 1997 through June 30, 1997 is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of
such combined statement have been included. The results of
Continued
F-29
<PAGE>
EMERALD PORTFOLIO
NOTES TO COMBINED STATEMENT OF REVENUE OVER CERTAIN OPERATING EXPENSES
operations for the period are not necessarily indicative of the Properties'
future results of operations.
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
4. Debt Assumption:
----------------
In connection with the acquisition, Berkshire will assume mortgage notes
encumbering the Properties of approximately $15,365 at December 31, 1996.
Berkshire's assumption of these mortgage notes does not provide for any
modification to the original terms; therefore, interest expense incurred
prior to Berkshire's assumption of the respective mortgage notes is
representative of future interest expense. Accordingly, interest expense of
$1,447 for 1996 and $712 for the six months ended June 30, 1997 (unaudited)
is recognized in the accompanying Combined Statement. The mortgage notes
are generally due in monthly installments and mature at various dates
through 2023. Interest rates on the notes are at 7.5%.
Principal payments due on the mortgage notes during the next five years are
approximately as follows:
1997 $264
1998 284
1999 307
2000 331
2001 357
F-30
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following unaudited pro forma Condensed Consolidating Balance Sheet of
Berkshire Realty Company, Inc. (the "Company") as of June 30, 1997, is presented
as if all significant activities related to certain transactions had occurred as
of June 30, 1997. These transactions include the following:
- sale of Crossroads
- acquisition of the Emerald portfolio
- issuance of 2,737,000 shares of the Company's Series 1997-A Convertible
Preferred Stock
- acquisition of the Citibank portfolio
- acquisition of Summer Place
- proposed acquisition of the Questar portfolio
- proposed common stock offering
The pro forma condensed Consolidating Statements of Operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 are presented as
if all significant activities related to certain transactions had occurred as of
January 1, 1996. The transactions include the following:
- all dispositions of all real estate properties which occurred between
January 1, 1996 and June 30, 1997 as well as the sale of Crossroads
- acquisition of assets from the Advisor Transaction which occurred on
March 1, 1996
- acquisition of assets from the Property Manager Transaction which
occurred on February 28, 1997
- all acquisitions of all real estate properties which
occurred between January 1, 1996 and June 30, 1997
- acquisition of the Emerald portfolio
- issuance of 2,737,000 shares of the Company's Series 1997-A Convertible
Preferred Stock
- acquisition of the Citibank portfolio
- acquisition of Summer Place
- proposed acquisition of the Questar portfolio
The unaudited pro forma Condensed Consolidating Balance Sheet and Statement
of Operations should be read in conjunction with the historical financial
statements of the Company. In management's opinion, all adjustments necessary to
reflect the above discussed transactions have been made. The unaudited pro forma
Condensed Consolidating Balance Sheet and Statement of Operations are not
necessarily indicative of what actual results of operations of the Company would
have been for the periods presented, nor does it purport to represent the
Company's results of operations for future periods.
Property acquisitions included in the pro forma financial statements:
<TABLE>
<CAPTION>
Apartment Date of
Property Name Seller Location Units Acquisition
- ------------- ------ -------- ----- -----------
<S> <C> <C> <C> <C>
1996 Acquisitions
Berkshire Towers Turtle Creek Associates L.P. Silver Spring, MD 1,119 5/14/96
Merit Portfolio Merit Texas Partners Dallas, TX area 1,480 6/06/96,
6/27/96,11/12/96
Prescott Place Prescott Place Associates L.P. Mesquite, TX 318 6/06/96
Hunters Glen Springfield Properties L.P. Plano, TX 276 7/31/96
</TABLE>
Continued
F-31
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Property acquisitions included in the pro forma financial statements
(continued):
<TABLE>
<CAPTION>
Apartment Date of
Property Name Seller Location Units Acquisition
- ------------- ------ -------- ----- -----------
<S> <C> <C> <C> <C>
1997 Acquisitions
Westchester West Westchester West L.P. Silver Spring, MD 345 1/01/97
Polos West Winter Garden, FL 200 5/13/97
and SunChase Colonial Properties Trust Bradenton, FL 168 5/13/97
Emerald Portfolio Emerald Partners Glen Burnie and
Millersville, MD 613 7/29/97
Citibank Portfolio Citibank Dallas and
Irving, TX 1,269 9/26/97
Summer Place Mountainside Summer Place L.P. Addison, TX 212 9/29/97
1997 Pending Acquisition
Questar Portfolio Questar Partners Baltimore, MD 3,699 Pending
</TABLE>
Property dispositions included in the pro forma financial statements:
<TABLE>
<CAPTION>
Apartment Date of
Property Name Buyer Location Units Disposition
- ------------- ----- -------- ----- -----------
<S> <C> <C> <C> <C>
1996 Dispositions
Pointe West Invesco Realty Advisors Des Moines, IA 223 9/12/96
Greentree Plaza Mainardi Management Co. Marlton, NJ 110,077 (a) 12/19/96
1997 Dispositions
Howell Commons Mid-America Realty Investments Greenville, SC 348 1/15/97
Banks Crossing A.B. Real Estate, Inc. Fayetteville, GA 243,660 (a) 3/25/97
Brookwood Village Colonial Properties Trust Birmingham, AL 474,138 (a)(b) 5/13/97
Crossroads State of Michigan Atlanta, GA 211,186 (a) 8/06/97
</TABLE>
(a) in Retail Square Feet
(b) 50% ownership of property via a joint venture
F-32
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Purchase Price (in thousands)
O.P. Common
Property Name Cash Debt Units Stock Total
- ------------- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1996 Acquisitions
Berkshire Towers $ - $35,536 $16,800(1) $ - $52,336
Prescott Place 8,700 - - - 8,700
Hunters Glen 4,445 5,555 - - 10,000
Merit Portfolio 21,381 12,106 5,438(2) - 38,925
1997 Acquisitions
Westchester West 856 11,361 3,883(3) - 16,100
Polos West and
SunChase 8,231 5,719 - - 13,950
Emerald Portfolio 1,000 17,686 8,674(4) - 27,360
Citibank Portfolio 60,300 - - - 60,300
Summer Place 7,000 - - - 7,000
1997 Pending Acquisitions
Questar Portfolio 24,606 131,654 20,561(5) 4,700 181,521
</TABLE>
(1) The Company issued 1,600,000 operating partnership units in connection with
the purchase of Berkshire Towers. 1,056,500 units were issued at the time of
closing, 443,500 units were issued January 1, 1997, and 100,000 units will be
issued January 1, 1998. The 443,500 and 100,000 units were discounted at a rate
of 9%. The units were valued at $10.50.
(2) The Company issued 523,303 operating partnership units in connection with
the purchase of the Merit Portfolio. All units were issued at the times of the
various closings. The units were valued based upon closing prices ranging from
$9.95 to $10.79.
(3) The Company issued 388,300 operating partnership units in connection with
the purchase of Westchester West. 338,300 units were issued at the time of
closing (at $10 per unit) and 50,000 units will be issued January 1, 1998. The
50,000 units were discounted at a rate of 9%. The units were valued at $10.00.
(4) The Company issued 772,253 operating partnership units in connection with
the purchase of the Emerald Portfolio. 515,260 units were issued at the time of
closing and 256,993 units will be issued January 21, 1998. The 256,993 units
were discounted at a rate of 9%. The units were valued based upon the Company's
share price at $11.25.
(5) The Company issued approximately 1,750,000 operating partnership units in
connection with the purchase of the Questar Portfolio. Approximately 720,000
units will be issued one year from the date of the proposed closing. The units
will be valued at share price of $11.75.
Equity Offerings included in the pro forma financial statements:
On September 25, 1997, the Company issued 2,737,000 shares of Series 1997-A
Convertible Preferred Stock, par value of $.01 per share, at $25 per share, with
a dividend rate of 9%. Net proceeds from the private placement totaled
approximately $65.8 million.
Proposed common stock offering of 10 million shares par value of $.01 per share
at $12-1/8 per share. Net proceeds from the offering are anticipated to be
approximately $114 million.
F-33
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1997
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Berkshire
Realty Preferred Common
Company Inc. Emerald Stock Citibank Summer Questar Stock
Historical Dispositions Portfolio Offering Portfolio Place Portfolio Offering Total
---------- ------------ --------- -------- --------- ----- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Multifamily apartment
complexes-net of (e)
accumulated depreciation $448,419 $ - $27,360 $ - $60,300 $ 7,000 $181,521 $ - $724,600
Other real estate assets 62,061 (11,456) - - - - - - 50,605
-------- ------ ------- ------- ------- ------ ------- -------- -------
Total real estate assets 510,480 (11,456)(a) 27,360 - 60,300 7,000 181,521 - 775,205
Cash 8,232 4,796 (1,000) 65,853 (60,300) (7,000) (32,106) 50,750 29,225
Other assets 30,406 - - - - - 7,500(f) - 37,906
Workforce and intangible
assets - net of accumulated
amortization 28,997 - - - - - - - 28,997
------- ------ ------- ------ -------- ------- ------- -------- --------
Total assets $578,115 $(6,660) $26,360 $65,853 $ - $ - $156,915 $ 50,750 $871,333
======== ====== ======= ======= ======= ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Mortgage notes payable $165,897 $ - $17,686(c) $ - $ - $ - $131,654(g) $ - $315,237
Credit agreements and variable
rate debt 125,610 (6,660)(b) - - - - - (63,000)(i) 55,950
Other liabilities 14,382 - - - - - - - 14,382
-------- ------ ------ ------ ------- ------- ------- ------- --------
Total liabilities 305,889 (6,660) 17,686 - - - 131,654 (63,000) 385,569
Commitments and contingencies
Minority interest in Operating
Partnership 57,715 - 8,674(d) - - - 20,561(h) - 86,950
Shareholders' equity 214,511 - - 65,853 - - 4,700 113,750(j) 398,814
-------- ------- ------ ------ ------- ------- ------- ------- --------
Total liabilities and
shareholders' equity $578,115 $(6,660) $26,360 $65,853 $ - $ - $156,915 $ 50,750 $871,333
======== ======= ======= ====== ======= ======= ======= ======= ========
</TABLE>
See accompanying notes to pro forma condensed consolidating balance sheet.
F-34
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1997
(Unaudited)
(dollars in thousands)
Notes:
(a) Represents the sale of the Crossroads property in August, 1997.
(b) Repayment of indebtedness related to the sale of Crossroads.
(c) Mortgage notes payable assumed in conjunction with the acquisition of the
Emerald portfolio detailed as follows:
Principal Interest Maturity
Property Balance Rate Date
-------- ------- ---- ----
Heritage Hill $ 2,316 7.75% 4/2018
Harpers Mill 3,477 7.75% 1/2021
Washington Square 6,575 7.75% 7/2023
Lamplighter 5,318 7.75% 1/2022
-------
$17,686
=======
(d) The seller of the Emerald portfolio was issued approximately 772,000 units
of the Operating Partnership valued at $8,674. The number of units was
based on a share price of $11.25 of common stock of the Company.
(e) Proceeds from the sale of 2,737,000 shares of the Company's Series 1997-A
Convertible Preferred Stock. The shares were priced at $25 per share.
Gross proceeds from offering $68,425
Cost of issuance (2,572)
-------
Net Proceeds $65,853
=======
(f) In connection with the proposed Questar Transactions, a loan will be
provided to the Questar Borrowers. The interest rate is anticipated to be
9.7% per annum and will mature five years from the closing date.
Continued
F-35
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
June 30, 1997
(Unaudited)
(Dollars in thousands)
Notes:
(g) Mortgage notes assumed in conjunction with the proposed acquisition of
the Questar portfolio are detailed as follows:
Principal Interest Maturity
Property Balance Rate Date
-------- ------- ---- ----
Stratton Meadows $ 12,470 7.54% 2/2030
The Estates 11,641 7.43% 11/2006
Arborview 16,666 7.84% 1/2034
Calverts 14,297 7.59% 4/2029
Kingswood II 5,952 8.04% 11/2006
Rolling Wind 18,427 7.72% 2/2035
Coventry 4,458 6.52% 4/2026
Courtleigh 11,888 6.37% 7/2028
Jamestowne 7,687 9.50% 11/2004
Williston 2,162 9.50% 11/2004
Fairway Ridge 6,117 8.11% 12/2006
Warren Park 5,080 8.04% 11/2006
Hazelcrest 822 8.04% 11/2006
Heraldry Square 7,968 8.11% 11/2006
Kingswood I 6,019 8.11% 11/2006
--------
$131,654
========
(h) The seller of the Questar Portfolio is expected to be issued approximately
1.7 million units of the Operating Partnership valued at $20,561. The
number of units was based on a share price of $11.75 of the common stock
of the Company.
(i) Repayment of variable rate indebtedness related to the Company's credit
facilities in addition to the repayment of amounts outstanding under the
Company's Master repurchase agreement.
(j) Proceeds from the issuance of 10 million shares of common stock at a
price of $12-1/8 per share.
Gross proceeds from offering $121,250
Estimated cost of issuance (7,500)
--------
Net Proceeds $113,750
========
F-36
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Berkshire Property
Realty Manager
Company, Inc. & Advisor Berkshire
Historical Dispositions Transactions Towers
---------- ------------ ----------- ------
(a) (g)
<S> <C> <C> <C> <C>
Revenue:
Rental $ 89,451 (8,254) $ - $ 3,394
Other income 3,551 (35) 3,804(b) 85
-------- ------- ------- -------
Total revenue 93,002 (8,289) 3,804 3,479
-------- ------- ------- -------
Expenses:
Property operating 29,374 (2,035) (1,302)(c) 2,011
Real estate taxes 8,654 (758) - 155
Property management fees 4,325 (465) (3,689)(c) -
Property management operations - - 4,642 (d,f) -
General and administrative 4,646 - (10)(e) -
Interest 20,501 (577) - 1,560
Amortization of workforce acquired 1,121 - - -
Non-recurring charges 442 - - -
Provision for loss 7,500 (2,800) - -
Depreciation and amortization 29,050 (2,228) - 1,311
-------- ------- ------- -------
Total expenses 105,613 (8,863) (359) 5,037
-------- ------- ------- -------
Income (loss) from operations (12,611) 574 4,163 (1,558)
Minority interest in Operating
Partnership 1,136 - - -
Income (loss) from joint ventures
net of minority interest (2,737) 3,491 - -
-------- ------- ------- -------
Income (loss) before gains on
sales and extraordinary items (14,212) 4,065 4,163 (1,558)
====== ===== ===== =====
</TABLE>
F-37
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Merit Other 1996 Westchester SunChase &
Portfolio Acquisitions West Polos West
--------- ------------ ----------- ----------
(h)
<S> <C> <C> <C> <C>
Revenue:
Rental $ 4,359 $ 1,888 $ 2,586 $ 2,539
Other income 5 - 65 -
------- ------- ------- -------
Total revenue 4,364 1,888 2,651 2,539
------- ------- ------- -------
Expenses:
Property operating 1,602 667 1,075 770
Real estate taxes 468 237 195 270
Property management fees - - - -
Property management operations - - - -
General and administrative - - - -
Interest 515 291 944 435
Amortization of workforce acquired - - - -
Non-recurring charges - - - -
Provision for loss - - - -
Depreciation and amortization 1,256(m) 517 880(m) 763(m)
------- ------- ------- -------
Total expenses 3,841 1,712 3,094 2,238
------- ------- ------- -------
Income (loss) from operations 523 176 (443) 301
Minority interest in Operating
Partnership - - - -
Income (loss) from joint ventures,
net of minority interest - - -
------- ------- ------- -------
Income (loss) before gains on
sales and extraordinary items 523 176 (443) 301
=== === === ===
</TABLE>
F-38
<PAGE>
BERKSHIRE REALTY COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerald Citibank Summer Questar Pro Forma Pro Forma
Portfolio Portfolio Place Portfolio Adjustments Consolidating
--------- --------- ----- --------- ----------- -------------
(i)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rental $ 4,755 $ 7,860 $1,262 $25,311 $ - $135,151
Other income 22 283 - 1,228 735(j) 9,743
------- ------- ------ ------- ------- --------
Total revenue 4,777 8,143 1,262 26,539 735 144,894
------- ------- ------ ------- ------- --------
Expenses:
Property operating 1,752 2,394 512 8,696 - 45,516
Real estate taxes 257 1,070 119 2,298 - 12,965
Property management fees - - - - - 171
Property management operations - - - 1,111 - 5,753
General and administrative 34 - - - - 4,670
Interest 1,447 - - 10,323 (4,622)(k) 30,817
Amortization of workforce
acquired - - - - 9,016 (l) 10,137
Non-recurring charges - - - - - 442
Provision for loss - - - - - 4,700
Depreciation and amortization 1,496(m) 3,296(m) 384 9,306(m) - 46,031
------- ------- ------ ------- ------- --------
Total expenses 4,986 6,760 1,015 31,734 4,394 161,202
------- ------- ------ ------- ------- --------
Income (loss) from operations (209) 1,383 247 (5,195) (3,659) (16,308)
Minority interest in Operating
Partnership - - - - 2,777(n) 3,913
Income (loss) from joint ventures,
net of minority interest - - - - - 754
------- ------- ------ ------- ------- --------
Income (loss) before gains on
sales and extraordinary items (209) 1,383 247 (5,195) (882) (11,641)
=== ===== === ===== === ======
Income allocated to preferred shareholders (6,158)(o)
--------
Net loss available to common shareholders $(17,799)
======
Weighted average common shares 35,793,147
Net loss per weighted average common share $ (.50)
=======
</TABLE>
(1) The Company's weighted average common share of the Operating Partnership is
82.58%.
See accompanying notes to pro forma
condensed consolidating statement of operations.
F-39
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(a) Results of operations for following properties sold in 1996 and 1997 for
the year ended December 31, 1996 are detailed below:
<TABLE>
<CAPTION>
Pointe Greentree Howell Banks Brookwood Total
West Plaza Commons Crossing Village Crossroads Dispositions
---- --------- ------- -------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Rental $(1,393) $(1,387) $(1,981) $(1,819) $ - $(1,674) $ (8,254)
Other income (31) - (4) - - - (35)
------- ------- ------- ------- ------ ------- --------
Total revenue (1,424) (1,387) (1,985) (1,819) - (1,674) (8,289)
------- ------- ------- ------- ------ ------- --------
Expenses:
Property operating (474) (470) (640) (219) - (232) (2,035)
Real estate taxes (236) (208) (131) (90) - (93) (758)
Property management fees (69) (93) (92) (110) - (101) (465)
Property management operations - - - - - - -
General and administrative - - - - - - -
Interest (577) - - - - - (577)
Amortization of workforce acquired - - - - - - -
Non-recurring charges - - - - - - -
Provision for loss - (1,800) - (750) - (250) (2,800)
Depreciation and amortization (496) (355) (498) (423) - (456) (2,228)
------- ------- ------- ------- ------ ------- --------
Total expenses (1,852) (2,926) (1,361) (1,592) - (1,132) (8,863)
------- ------- ------- ------- ------ ------- --------
(Income) loss from
operations 428 1,539 (624) (227) - (542) 574
Loss from joint ventures,
net of minority interest - - - - 3,491 - 3,491
------- ------- ------- ------- ------ ------- --------
(Income) loss before gains
on sales and extraordinary items $ 428 $ 1,539 $ (624) $ (227) $3,491 $ (542) $ 4,065
=== ===== === === ===== === =====
</TABLE>
(b) Increased third party property management revenue of $3,804 for 1996
as a result of third party multifamily property management contracts
acquired in the Property Manager Transaction.
(c) Reduced property management fees of $3,689 and reimbursements of
$1,302 for 1996 for the Company-owned multifamily properties as a
result of the Company becoming self managed in the Property Manager
Transaction.
(d) Increased property management operations expense of $4,392 for 1996 as
a result of the Company becoming self managed in the Property Manager
Transaction.
(e) Decreased general and administrative expenses resulting from reduction of
advisory fees for the period January 1, 1996 through February 28, 1996 of
$202 and increased general and administrative expense of $192 as a result
of the Company becoming self advised in the Advisor Transaction.
(f) Incremental cost of property management operations of $250 attributable to
the increased asset base.
Continued
F-40
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(g) Results of operations for Berkshire Towers (formerly known as The
Point) for the period January 1, 1996 through May 13, 1996 adjusted
for pro forma amounts:
<TABLE>
<CAPTION>
Total
Pro forma Pro forma
Historical Adjustments Acquisition
---------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Rental $3,394 $ - $3,394
Other income 85 - 85
------ ------ ------
Total revenue 3,479 - 3,479
------ ------ ------
Expenses:
Property operating 2,185 (174) 2,011
Real estate taxes 155 - 155
Property management fees 256 (256) -
Property management operations - - -
General and administrative - - -
Interest 1,560 - 1,560
Amortization of workforce acquired - - -
Non-recurring charges - - -
Provision for loss - - -
Depreciation and amortization - 1,311 (m) 1,311
------ ----- ------
Total expenses 4,156 881 5,037
------ ----- ------
Income (loss) from operations $ (677) $(881) $(1,558)
=== === =====
</TABLE>
(h) Results of operations for Hunters Glen for the period January 1, 1996
through July 31, 1996 and for Prescott Place for the period January 1,
1996 through June 5, 1996. Adjusted for pro forma amounts:
<TABLE>
<CAPTION>
Total
Hunters Prescott Pro forma Other 1996
Glen Place Adjustments Acquisitions
---- ----- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rental $1,106 $ 782 $ - $1,888
Other income - - - -
----- ----- ----- -----
Total revenue 1,106 782 - 1,888
----- ----- ----- -----
Expenses:
Property operating 392 300 (25) 667
Real estate taxes 140 97 - 237
Property management fees 66 37 (103) -
Property management operations - - - -
General and administrative - - - -
Interest 291 - - 291
Amortization of workforce acquired - - - -
Non-recurring charges - - - -
Provision for loss - - - -
Depreciation and amortization - - 517(m) 517
----- ----- ----- -----
Total expenses 889 434 389 1,712
----- ----- ----- -----
Income (loss) from operations $ 217 $ 348 $ (389) $ 176
=== === === ===
</TABLE>
Continued
F-41
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(i) Results of operations for Summer Place for the year ended December 31, 1996
adjusted for pro forma amounts:
Total
Pro forma Pro forma
Historical Adjustments Acquisition
---------- ----------- ------------
Revenue:
Rental $1,262 $ - $1,262
Other income - - -
------ ------ ------
Total revenue 1,262 - 1,262
------ ------ ------
Expenses:
Property operating 512 - 512
Real estate taxes 119 - 119
Property management fees 69 (69) -
Property management operations - - -
General and administrative - - -
Interest - - -
Amortization of workforce
acquired - - -
Non-recurring charges - - -
Provision for loss - - -
Depreciation and amortization - 384(m) 384
------ ------ ------
Total expenses 700 315 1,015
------ ------ ------
Income (loss) from operations $ 562 $ (315) $ 247
=== === ===
(j) Interest income of $735 on the $7,500 loan to be made pursuant to the
Questar Transaction at 9.7% per annum.
Continued
F-42
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(k) Pro forma effect of interest expense incurred on debt for the year
ended December 31, 1996 which is expected to be paid down with the
proceeds of the Common Stock Offering.
Average
Historical
Interest Pro forma Historical
Pro forma Rate at Interest Interest
Balance 12/31/96 Expense Expense Adjustment
------- -------- ------- ------- ----------
Variable rate
credit facility $12,307 6.88% $847 $4,642 $(3,795)
Repurchase
agreement 2,401 5.85% 140 597 (457)
Historical interest expense related to certain Questar
mortgages totaling $9,891 to be refinanced subsequent
to acquisition (942)
Pro forma interest expense on refinanced mortgage loans
assuming a principal balance of $7,381 with interest at 7.75% 572
------
Total adjustment $(4,622)
=======
(l) Pro forma amortization of intangible assets in connection with the
Advisor Transaction and the Property Manager Transaction calculated as
follows:
Historical Period Pro Forma
Transaction Total Cost (Months) Amortization
----------- ---------- -------- ------------
Property Manager:
Workforce acquired $13,246 36 $4,415
Third-party contracts 4,951 48 1,238
Advisor:
Workforce acquired 13,448 36 4,484
------
Pro forma amortization adjustment 10,137
Historical amortization expense (1,121)
------
Net pro forma amortization $9,016
======
The Company utilized 10 and 15 year lives respectively for the
amortization of the workforce acquired in its 1996 and interim 1997
financial statements. Commencing in the period ended September 30,
1997, the Company will prospectively amortize the workforce assets over
a shortened 3 year life.
Continued
F-43
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
(Unaudited)
(Dollars in thousands)
(m) Detail of pro forma depreciation expense is presented as follows:
Estimated
Lives of
Property Basis Assets (Yrs.) Depreciation
-------- ----- ------------ ------------
1996 Acquisitions
-----------------
Berkshire Towers $52,336 3 to 25 $ 1,311
Merit Portfolio 38,925 3 to 25 1,256
Prescott Place 8,700 3 to 25 198
Hunters Glen 10,000 3 to 25 319
1997 Acquisitions
-----------------
Westchester West 16,100 3 to 25 880
Polos West and SunChase 13,950 3 to 25 763
Emerald Portfolio 27,360 3 to 25 1,496
Citibank Portfolio 60,300 3 to 25 3,296
Summer Place 7,000 3 to 25 384
Pending Acquisition
-------------------
Questar Portfolio 174,935 3 to 25 9,306
-------
Pro forma depreciation $19,209
=======
(n) Pro forma minority interest (17.42%) in Operating Partnership.
(o) Preferred dividends of $6,158 on 2,737,000 Series 1997-A Preferred shares
issued with a dividend rate of 9%.
F-44
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Berkshire Property
Realty Manager
Company, Inc. & Advisor SunChase &
Historical Dispositions Transactions Polos West
---------- ------------ ------------ ----------
(a)
<S> <C> <C> <C> <C>
Revenue:
Rental $ 49,709 $(1,309) $ - $ 974
Other income 2,379 - 638(b) -
-------- ------- ------ -------
Total revenue 52,088 (1,309) 638 974
-------- ------- ------ -------
Expenses:
Property operating 15,425 (166) (25)(c) 278
Real estate taxes 4,718 (77) - 105
Property management fees 819 (81) (709)(c) -
Property management
operations 2,156 - 989(d,e) -
General and administrative 2,426 - - -
Interest 11,485 - - 157
Amortization of workforce acquired 1,527 - - -
Cost associated with Advisor
Transaction 1,200 - - -
Depreciation and
amortization 15,579 (19) - 286(j)
------- ------ ------ -------
Total expenses 55,335 (343) 255 826
------- ------ ------ -------
Income (loss) from operations (3,247) (966) 383 148
Minority interest in Operating
Partnership 571 - - -
Income (loss) from joint ventures,
net of minority interest (418) 726 - -
------- ------ ------ -------
Income (loss) before gains on
sales and extraordinary items $(3,094) $ (240) $ 383 $148
======= ======= ====== ====
</TABLE>
F-45
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Emerald Citibank Summer Questar
Portfolio Portfolio Place Portfolio
--------- --------- ----- ----------
(f)
<S> <C> <C> <C> <C>
Revenue:
Rental $ 2,411 $ 4,518 $ 637 $12,689
Other income 6 188 - 691
------- ------- ----- -------
Total revenue 2,417 4,706 637 13,380
------ ------- ----- -------
Expenses:
Property operating 990 1,160 256 3,011
Real estate taxes 127 625 60 1,656
Property management fees - - - -
Property management
operations - - - 1,865
General and administrative - - - -
Interest 712 - - 5,180
Amortization of workforce acquired - - - -
Cost associated with Advisor
Transaction - - - -
Depreciation and
amortization 748(j) 1,640(j) 192 4,781(j)
------ ------ ----- -------
Total expenses 2,577 3,425 508 16,493
------ ------ ----- -------
Income (loss) from operations (160) 1,281 129 (3,113)
Minority interest in Operating
Partnership - - - -
Income (loss) from joint ventures,
net of minority interest - - - -
------ ------ ----- -------
Income (loss) before gains on
sales and extraordinary items $(160) $1,281 $ 129 $(3,113)
===== ====== ===== =======
F-46
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
Pro Forma Pro Forma
Adjustments Consolidating
----------- -------------
<S> <C> <C>
Revenue:
Rental $ - $69,629
Other income 367(g) 4,269
------ --------
Total revenue 367 73,898
------ --------
Expenses:
Property operating - 20,929
Real estate taxes - 7,214
Property management fees - 29
Property management
operations - 5,010
General and administrative - 2,426
Interest (2,403)(h) 15,131
Amortization of workforce acquired 3,541 (i) 5,068
Costs associated with Advisor
Transaction - 1,200
Depreciation and
amortization - 23,207
------- --------
Total expenses 1,138 80,214
------- --------
Income (loss) from operations (771) (6,316)
Minority interest in Operating
Partnership 1,063(k) 1,634
Income (loss) from joint ventures,
net of minority interest - 308
------ --------
Income (loss) before gains on
sales and extraordinary items $ 292 $(4,374)
====== ========
Income allocated to preferred shareholders (3,079)(l)
--------
Loss available to common
shareholders $(7,453)
========
Weighted average common shares 35,850,743
Net loss per weighted average common share $ (.21)
========
</TABLE>
(1) The Company's weighted average common share of the Operating Partnership is
82.61%.
See accompanying notes to pro forma
condensed consolidating statement of operations.
F-47
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(a) Historical results of operations for properties sold in 1997 for the period
ended June 30, 1997.
<TABLE>
<CAPTION>
Howell Banks Brookwood Total
Commons Crossing Village Crossroads Dispositions
------- -------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Rental $ (66) $ (408) $ - (835) $(1,309)
Other income - - - - -
------- ------ ---- ----- -----
Total revenue (66) (408) - (835) (1,309)
------- ------ ---- ----- ------
Expenses:
Property operating (45) (49) - (72) (166)
Real estate taxes (5) (24) - (48) (77)
Property management fees (5) (26) - (50) (81)
Property management operations - - - - -
General and administrative - - - - -
Interest - - - - -
Amortization of workforce acquired - - - - -
Depreciation and amortization (19) - - - (19)
------- ------ ---- ----- -------
Total expenses (74) (99) - (170) (343)
------- ------ ---- ----- -------
(Income) loss from operations 8 (309) - (665) (966)
(Income) loss from joint ventures,
net of minority interest - - 726 - 726
------- ------ ---- ----- ------
(Income) loss before gains
on sales and extraordinary items $8 $(309) $726 $(665) $(240)
= === === === =====
</TABLE>
(b) Increased third party property management revenue of $638 for 1997 as a
result of third party multifamily property management contracts acquired in
the Property Manager Transaction.
(c) Reduced property management fees of $709 and reimbursements of $25 for 1997
for the Company-owned multifamily properties as a result of the Company
becoming self managed in the Property Manager Transaction.
(d) Increased property management operations expense of $864 for 1997 as a
result of the Company becoming self managed in the Property Manager
Transaction.
(e) Additional property management operations of $125 attributable to the
increased asset base.
Continued
F-48
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(f) Results of operations for Summer Place for the period ended June 30, 1997
adjusted for pro forma amounts:
Total
Pro forma Pro forma
Historical Adjustments Acquisition
---------- ----------- ------------
Revenue:
Rental $637 $ - $637
Other income - - -
---- ------ ---
Total revenue 637 - 637
---- ------ ---
Expenses:
Property operating 256 - 256
Real estate taxes 60 - 60
Property management fees 37 (37) -
Property management operations - - -
General and administrative - - -
Interest - - -
Amortization of intangibles - - -
Non-recurring charges - - -
Depreciation and amortization - 192(j) 192
---- ------ ---
Total expenses 353 155 508
---- ------ ---
Income from operations $284 $ (155) $129
==== ====== ====
(g) Interest income of $367 on the $7,500 loan to be made pursuant to the
Questar Transaction at 9.7% per annum.
(h) Pro forma effect of interest expense incurred on debt for the period ended
June 30, 1997 which is expected to be paid down with the proceeds of the
Common Stock Offering. A portion of the debt assumed with the proposed
Questar portfolio acquisition will be refinanced.
<TABLE>
<CAPTION>
Average
Historical
Interest Pro forma Historical
Pro forma Rate at Interest Interest
Balance 6/30/97 Expense Expense Adjustment
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Variable rate
credit facility $5,881 6.62% $389 $ 2,066 $(1,677)
Repurchase
agreement 925 5.75% 53 597 (544)
Historical interest expense related to certain Questar
mortgages totaling $9,891 to be refinanced subsequent
to acquisition (468)
Pro forma interest expense on refinanced mortgage
loans assuming a principal balance of $7,381 with
interest at 7.75% 286
-------
Total adjustment $(2,403)
=======
</TABLE>
Continued
F-49
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(i) Pro forma amortization of intangible assets in connection with the Advisor
and Property Manager Transactions calculated as follows:
Pro Forma
Amortization Pro Forma
Transaction Total Cost Period (Months) Amortization
----------- ---------- --------------- ------------
Property Manager:
Workforce acquired $13,246 36 $2,208
Management contracts 4,951 48 619
Advisory:
Workforce acquired $13,448 36 2,241
------
Pro forma amortization adjustment 5,068
Historical amortization expense (1,527)
------
Net pro forma amortization $3,541
======
The Company utilized 10 and 15 year lives respectively for the
amortization of the workforce acquired in its 1996 and interim 1997
financial statements. Commencing in the period ended September 30,
1997, the Company will prospectively amortize the workforce assets
over a shortened 3 year life.
(j) Detail of pro forma depreciation expense is presented as follows:
Estimated
Lives of
Property Basis Assets (Yrs.) Depreciation
-------- ----- ------------- ------------
1997 Acquisitions
-----------------
Polos West and SunChase $13,950 3 to 25 $ 286
Emerald Portfolio 27,360 3 to 25 748
Citibank Portfolio 60,300 3 to 25 1,640
Summer Place 7,000 3 to 25 192
Pending Acquisition
-------------------
Questar Portfolio 174,935 3 to 25 4,781
------
Pro forma depreciation $7,647
======
Continued
F-50
<PAGE>
BERKSHIRE REALTY COMPANY, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Period Ended June 30, 1997
(Unaudited)
(Dollars in thousands)
(k) Pro forma minority interest (17.39%) in Operating Partnership.
(l) Preferred dividends of $3,079 on 2,737,000 Series 1997-A Preferred shares
issued with a dividend rate of 9%.
F-51
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
10. The Questar Transaction
10.1 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Third Rolling Road
Associates Limited Partnership (Third Rolling Road/Coventry) and
Questar Investment Corporation dated as of August 25, 1997
10.2 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Williston Associates and
Questar Investment Corporation dated as of August 25, 1997
10.3 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Ridgeview Chase
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.4 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Kingswood Common
Associates Limited Partnership and Questar Investment Corporation
dated as of August 25, 1997
10.5 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Second Rolling Road
Associates (Kingswood Common I) and Questar Investment
Corporation dated as of August 25, 1997
10.6 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Frederick Road Associates
(Jamestown) and Questar Investment Corporation dated as of August
25, 1997
10.7 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Gorn Properties, Inc.
(Hilltop) and Questar Investment Corporation dated as of August
25, 1997
10.8 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Rolling Road Associates
(Heraldry Square) and Questar Investment Corporation dated as of
August 25, 1997
10.9 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Tremaine Associates
Limited Partnership (Henley/Rolling Wind) and Questar Investment
Corporation dated as of August 25, 1997
10.10 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Plainfield Associates
(Hazelcrest) and Questar Investment Corporation dated as of August
25, 1997
10.11 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Fourth Rolling Road
Associates Limited Partnership (Fourth Rolling Road/Courtleigh),
19 West Lexington Street Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.12 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Purnell Associates
(Fairway Ridge) and Questar Investment Corporation dated as of
August 25, 1997
10.13 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Stratton Associates
Limited Partnership, Fairbrook Associates Limited Partnership
(Fairbrook/Stratton Meadows) and Questar Investment Corporation
dated as of August 25, 1997
10.14 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Diamond Ridge Associates
Limited Partnership and Questar Investment Corporation dated as
of August 25, 1997
10.15 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Citadel Associates
Limited Partnership, Calvert's Walk Associates Limited
Partnership and Questar Investment Corporation dated as of August
25, 1997
10.16 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Caliber Associates
Limited Partnership, Arborview Associates Limited Partnership and
Questar Investment Corporation dated as of August 25, 1997
10.17 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Estates II Funding
Corporation, The Estates Limited Partnership and Questar
Investment Corporation dated as of August 25, 1997
10.18 Contribution Agreement dated as of August 25, 1997 among BRI OP
Limited Partnership and the partners of Warren Park Associates and
Questar Investment Corporation dated as of August 25, 1997
10.19 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Property Management Corporation and its Shareholders
dated as of August 25, 1997
10.20 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Questar Management Company and its Shareholders dated as of
August 25, 1997
10.21 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Kingswood Management Company and its Shareholders dated as of
August 25, 1997
10.22 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Vector Property Management Company and its Shareholders dated
as of August 25, 1997
10.23 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Gorn Management Company and its Shareholders dated as of
August 25, 1997
10.24 Agreement and Plan of Merger among Berkshire Realty Company, Inc.,
Arborview Management Company and its Shareholders dated as of
August 25, 1997
*10.25 Form of Development Acquisition Agreement among Questar
Properties, Inc. Stephen M. Gorn, John B. Colvin and BRI OP
Limited Partnership
*10.26 Development Contribution Agreement (Avalon, 1,3,4) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.27 Development Contribution Agreement (Liriope) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
*10.28 Development Contribution Agreement (Granite Run) among
Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated
as of August 25, 1997
*10.29 Development Contribution Agreement (Avalon 2) among Stephen Gorn,
John B. Colvin and BRI OP Limited Partnership dated as of
August 25, 1997
10.30 Form of Registration Rights Agreement among Berkshire Realty
Company, Inc. and certain partners of BRI OP Limited Partnership
*10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C.
dated as of August 25, 1997
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants
23.2 Consent of KPMG Peat Marwick LLP, Independent Accountants
- ----------------
*To be filed by amendment.
Execution Copy
Third Rolling Road/Coventry
(8/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between John B.
Colvin, Irvin Gomprecht, Morton Gorn, Stephen M. Gorn, M. Peter Moser, James D.
Nolan, Estate of Marjorie Wyman and M. Richard Wyman (collectively, the
"Transferor General Partners") and the individuals and entities listed on
Exhibit I attached hereto (the "Transferor Limited Partners"), with an address
c/o Questar Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208, Attention: Mr. Stephen M. Gorn (the Transferor General Partners and the
Transferor Limited Partners are sometimes collectively referred to as the
"Transferor Partners"), and Questar Investment Corporation, a Maryland
corporation (the "Transferor Agent"), with an address of 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partners are the legal and beneficial owner
of all of the general partnership interests as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in Third
Rolling Road Associates Limited Partnership, a Maryland Limited Partnership (the
"Transferor Partnership") pursuant to the Amended and Restated Certificate and
Agreement of Limited Partnership dated as of August 2, 1984, as amended (a copy
of which, including all amendments, is attached hereto as Exhibit II and is
referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 122-unit apartment complex, commonly known as Coventry Apartments,
which contains related improvements, facilities, amenities, structures,
<PAGE>
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
-2-
<PAGE>
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
-3-
<PAGE>
Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
-4-
<PAGE>
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
-5-
<PAGE>
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
-6-
<PAGE>
tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
-7-
<PAGE>
tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $5,859,308, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated August 3, 1984,
as amended through the Fourth Allonge Deed of Trust Note dated as of January 25,
1994, in the original principal amount of $4,628,300 (the "Note") evidencing the
loan (the "Loan") made to the Transferor Partnership by CPC Mortgage Capital,
LLC ("Lender") and secured by the Loan Documents which shall be an obligation of
the Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted
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Distribution BRI Partnership Units are collectively referred to herein as the
"BRI Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the
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occurrence of any of the following events to reflect a stock split, dividend
(outside of the ordinary course), recapitalization or other similar event
outside of the ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
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SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
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4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
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4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or
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result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Transferor Partnership, except for
Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor
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Partnership's knowledge, threat thereof against the Transferor Partners, the
Transferor Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's
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business as such is presently conducted and neither the conduct of the
Transferor Partnership's business nor any material portion thereof is dependent
on the issuance or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan described in Schedule 5.10 and
in such audited financial statements and provide evidence thereof to the BRI
Partnership. As of the Closing Date the Transferor Partnership shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Partnership's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts and (c) liabilities under the Loan Documents. The Transferor
Partnership has conducted its business only in the ordinary course and, except
for the Loan and the matters disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, the Transferor
Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
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5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no
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representative of the Transferor Partners shall be a signatory on any other
account or safe deposit box of the Transferor Partnership or shall have the
power to borrow, discount debt obligations, cash or draw checks, or otherwise
act on behalf of the Transferor Partnership in any dealings with any banks or
other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
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(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents which are due and payable, through the Closing
Date, have been, and will be, paid in full and no default exists thereunder
which extends beyond applicable grace or cure periods. The Transferor
Partnership has not received any written notice of default under any of the Loan
Documents. The Lender is the sole holder or designated servicer of the Note. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. The Loan Documents secure no other indebtedness but the Loan. To the
best knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be
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obtained by the BRI Partnership in accordance with Section 1.04 hereof (the "BRI
Environmental Reports"), the Transferor Partnership has not received any written
notice from any governmental entity or other person that the Property, or
current or former operations on the Property, are not or have not been in
material compliance with any Environmental Laws or that the Transferor
Partnership has any material liability with respect thereto. To the Transferor
Partnership's knowledge, except as set forth in the Environmental Reports or in
the BRI Environmental Reports, there are no underground tanks for Hazardous
Materials, active or abandoned, at the Property and no Hazardous Materials are
present or have been released in a reportable quantity, where such a quantity
has been established by statute, ordinance, rule, regulation or order, at, on or
under the Property. To the Transferor Partnership's knowledge, except as
disclosed in the Environmental Reports or in the BRI Environmental Reports,
neither the Transferor Partnership nor the Property is in violation in any
material respect of any Environmental Laws and there is no asbestos, PCB's or
lead paint on the Property or any part thereof. For purposes of this Agreement,
"Environmental Laws" shall mean the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), as amended by the Hazardous and Solid Waste Amendments
of 1984; the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.), as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49
U.S.C. ss. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. ss. 2601 et
seq.; the Clean Air Act (42 U.S.C. ss. 9402 et seq.); the Clean Water Act (33
U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. ss. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.); and all other applicable federal, state and local
environmental laws (including, without limitation, obligations under the common
law), ordinances, orders, rules and regulations, as any of the foregoing may
have been amended, supplemented or supplanted prior to the Closing, relating to
regulation or control of hazardous, toxic or dangerous substances, materials or
wastes (collectively, "Hazardous Materials"), or their handling, storage or
disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would
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not have a Material Adverse Effect. To the Transferor Partnership's knowledge
the Property and the current use thereof comply in all material respects with
(a) all applicable laws and (b) all restrictive covenants and title encumbrances
affecting the Property. The Transferor Partnership holds all material licenses,
permits and authorizations required for the lawful use, operation and occupancy
of the Property. The parties agree that all matters relating to compliance with
Environmental Laws shall be covered by Section 5.21 and not by this Section
5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property
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not included in the Property relies for its operation, maintenance or legal
compliance on any facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and complete copy of all material correspondence submitted to and issued
by HUD in connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person not a party to this Agreement is necessary for the contribution by such
Transferor
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Partner of the Transferor Partnership Interests held by such Transferor Partner
and the performance of such Transferor Partner's obligations under this
Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and
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Exchange Commission to the effect that a proposed transfer of the BRI
Partnership Units (or shares of common stock issued upon exchange of the BRI
Partnership Units) may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon the BRI Partnership or BRI, as the case may be, receiving an opinion of
counsel knowledgeable in securities law matters (and which opinion and counsel
shall be reasonably acceptable to both the BRI Partnership and BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Transferor Partner must bear the economic risk of an investment in the BRI
Partnership Units (and the shares of common stock issued upon exchange of the
BRI Partnership Units) for an indefinite period of time. Such Transferor Partner
acknowledges, represents and agrees that (i) its economic circumstances are such
that it is able to bear all risks of the investment in the BRI Partnership and
BRI for an indefinite period of time, including the risk of a complete loss of
its investment in the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units), (ii) it has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in the BRI Partnership Units and BRI, and (iii) it has consulted with
its own separate counsel and tax advisor, to the extent deemed necessary by it,
as to all legal and taxation matters covered by this Agreement and has not
relied upon the BRI Partnership or the Transferor Agent, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
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(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
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(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other
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material agreement to which the BRI Partnership is a party or by which the BRI
Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
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6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
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6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
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6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and
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without recourse to the parties hereto except for provisions which are expressly
stated to survive such termination; or (b) proceed with the contribution and
transfer of the Transferor Partnership Interests, and in such case, unless the
Transferor Partners shall have previously restored the Property to its condition
prior to the occurrence of any such damage or destruction, the Transferor
Partners shall pay over or assign to the BRI Partnership, on behalf of the
Transferor Partnership, all amounts received or due (plus an amount equal to any
deductible under any insurance policy covering the Property) from, and all
claims against, any insurance company or governmental entity as a result of such
destruction or taking and there shall be no adjustment to the Consideration
hereunder. If prior to the Time of Closing, any such damage or destruction shall
occur having a replacement cost of less than $750,000.00 or if any eminent
domain notice or proceeding is commenced which does not affect any material
portion of the Property, the BRI Partnership shall proceed to accept the
contribution and transfer of the Transferor Partnership Interests in accordance
with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur
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or any subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the Closing Date
which are attributable to (i) the fiscal tax year during which the Closing
occurs shall be apportioned between Transferor Partners and the BRI Partnership,
based upon the relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs shall be paid
to the Transferor Partners, in either case after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
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(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
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(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor
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Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V hereto duly
executed and delivered by the Transferor Partners, pursuant to which the
Transferor Partners shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
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(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
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(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, and to the transfer of the ownership of the
Transferor Partnership to the BRI Partnership and (ii) the following matters:
(A) the Note and other Loan Documents are in full force and effect; (B) to the
Lender's knowledge, no default exists; (C) the amount of the outstanding unpaid
principal balance of the Note, and the date to which interest and principal have
been paid on the Note; and (D) the amount of any real estate tax escrow,
insurance escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the
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BRI Partnership title to the Transferor Partnership Interests. The provisions of
this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the Transferor Partnership shall
be entitled to rely on the agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
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(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor
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Partner under Section 10.05(b)(i) for any amounts in excess of 50% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
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708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
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(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
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11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect
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to allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
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(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor
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Partner, and (iii) the number of the Restricted Distribution BRI Partnership
Units to be received by each Transferor Partner. The BRI Partnership shall have
no obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the
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Transferor Partners to adjust for such amounts owing by the Transferor Partners
to the BRI Partnership in the form of BRI Partnership Units rather than cash. In
addition, if as a result of the prorations and apportionments set forth in
Section 12.01, the BRI Partnership owes an amount to the Transferor Partners,
such amount shall be paid in the form of BRI Partnership Units rather than cash.
The Transferor Agent shall have the right to elect to adjust for amounts owing
to the Transferor Partners or the BRI Partnership, as the case may be, in the
form of cash and/or BRI Partnership Units. The Transferor Agent shall notify the
BRI Partnership at least seven (7) business days prior to the Closing Date of
the manner in which the Transferor Partnership shall have elected to settle
adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such distribution of surplus cash
relates only to the period prior to the Closing Date, all such surplus cash
shall be distributed to the Transferor Partners prior to Closing; provided
however, if as a result of the 1997 annual HUD audit (it being agreed that the
BRI Partnership shall consult with the Transferor Agent during the HUD audit
procedure), HUD (after final adjudication by regulatory and judicial
authorities) determines that all or any portion of such distribution of surplus
cash to the Transferor Partners was improper, the Transferor Partners,
severally, agree to reimburse the Transferor Partnership immediately upon demand
for all amounts so designated by HUD as improper and to indemnify, defend and
hold the Transferor Partnership and the BRI Partnership harmless from and
against all loss, cost, damage or expense (including reasonable legal fees)
suffered or incurred as a result of such improper distribution of surplus cash.
In all other cases, there shall be no adjustment at Closing regarding surplus
cash, but at such time as HUD approves the distribution of surplus cash for
fiscal 1997, the BRI Partnership shall receive all such surplus cash and
thereafter the BRI Partnership shall promptly pay to the Transferor Agent, as
distribution agent for the Transferor Partners, the Transferor Partners pro-rata
share of such surplus cash allocable to the period prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled
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closing the Transferor Partnership Interests or the Property does not conform
with the provisions hereof, the BRI Partnership may elect by written notice
given to the Transferor Agent on or before the Closing Date either (a) to take
title as provided in Section 13.02, or (b) to terminate this Agreement as
provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to
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compel specific performance by the BRI Partnership hereunder, in which event the
Transferor Partners shall have the right to recover from the BRI Partnership the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the Transferor Partners in connection with the exercise of their
right of specific performance. The remedies provided in this Section 13.04 shall
be the sole and exclusive remedies at law or in equity of the Transferor
Partners in the event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Partners may have against the BRI
Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail,
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sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Transferor Agent or the BRI Partnership shall
otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with
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the Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate
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this Agreement by written notice given to the Transferor Agent within seven (7)
days after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the
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Transferor Partners, to the transfer of ownership of the Transferor Partnership
to the BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of
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common stock or other equity securities of BRI (the "Public Offering"), or (ii)
a private placement of common stock or other equity securities of BRI (the
"Private Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the
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Transferor Partners pursuant to the terms of this Agreement. Each Transferor
Partner and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed
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counterparts to such agreements and, to the extent that any agreements or
documents relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the Transferor
Agent is authorized on behalf of each Transferor Partner to hold all such
agreements in escrow pending the Closing, at which time the Transferor Agent
shall be authorized to deliver such documents on behalf of the Transferor
Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: EACH TRANSFEROR GENERAL PARTNER
ESTATE OF MARJORIE WYMAN
By:
- --------------------------------- --------------------------------
Name:
Executor
- --------------------------------- ------------------------------------
John B. Colvin
- --------------------------------- ------------------------------------
Morton Gorn
- --------------------------------- ------------------------------------
Irvin Gomprecht
- --------------------------------- ------------------------------------
M. Richard Wyman
- --------------------------------- ------------------------------------
Stephen M. Gorn
- --------------------------------- ------------------------------------
James D. Nolan
- --------------------------------- ------------------------------------
M. Peter Moser
WITNESS: EACH TRANSFEROR LIMITED PARTNER
- --------------------------------- ------------------------------------
M. Peter Moser
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- --------------------------------- ------------------------------------
John Colvin
- --------------------------------- ------------------------------------
James D. Nolan
- --------------------------------- ------------------------------------
Karen Colvin
ESTATE OF MARJORIE WYMAN
By:
- --------------------------------- --------------------------------
Name:
Executor
- --------------------------------- ------------------------------------
Irvin Gomprecht
- --------------------------------- ------------------------------------
M. Richard Wyman
- --------------------------------- ------------------------------------
Morton Gorn
- --------------------------------- ------------------------------------
Stephen M. Gorn
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:
- --------------------------------- --------------------------------
Name:
Title:
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BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.,
Its General Partner
By:
- --------------------------------- --------------------------------
Name:
Title:
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<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
(with address and partnership interest of each partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Williston
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Williston Funding, Inc., a Maryland corporation (the
"Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Williston Associates, a Maryland general partnership (the
"Transferor Partnership") pursuant to a Joint Venture Agreement dated as of July
28, 1966, as amended (a copy of which, including all amendments, is attached
hereto as Exhibit II and is referred to as the "Transferor Partnership
Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore City,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 98-unit apartment complex, commonly known as Jamestowne Apartments,
which contains related improvements, facilities, amenities, structures,
<PAGE>
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Williston II General
Partnership, a Maryland general partnership ("Borrower Partnership") pursuant to
that certain Partnership Agreement dated as of October 18, 1989, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit IX and is
referred to herein as the "Borrower Partnership Agreement"), and the Transferor
Partnership is also the legal and beneficial owner of all of the issued and
outstanding stock of the Borrower Corporate General Partner, which owns the
remaining fifty percent (50%) general
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partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
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cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
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terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $2,608,723, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of CPC Mortgage
Capital, LLC, as successor to Maryland National Mortgage Corporation ("Lender"),
securing the outstanding principal balance of the Note dated October 18, 1989,
in the original principal amount of $2,250,000 (the "Note") evidencing the loan
(the "Loan") made to the Borrower Partnership by Lender. The Loan is also
secured by the other Loan Documents (as defined in Section 5.20 hereof) which
shall be an obligation of the Borrower Partnership and the Transferor
Partnership as of the Closing subject to any exculpation from liability
provisions therein. The Transferor Partnership shall also
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remain as obligor of the outstanding principal balance of the note dated October
19, 1989 in the original principal amount of the Note (the "Borrower Partnership
Note"), evidencing the loan made to the Transferor Partnership by the Borrower
Partnership (the "Borrower Partnership Loan").
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a fractional BRI Partnership Unit, the number of BRI Partnership Units shall
be rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit. At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"), at Closing, the BRI Partnership
shall pay the BRI Additional Payment to the Transferor Agent in accordance with
the election made by each Transferor Partner pursuant to Section 12.04. The
Transferor Agent shall be liable to distribute the BRI Partnership Units and if
applicable, a pro-rata share of the BRI Additional Payment to each of the
Transferor Partners in accordance with the Transferor Allocation Schedule. The
BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transferor Allocation Schedule or the distribution of the BRI Partnership Units
or the BRI Additional
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Payment, if applicable, to the Transferor Partners and the Transferor Partners
hereby release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market
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value of the common stock of BRI subsequent to the closing of the Public
Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall
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provide the BRI Partnership with access on-site to the originals of all leases
and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
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4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
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5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners, and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the
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Transferor Partners, the Transferor Partnership, the Borrower Partnership or the
Property or any part thereof which questions the validity of this Agreement or
the right of the Transferor Partners to enter into it, or which might result in
or have, either individually or in the aggregate, a material adverse effect on
(i) the business of the Transferor Partnership or the Borrower Partnership, as
such is presently contemplated; or (ii) the rights represented by the Transferor
Partnership Interests or the partnership interests in the Borrower Partnership.
During the period commencing on the date hereof and ending on the Closing Date,
the Transferor Partnership will promptly inform the BRI Partnership in writing
of any material action, suit, proceeding or investigation pending, or to the
Transferor Partnership's knowledge, threat thereof against the Transferor
Partners, the Transferor Partnership, the Borrower Partnership or the Property
or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
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5.08 Title to Properties and Assets. Legal title to the Property is
currently held in the name of some or all of the partners of the Partnership who
are holding title on behalf of and for the benefit of the Transferor Partnerhip.
Except as disclosed on the Financial Statements, the Transferor Partnership does
not own, or otherwise hold any interest in, any material assets other than its
interest Property. On or before the Closing Date, the Transferor Partnership
shall cause legal and equitable title to the Property to be in the name of the
Transferor Partnership, and it shall be a condition to the BRI Partnership's
obligation to close that legal and equitable title to the Property be in the
name of the Transferor Partnership on or before the Closing Date. The Transferor
Partners shall pay all costs in connection with the transfer of title to the
Property to the Transferor Partnership, including, without limitation, any
transfer taxes and documentary stamps.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Guaranty and the Borrower Partnership Loan described in Schedule
5.10 and in such audited financial statements and provide evidence thereof to
the BRI Partnership. As of the Closing Date the Transferor Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Transferor Partnership's business which are either (i) in the aggregate, not in
excess of $50,000, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Service Contracts; and (c) liabilities under the Guaranty or
the Borrower Partnership Note and (d) a contingent liability for recordation
taxes if the Transferor
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Partnership or the Borrower Partnership defaults on the Loan after Closing. The
Transferor Partnership has conducted its business only in the ordinary course
and, except for the Loan and the matters disclosed on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
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(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
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(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents
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and the Borrower Partnership Note are in full force and effect and none of the
Loan Documents or the Borrower Partnership Note have been or shall be modified,
amended or extended except as disclosed on Schedule H and except for extension
of the maturity of the Loan and the Borrower Partnership Loan as provided in
Section 9.06. All payments of principal, interest, and, if applicable, real
estate tax escrow, insurance escrow and any other payments required under the
Loan Documents or the Borrower Partnership Note which are due and payable,
through the Closing Date, have been, and will be, paid in full and no default
exists thereunder which extends beyond applicable grace or cure periods. Neither
the Transferor Partnership nor the Borrower Partnership has received any written
notice of default under any of the Loan Documents or the Borrower Partnership
Note. The Lender is the sole holder or designated servicer of the Note. The
Borrower Partnership is the sole holder of the Borrower Partnership Note,
subject to any pledge thereof to Lender. The only security taken or held in
connection with the Note is evidenced in the Loan Documents. No security has
been taken or held in connection with the Borrower Partnership Note. The Loan
Documents do not secure any other indebtedness but the Loan or the Borrower
Partnership Loan. To the best knowledge of the Transferor Partnership, the
amounts of any real estate tax escrow, insurance escrow and any other escrows
and reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither
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the Transferor Partnership nor the Property is in violation in any material
respect of any Environmental Laws and there is no asbestos, PCB's or lead paint
on the Property or any part thereof. For purposes of this Agreement,
"Environmental Laws" shall mean the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), as amended by the Hazardous and Solid Waste Amendments
of 1984; the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.), as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49
U.S.C. ss. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. ss. 2601 et
seq.; the Clean Air Act (42 U.S.C. ss. 9402 et seq.); the Clean Water Act (33
U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. ss. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.); and all other applicable federal, state and local
environmental laws (including, without limitation, obligations under the common
law), ordinances, orders, rules and regulations, as any of the foregoing may
have been amended, supplemented or supplanted prior to the Closing, relating to
regulation or control of hazardous, toxic or dangerous substances, materials or
wastes (collectively, "Hazardous Materials"), or their handling, storage or
disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of
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the Transferor Partnership, all necessary easements, permits, licenses and
agreements in respect of any of the foregoing are installed and operating and
all installation and connection charges, to the extent due and payable, have
been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the
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Transferor Partnership, there are no presently planned public improvements which
would result in the creation of a special improvement or similar lien upon the
Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
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(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this
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Agreement and has not relied upon the BRI Partnership or the Transferor Agent,
its affiliates or its other legal counsel and advisors for any explanation of
the application of the various United States or state securities laws or tax
laws with regard to its acquisition of the BRI Partnership Units. Such
Transferor Partner further acknowledges and represents that it has made its own
independent investigation of the BRI Partnership and the business conducted or
proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement
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under the Act and under any applicable state securities laws,
receipt of a no-action letter issued by the Securities and
Exchange Commission (together with either registration or an,
exemption under applicable state securities laws) or an opinion
of counsel (which opinion and which counsel shall be acceptable
to Berkshire Realty Company, Inc.) that the proposed transaction
will be exempt from registration under the Act and its applicable
state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
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5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's knowledge the Borrower Partnership is not in violation of any
order, statute, rule or regulation applicable to it, except for such violations
which would not have a Material Adverse Effect. Neither the execution, delivery
and performance of this Agreement by the Transferor Partnership, nor the
contribution of the Transferor Partnership Interests by the Transferor Partners
hereunder, nor the assignment and transfer of the Borrower General Partnership
Interest by the Borrower Corporate General Partner to the Borrower LLC General
Partner will result in any Material Adverse Effect or be in conflict with or
constitute a default under the Borrower Partnership Agreement or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208. Each of the Transferor Partnership and the Borrower Corporate General
Partner owns a 50% general partnership interest in the Borrower Partnership. No
partner of the Borrower Partnership is in default with respect to any capital
contribution required to be paid by it pursuant to the Borrower Partnership
Agreement. A true, correct and complete copy of the Borrower Partnership
Agreement is attached hereto as Exhibit IX. The Borrower Partnership has no
commitment to issue any right to purchase or acquire or to issue or distribute
to the partners thereof any evidences of indebtedness or assets; and the
Borrower Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the Borrower Partnership or any
interest therein or to make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
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5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Borrower Partnership has conducted its
business only in the ordinary course and, except for the Loan and the Borrower
Partnership Loan and the matters disclosed on Schedule 5.10, the Borrower
Partnership has not created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
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(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of
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the Borrower Corporate General Partner free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party. The Borrower Corporate General Partner currently owns and holds,
and, subject to the provisions of Section 9.12 hereof, until immediately prior
to Closing will own and hold, the Borrower General Partnership Interest free and
clear of any liens, pledges and encumbrances of any kind whatsoever and free of
any rights of assignment of any third party. Upon Closing, the Transfer
Partnership shall own and hold its interest in the Borrower Partnership free and
clear of any liens, pledges and encumbrances of any kind whatsoever, and free of
any rights of assignment of any third party. Prior to Closing, the Transferor
Partnership shall assign and transfer to the Transferor Agent all of the issued
and outstanding stock of the Borrower Corporate General Partner. Subsequent to
such assignment and transfer to the Transferor Agent but prior to Closing, the
Transferor Agent shall cause the Borrower Corporate General Partner to assign
and transfer the Borrower General Partnership Interest to the Borrower LLC
General Partner (as defined in Section 9.12 hereof) free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party, such that upon Closing the Transferor Partnership
and the Borrower LLC General Partner will each own and hold a fifty percent
(50%) general partnership interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO THE BORROWER CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding
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obligations, enforceable against the Borrower Corporate General Partner in
accordance with their respective terms.
5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the acquisition of the Borrower General
Partnership Interest in the Borrower Partnership or any part thereof, except for
the rights of the Borrower LLC General Partner and the BRI Partnership under
this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so
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delivered or made available, has not been modified and is in full force and
effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
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6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $100,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such damage or
destruction shall occur having a replacement cost of less than $100,000.00 or if
any eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Partnership Interests in
accordance with the provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder, except that the Transferor Partnership
(and the Borrower Partnership) may extend the maturity date of the Loan to
January 31, 1998 and shall use its good faith efforts to do so, and
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(d) not make (or permit the Borrower Partnership to make) any prepayment of
principal under the Note. Without limitation of the foregoing, the Transferor
Partnership shall (a) make all payments of interest and principal and, if
applicable, tax escrow, insurance escrow, and other amounts required under the
Borrower Partnership Note coming due thereunder prior to the Closing in
accordance with the terms thereof, (b) otherwise comply with all of the material
terms and provisions of the Borrower Partnership Note up to the Closing, (c) not
alter or amend the Borrower Partnership Note, or seek or accept any waivers or
extensions of time for payment or performance thereunder, except that the
maturity date of the Borrower Partnership Loan may be extended to January 31,
1998 in the event that the maturity date of the Loan is extended to January 31,
1998 as provided above, and (d) not make any prepayment of principal under the
Borrower Partnership Note. All costs incurred in extending the maturity date of
the Loan and the Borrower Partnership Loan shall be paid by the Transferor
Partnership.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any
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contract, transaction or agreement which shall survive the Closing (except as
permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
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(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent,
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on behalf of the Transferor Partnership and pursuant to the power of attorney
granted to it under Section 19.04, shall transfer all of the issued and
outstanding stock in the Borrower Corporate General Partner to the Transferor
Agent. Immediately prior to Closing, (i) the Transferor Agent shall cause the
Borrower Corporate General Partner to assign its Borrower General Partnership
Interest in the Borrower Partnership to a limited liability company formed by
the BRI Partnership, all of the membership interests in which shall be owned by
the BRI Partnership or an affiliate thereof (the "Borrower LLC General Partner")
and (ii) the Transferor Agent shall cause the Borrower Corporate General Partner
to withdraw as a general partner of the Borrower Partnership, such that, at
Closing, the Borrower Partnership shall validly exist as a Maryland general
partnership, having as its sole general partners the Transferor Partnership and
the Borrower LLC General Partner, each of which shall hold a 50% general
partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
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delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the Borrower Partnership Assignment has not been duly executed
and delivered by the Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security
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deposits, including interest thereon, if any, held by the Transferor Partnership
at the Closing Date under the Leases and a schedule updating the Rent Roll and
setting forth all arrears in rents and all prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and fairways endorsement and to omit from its title insurance policy
all exceptions for (i) judgments, bankruptcies or other returns against persons
or entities whose names are the same as or similar to the Transferor
Partnership's name; (ii) parties in possession other than under the rights to
possession granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by
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the Transferor Partners with the Foreign Investment and Real Property Tax Act,
Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been paid on the Note; and (D) the amount of
any real estate tax escrow, insurance escrow and other escrows or reserves held
by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
all loan assumption fees, all transfer taxes and documentary stamps, if any, in
connection with the transfer of title to the Property to the Transferor
Partnership described in Section 5.08 hereof, and one-half of all: (i) Title
Insurance and Survey costs, (ii) escrow
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and recording costs (iii) transfer taxes and documentary stamps, if any, in
connection with the assignment and transfer of the Transferor Partnership
Interests as contemplated herein, and (iv) UCC Search costs. The Transferor
Partners also shall pay their pro rata share of the fees and expenses
attributable to the transactions contemplated by this Agreement in accordance
with the provisions of Section 19.03 and all of the fees and expenses of their
own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI Partnership
and the Transferor Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
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10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any amounts in
excess of 50% of the fair market value of the BRI Partnership Units received by
such Transferor Partner as of the date such indemnification obligation is
satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor
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Partner under Section 10.05(b)(i) for any amounts in excess of 50% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
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708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower Corporate General
Partner in the Borrower Partnership to the Borrower LLC General Partner in such
a manner as not to result in the dissolution of the Borrower Partnership, in the
form of the Borrower Partnership Assignment attached hereto as Exhibit X, duly
executed and delivered by the Borrower Corporate General Partner, which shall
transfer such Borrower General Partnership Interest in the Borrower Partnership
to the Borrower LLC General Partner free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party (the "Borrower
Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
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11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant to which the BRI Partnership, or its designees, shall be admitted as
partners of the Transferor Partnership.
(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
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(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees and one-half of all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs and (iii) transfer taxes and documentary stamps, if any, in
connection with the assignment and transfer of the Transferor Partnership
Interests as contemplated herein, and (iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
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(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments, or except as contemplated in Section
11.04 hereof, or as otherwise required by the holder of the Loan under the Loan
Documents, or change the terms in a manner that would change the Loan from
nonrecourse to recourse within the meaning of Section 752 of the Code and the
regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the
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Code, the Treasury Regulations, or published Internal Revenue Service ("IRS")
rulings, notices or other administrative guidance, or in any private letter
ruling issued to a taxpayer other than the BRI Partnership (any such change, a
"Change in Law") such that, in the reasonable opinion of tax counsel to the BRI
Partnership, based on such Change in Law, either (i) the foregoing method is no
longer legally permissible, (ii) or an alternative method, not previously
permitted, which results in more favorable tax consequences to each of the
limited partners, including the Transferor Partners, of the BRI Partnership is
currently permitted, the BRI Partnership, shall be entitled, without the consent
of the Transferor Agent, to adopt an alternative method, provided further that,
in the case of clause (i), the BRI Partnership shall choose the alternative
method that minimizes to the extent reasonably possible, the adverse tax
consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
11.04 Post-Closing Refinancing. Notwithstanding the provisions of Section
11.03(c) hereof, the BRI Partnership and BRI shall cause the Transferor
Partnership within 90 days after the Closing Date to refinance the Loan with a
new non-recourse loan (the "New Loan") for an amount not less than $1,820,000
for a term not less than seven years, for an interest rate not to exceed that
available under the Tier 2 FNMA Underwriting Guidelines and upon such other
terms and conditions as may be satisfactory to the BRI Partnership and BRI. The
Transferor Partners shall pay all costs and expenses incurred by the Transferor
Partnership, the BRI Partnership or BRI in connection with such refinancing,
including, without limitation, loan origination fees, lender legal fees and all
other expenses charged by the refinancing lender and the Transferor
Partnership's, the BRI Partnership's or BRI's attorneys' fees and costs
(collectively, "Refinancing Costs"), but excluding any escrow required to be
established with the refinancing lender and the cost of any repairs or
replacements required by the refinancing lender. At Closing, the Transferor
Partners shall deposit in escrow a sum (the "Refinancing Escrow Amount") equal
to the lesser of (a) two (2%) percent of the principal amount of the New Loan as
estimated by the BRI Partnership at the time of Closing (but in any event not
more than $36,400), or (b) an amount mutually agreed to by the Transferor Agent
and the BRI Partnership, with a mutually acceptable escrow agent and pursuant to
a mutually acceptable escrow agreement. The Refinancing Escrow Amount shall be
used to pay for the Refinancing Costs. The amount to be deposited by each
Transferor Partner shall be proportionate to the number of BRI Partnership Units
to be received by each Transferor Partner at Closing in accordance with the
Transferor Allocation Schedule. In the event that the actual Refinancing Costs
are less than the Refinancing Escrow Amount, the difference shall be refunded to
the Transferor Agent who shall distribute such refund to the Transferor Partners
in
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proportion to their respective contributions to the Refinancing Escrow Amount.
Once the Loan is refinanced under this Section, the provisions of Section
11.03(c) shall apply to the New Loan as fully and completely as if all
references in Section 11.03(c) to the Loan instead referred to the New Loan and
all references to the Loan shall be deemed to refer to the New Loan.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy
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resulting from such recomputation and any material errors or omissions in
computing any apportionments on the Closing Date shall be promptly corrected,
which obligation shall survive the Closing Date for a period of ninety (90) days
after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transferor Allocation Schedule (the "Transferor Allocation Schedule"), which
shall be based upon the Preliminary Transferor Allocation Schedule, shall
incorporate all adjustments and prorations to be made pursuant to Section 12,
and shall set forth (i) the name of each Transferor Partner, (ii) the number of
Unrestricted Distribution BRI Partnership Units to be received by each
Transferor Partner, and (iii) the number of Restricted Distribution BRI
Partnership Units to be received by each Transferor Partner. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Preliminary Transferor Allocation Schedule or the Transferor
Allocation Schedule or the distribution of the BRI Partnership Units or the BRI
Additional Payment, if applicable, to the Transferor Partners and the Transferor
Partners hereby release the BRI Partnership from any such obligation or
liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable
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to the other party by reason of this allocation or otherwise, the appropriate
sum shall be paid to the other party within thirty (30) days from the receipt
thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01 and the escrow required to be
established under Section 11.04, the Transferor Partners owe an amount to the
BRI Partnership or into escrow, the Transferor Partnership shall have the right
to elect on behalf of the Transferor Partners to adjust for such amounts owing
by the Transferor Partners to the BRI Partnership or the escrow in the form of
BRI Partnership Units rather than cash. In addition, if as a result of the
prorations and apportionments set forth in Section 12.01, the BRI Partnership
owes an amount to the Transferor Partners, such amount shall be paid in the form
of BRI Partnership Units rather than cash. The Transferor Agent shall have the
right to elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition
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and to deliver in exchange therefor the Consideration subject to reduction of
the Consideration Amount by the amounts required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The Transferor Partners will pay any assumption
or transfer fee and other related costs and expenses required by Lender (the
"Loan Assumption Fees") in connection with obtaining the consent of Lender to
the contribution of the Transferor Partnership Interests to the BRI Partnership
and the transfer of the ownership of the Transferor Partnership to the BRI
Partnership subject to the Notes and other Loan Documents as contemplated
hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
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With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
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representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower
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Corporate General Partner set forth in this Agreement shall be true and correct,
in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title to a fifty percent (50%) general partnership interest
in the Borrower General Partnership, free and clear of all liens, pledges, and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party; and the Borrower LLC General Partner shall own a fifty percent
(50%) general partnership interest in the Borrower Partnership, free and clear
of any liens, pledges and encumbrances of any kind whatsoever and free of any
rights of assignment of any third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all
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parties hereunder except for provisions which are expressly stated to survive
termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of
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its interests in the Borrower Partnership to the Borrower LLC General Partner,
to the withdrawal from the Borrower Partnership of the Borrower Corporate
General Partner, and to the admission to the Borrower Partnership of the
Borrower LLC General Partner as a fifty percent (50%) general partner, and to
obtain the Lender Estoppel Letter. The Transferor Partnership, with the BRI
Partnership's cooperation, shall immediately commence to obtain the consent of
Lender necessary to permit the contribution of the Transferor Partnership
Interests to the BRI Partnership, the transfer of ownership of the Transferor
Partnership to the BRI Partnership, to the assignment by the Borrower Corporate
General Partner of all of its interests in the Borrower Partnership to the
Borrower LLC General Partner, to the withdrawal from the Borrower Partnership of
the Borrower Corporate General Partner, and to the admission to the Borrower
Partnership of the Borrower LLC General Partner as a fifty percent (50%) general
partner. The BRI Partnership shall supply any and all documentation and
additional information required by Lender in order to promptly complete the
request for the consent of Lender to the transactions contemplated hereunder.
The Transferor Partnership shall request that Lender state in writing any terms
and requirements, including the amount of any Loan Assumption Fees, to be
imposed by Lender in connection with its consent to the transactions
contemplated hereby. It shall be a condition of Closing that prior to October
15, 1997, Lender shall have granted its consent to the transactions contemplated
hereunder on terms and requirements reasonably satisfactory to the BRI
Partnership, shall have issued the Lender Estoppel Letter and shall have agreed
to release the Transferor Partners from all liability under the Loan Documents.
In the event that any of the terms or requirements required by Lender for its
consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, and the BRI
Partnership gives timely notice of termination hereunder to the Transferor
Agent, this Agreement shall terminate without further action by any party, and,
thereafter this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive termination of this
Agreement. In the event the Lender shall not have agreed to release the
Transferor Partners from all liability under the Loan Documents or the Lender
shall have placed terms and conditions on the Transferor Partners that are
unacceptable to them, the Transferor Agent may terminate this Agreement by
written notice given to the BRI Partnership within fifteen (15) business days
after the Transferor Agent has received in writing notice that the Lender has
refused to release the Transferor Partners from liability under the Loan
Documents or has imposed such unacceptable terms and conditions. If the
Transferor Agent gives timely notice of termination to the BRI Partnership, this
Agreement shall terminate without further action by any party, and, thereafter
this
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Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
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SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
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18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
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18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
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Notwithstanding anything to the contrary contained herein, for the proposes of
this Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI
shall be entitled to an aggregate administrative fee of $200,000 in connection
with the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out the
provisions of this Agreement and the transactions contemplated hereby including,
without limitation, execution of such title affidavits, non-imputation and
fairways affidavits and gap indemnities as are required by the terms of this
Agreement and endorsement, assignment and transfer of the issued and outstanding
stock of the Borrower Corporate General Partner currently owned by the
Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such agreements and, to the extent that any agreements or documents relating to
this
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Agreement (such as partnership assignments or other similar closing documents)
are executed prior to the Closing, the Transferor Agent is authorized on behalf
of each Transferor Partner and the Borrower Corporate General Partner to hold
all such agreements in escrow pending the Closing, at which time the Transferor
Agent shall be authorized to deliver such documents on behalf of the Transferor
Partners and the Borrower Corporate General Partner to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
_________________________ __________________________________
Morton Gorn
WITNESS:
_________________________ __________________________________
Arlene Gorn
WITNESS:
_________________________ __________________________________
Samuel G. Gorn
WITNESS:
_________________________ __________________________________
Name:
As Trustee of
Irving Gisner u/w/o Trust
WITNESS:
_________________________ __________________________________
Slova Gisner
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<PAGE>
WITNESS:
_________________________ __________________________________
Bette Miller
WITNESS:
_________________________ __________________________________
Irvin Miller
WITNESS:
_________________________ __________________________________
Wilbert H. Sirota
WITNESS:
_________________________ __________________________________
M. Richard Wyman
WITNESS:
_________________________ __________________________________
Name:
For the Estate of Harry S. Miller
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<PAGE>
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
_________________________ By:__________________________________________
Name:
Title:
BORROWER CORPORATE GENERAL PARTNER:
WITNESS: WILLISTON FUNDING, INC.,
a Maryland corporation
_________________________ By:__________________________________________
Name:
Title:
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<PAGE>
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
__________________________ By:____________________________________
Name:
Title:
WITNESS:
__________________________ _______________________________________
Morton Gorn, solely for the purposes of
Section 19.06
WITNESS:
__________________________ _______________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
WITNESS:
__________________________ _______________________________________
John Colvin, solely for the purposes of
Section 19.06
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<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow,
insurance escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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<PAGE>
Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Copy
Ridgeview Chase
(8-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Avondale
Associates Limited Partnership, a Maryland limited partnershp (the "Transferor
General Partner") and the individuals and entities listed on Exhibit I attached
hereto (the "Transferor Limited Partners"), with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (the Transferor General Partner and the
Transferor Limited Partners are sometimes collectively referred to as the
"Transferor Partners"), and Questar Investment Corporation, a Maryland
corporation (the "Transferor Agent"), with an address of 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in
Ridgeview Chase Associates Limited Partnership, a Maryland Limited Partnership
(the "Transferor Partnership") pursuant to the Fifth Amended and Restated
Certificate and Agreement of Limited Partnership dated as of January 1, 1993, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Carroll County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 204-unit apartment complex, commonly known as Ridgeview Chase
Apartments, which contains related improvements, facilities, amenities,
<PAGE>
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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<PAGE>
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before September 5, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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<PAGE>
Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before September 5, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than liens for real estate taxes and current water and sewer charges for
fiscal 1997 which taxes and current water and sewer charges will be adjusted as
provided in Section 12 hereof) (collectively the "Monetary Liens") shall
automatically be deemed to be unacceptable exceptions to title and shall be paid
and removed by the Transferor Partners at Closing. The Transferor Partnership
shall be deemed to have refused to cure any unacceptable exceptions unless the
Transferor Partnership, within ten (10) days after receipt of notice from the
BRI Partnership, shall notify the BRI Partnership in writing that the Transferor
Partnership will attempt to cure such unacceptable exceptions. If the Transferor
Partnership fails or refuses to cure said unacceptable exceptions within the
time period above provided, on or before the earlier to occur of (A) ten (10)
days after the Transferor Partnership notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
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<PAGE>
1.03 Survey. On or before September 5, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of
the Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before September 5, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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<PAGE>
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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<PAGE>
tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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<PAGE>
tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be $11,942,522, which shall consist of BRI Partnership Units, to
be issued by the BRI Partnership to the Transferor Partners as of the Closing,
equal in value (as such value is determined at the time and in the manner
provided hereinbelow) to the excess of (X) $11,942,522, subject to the
prorations and adjustments as provided in this Agreement, (the "Consideration
Amount") minus (Y) the amount required to pay the Loan in full.
At the Closing, the BRI Partnership, at its election, may pay in full the
outstanding principal balance of the Note dated October 26, 1987, in the
original principal amount of $9,600,000 (the "Note") evidencing the loan (the
"Loan") made to the Transferor Partnership by CRIIMI MAE Services Limited
Partnership ("Lender") and secured by the Loan Documents.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
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<PAGE>
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
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<PAGE>
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Retention of Escrow. At the Closing, the Transferor Partnership shall
disburse the escrow deposits set forth on Schedule C as provided in Section
12.01.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this
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<PAGE>
Agreement (the "Closing") shall take place in the offices of Hale and Dorr LLP,
60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
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4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
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4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent,
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approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the Transferor Partners or the Transferor Partnership in connection with
the valid execution and delivery of this Agreement by the Transferor Partners
and the performance of the Transferor Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership,
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relating to the Transferor Partnership or all or a portion of the Property or
otherwise affecting the Property, including without limitation, all material
management, maintenance, brokerage, supply and service contracts and any
material contract, agreement or other arrangement providing for the employment
of, furnishing of services by, rental of real or personal property from or
otherwise requiring payments to or by the Transferor Partnership (collectively
"Service Contracts"). Except as noted on Schedule E, each Service Contract is
cancelable on thirty (30) days notice. Transferor Partnership has no knowledge
of any material breach or material default under any Service Contract. As of
Closing, the Transferor Partnership will have paid all amounts due under each
Service Contract, other than payments for which an adjustment shall be made
pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the
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payment of any borrowed money. Except as disclosed on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, no Transferor
Partner, nor any affiliate of any Transferor Partner nor any employee of the
Transferor Partnership is presently indebted to the Transferor Partnership for
borrowed money and the Transferor Partnership is not presently indebted for
borrowed money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Loan and the Other Loans described in Schedule 5.10 and in such
audited financial statements and provide evidence thereof to the BRI
Partnership. As of the Closing Date the Transferor Partnership shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Partnership's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts and (c) liabilities under the Loan Documents. The Transferor
Partnership has conducted its business only in the ordinary course and, except
for the Loan and the matters disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, the Transferor
Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any
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taxes that might result in a determination materially adverse to the Transferor
Partnership. All taxes due with respect to completed and settled examinations or
concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or
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entered into other agreements of any kind which are currently in effect for the
acquisition of the Property or any part thereof, except for the rights of the
BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
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5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents which are due and payable, through the Closing
Date, have been, and will be, paid in full and no default exists thereunder
which extends beyond applicable grace or cure periods. The Transferor
Partnership has not received any written notice of default under any of the Loan
Documents. The Lender is the sole holder or designated servicer of the Note. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. The Loan Documents secure no other indebtedness but the Loan. To the
best knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no
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underground tanks for Hazardous Materials, active or abandoned, at the Property
and no Hazardous Materials are present or have been released in a reportable
quantity, where such a quantity has been established by statute, ordinance,
rule, regulation or order, at, on or under the Property. To the Transferor
Partnership's knowledge, except as disclosed in the Environmental Reports or in
the BRI Environmental Reports, neither the Transferor Partnership nor the
Property is in violation in any material respect of any Environmental Laws and
there is no asbestos, PCB's or lead paint on the Property or any part thereof.
For purposes of this Agreement, "Environmental Laws" shall mean the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended by the
Hazardous and Solid Waste Amendments of 1984; the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), as
amended by the Superfund Amendments and Reauthorization Act of 1986; the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the Toxic
Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42 U.S.C.
ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all other
applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
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5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
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5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33, no
approval of any person not a party to this Agreement is necessary for the
contribution by such Transferor Partner of the Transferor Partnership Interests
held by such Transferor Partner and the performance of such Transferor Partner's
obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien,
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claim, charge, pledge, encumbrance, limitation, agreement or instrument
whatsoever. The provisions of this Section 5.34 shall survive the Closing
indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite
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period of time, including the risk of a complete loss of its investment in the
BRI Partnership Units (or shares of common stock issued upon exchange of the BRI
Partnership Units), (ii) it has knowledge and experience in financial and
business matters sufficient to evaluate the risks of investment in the BRI
Partnership Units and BRI, and (iii) it has consulted with its own separate
counsel and tax advisor, to the extent deemed necessary by it, as to all legal
and taxation matters covered by this Agreement and has not relied upon the BRI
Partnership or the Transferor Agent, its affiliates or its other legal counsel
and advisors for any explanation of the application of the various United States
or state securities laws or tax laws with regard to its acquisition of the BRI
Partnership Units. Such Transferor Partner further acknowledges and represents
that it has made its own independent investigation of the BRI Partnership and
the business conducted or proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
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"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
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6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
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liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
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(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
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6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any
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governmental authority has a current plan that would adversely affect the
continued use and operation of any of its properties as currently used and
operated except, in the case of clauses (i), (ii), (iii) and (iv), as would not
have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the
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ordinary course of business or by reason of a default by the tenant thereunder
or by reason of the provisions contained in the Lease or as required by
applicable law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on
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Schedule 9.06 attached hereto and (d) not make any prepayment of principal under
the Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
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(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the
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Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
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(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V hereto duly
executed and delivered by the Transferor Partners, pursuant to which the
Transferor Partners shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
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(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
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(o) Intentionally Omitted.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the Transferor Partnership shall
be entitled to rely on the agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
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(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this
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Agreement having a fair market value (measured at the time such BRI Partnership
Units are returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions,
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representations or warranties contained herein, and each party acknowledges and
agrees that other than the representations and warranties set forth herein, no
other representations and warranties are being made with respect to the BRI
Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
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apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
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(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and one-half of all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net
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condemnation proceeds in accordance with Section 1033 of the Code and hold the
same until the expiration of the No Transfer Period.
(c) Intentionally Omitted.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
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SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) Intentionally omitted;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer
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Allocation Schedule"), which shall be based upon the Preliminary Transfer
Allocation Schedule, shall incorporate all adjustments and prorations to be made
pursuant to Section 12 and shall set forth (i) the name of each Transferor
Partner, (ii) the number of Unrestricted Distribution BRI Partnership Units to
be received by each Transferor Partner, and (iii) the number of the Restricted
Distribution BRI Partnership Units to be received by each Transferor Partner.
The BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transfer Allocation Schedule or the distribution of the BRI Partnership Units or
the BRI Additional Payment, if applicable, to the Transferor Partners and the
Transferor Partners hereby release the BRI Partnership from any such obligation
or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
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12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this
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Agreement. In addition to the foregoing, if the BRI Partnership desires to
accept the contribution and transfer of the Transferor Partnership Interests in
accordance with the terms of this Agreement and the Transferor Partners
willfully refuse to perform the Transferor Partners' obligations hereunder, the
BRI Partnership, at its option, shall have the right to compel specific
performance by the Transferor Partners hereunder, in which event the BRI
Partnership shall have the right to recover from the Transferor Partners the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the BRI Partnership in connection with the exercise of its right of
specific performance. The remedies provided in this Section 13.03 shall be the
sole and exclusive remedies at law or in equity of the BRI Partnership in the
event of a default by the Transferor Partners in lieu of all other rights and
remedies which the BRI Partnership may have against the Transferor Partners at
law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN PRE-PAYMENT
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that
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American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of the Transferor Partners and
QPI in accordance with the provisions of Section 19 hereof. In no event shall
any commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall the BRI
Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Intentionally Omitted.
14.03 Loan Prepayment. The Transferor Partnership shall pay any prepayment
or other penalty and all other amounts required to repay the Loan in full at
Closing.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
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If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6
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(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
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(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(f) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
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(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Intentionally Omitted.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on
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Schedule K attached hereto (collectively the "Related Agreements"). (The
transactions described in the Related Agreements, including this Agreement, are
collectively the "Related Transactions"). Except to the extent the parties
expressly agree otherwise in writing or in that certain Kickout Agreement of
even date between the BRI Partnership and the Transferor Agent attached hereto
as Exhibit 6 (the "Kickout Agreement"), in the event that any of the Related
Agreements is terminated pursuant to any termination provision of any other
Related Agreement or does not become effective due to the failure of all of the
other parties to the Related Agreement to execute the Related Agreement on or
before September 22, 1997, this Agreement shall terminate automatically
simultaneously with the termination of any such Related Agreement or upon the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, whereupon this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive the termination of this Agreement. The Closing
under this Agreement shall be simultaneous with the closings under the Related
Agreements. Except as provided in the Kickout Agreement, in the event the
closing under any of the Related Agreements is cancelled or postponed, the
Closing under this Agreement shall be cancelled or postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
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18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
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18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided
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that delivery of the consideration as provided herein to the Transferor Partners
may not be waived by the Transferor Agent) and/or effecting or refraining to
effect a termination of this Agreement pursuant to the terms hereof and the
Kickout Agreement, agreeing to extend any of the dates by which certain events
must occur in accordance with Section 18.11, calculation of apportionment
amounts under Section 12, electing on behalf of the Transferor Partners which
pro-rations will be adjusted with cash and/or BRI Partnership Units and acting
as distribution agent with respect to the apportionments and adjustments under
Section 12 hereof and such other administrative activities as are described in
this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the proposes of
this Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI
shall be entitled to an aggregate administrative fee of $200,000 in connection
with the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
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19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed counterparts to such agreements and, to the extent that any
agreements or documents relating to this Agreement (such as partnership
assignments or other similar closing documents) are executed prior to the
Closing, the Transferor Agent is authorized on behalf of each Transferor Partner
to hold all such agreements in escrow pending the Closing, at which time the
Transferor Agent shall be authorized to deliver such documents on behalf of the
Transferor Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its,
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his, or their responsibilities in good faith and in accordance with the terms of
this Agreement; provided that the indemnity granted under this Section 19.06
shall not extend to any act of gross negligence or willful malfeasance on the
part of the Transferor Agent and/or the GGC Parties. By executing this
Agreement, Morton Gorn, Stephen Gorn and John Colvin, individually, and on
behalf of all of the GGC Parties, jointly and severally, hereby release each of
the Transferor Partners from any and all liability arising out of the
transactions contemplated hereby and the operation of the Transferor Partnership
prior to the Closing, except as specifically provided to the contrary herein or
in any of the Closing documents implementing the transactions contemplated
hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNER
AVONDALE ASSOCIATES LIMITED
PARTNERSHIP
By:
- -------------------------------- --------------------------------
Name:
Its:
WITNESS: EACH TRANSFEROR LIMITED PARTNER
NORMAN BERGER MARITAL TRUST
By:
- -------------------------------- --------------------------------
Name:
As trustee for the Norman Berger
Marital Trust
- -------------------------------- ------------------------------------
Lionel Goodman
- -------------------------------- ------------------------------------
Stanley Klatsky
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BERNARD S. KLEIMAN TRUST
By:
- -------------------------------- --------------------------------
Name:
As Trustee for the Bernard S.
Kleiman Trust
- -------------------------------- ------------------------------------
James P. McDonagh
TEG ASSOCIATES
By:
- -------------------------------- --------------------------------
Name:
Its:
- -------------------------------- ------------------------------------
Bette Miller
- -------------------------------- ------------------------------------
Leonard Stoler
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:
- -------------------------------- --------------------------------
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
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By: Berkshire Apartments, Inc.,
Its General Partner
By:
- -------------------------------- --------------------------------
Name:
Title:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - CapitalContribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letters
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
(with address and partnership interest of each partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Kingswood Common II
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between John B.
Colvin, Morton Gorn, Stephen M. Gorn and Samuel G. Gorn (the "Transferor General
Partners") and the individuals and entities listed on Exhibit I attached hereto
(the "Transferor Limited Partners"), with an address c/o Questar Properties,
Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr.
Stephen M. Gorn (the Transferor General Partners and the Transferor Limited
Partners are sometimes collectively referred to herein as the "Transferor
Partners"), and Questar Investment Corporation, a Maryland corporation (the
"Transferor Agent"), with an address of 124 Slade Avenue, Suite 200, Baltimore,
Maryland 21208, Attention: Mr. Stephen M. Gorn, Second Kingswood Common Funding,
Inc., a Maryland corporation (the "Borrower Corporate General Partner"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, and BRI OP Limited Partnership, a Delaware limited
partnership (the "BRI Partnership") with an address c/o Berkshire Realty
Company, Inc., 470 Atlantic Avenue, Boston, Massachusetts 02210, Attention: Mr.
David J. Olney.
WHEREAS, the Transferor General Partners are the legal and beneficial
owners, respectively, of all of the general partnership interests as set forth
in Exhibit I and the Transferor Limited Partners are the legal and beneficial
owners, respectively, of all of the limited partnership interests as set forth
in Exhibit I in Second Kingswood Common Associates Limited Partnership, a
Maryland limited partnership (the "Transferor Partnership") pursuant to the
Amended and Restated Limited Partnership Agreement dated as of June 29, 1977 as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
<PAGE>
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 203-unit apartment complex, commonly known as Kingswood Common
II Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Partnership in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
all the estate and rights of the Transferor Partnership in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Partnership
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible
property now or hereafter, owned by the Transferor Partnership and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Partners pursuant
to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
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WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Second Kingswood Common II
General Partnership, a Maryland general partnership ("Borrower Partnership")
pursuant to that certain Partnership Agreement dated as of ________________, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit IX and is referred to herein as the "Borrower Partnership Agreement"),
and the Transferor Partnership is also the legal and beneficial owner of all of
the issued and outstanding stock of the Borrower Corporate General Partner,
which owns the remaining fifty percent (50%) general partnership interest in the
Borrower Partnership (the "Borrower General Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general and limited partnership interests in the Transferor
Partnership (collectively referred to as the "Transferor Partnership Interests")
to the BRI Partnership, and the BRI Partnership desires to admit the Transferor
Partners as limited partners in the BRI Partnership and to accept such
contribution from the Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the
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"Amended Transferor Partnership Agreement") and an Amended and Restated
Certificate of Limited Partnership in the form of Exhibit V attached hereto (the
"Amended Transferor Partnership Certificate") pursuant to which the BRI
Partnership, or its designees, shall be admitted and the Transferor Partners
shall withdraw, as the partners of the Transferor Partnership and be released of
all liability thereunder, and the terms of the Transferor Partnership shall be
amended in accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement and such other endorsements as are reasonably required by the BRI
Partnership (provided, that the cost of any such other endorsements shall be
paid by the BRI Partnership) and are available under the law of the state in
which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan
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Documents and liens for real estate taxes and current water and sewer charges
for fiscal 1997 which taxes and current water and sewer charges will be adjusted
as provided in Section 12 hereof) (collectively the "Monetary Liens") shall
automatically be deemed to be unacceptable exceptions to title and shall be paid
and removed by the Transferor Partners at Closing. The Transferor Partnership
shall be deemed to have refused to cure any unacceptable exceptions unless the
Transferor Partnership, within ten (10) days after receipt of notice from the
BRI Partnership, shall notify the BRI Partnership in writing that the Transferor
Partnership will attempt to cure such unacceptable exceptions. If the Transferor
Partnership fails or refuses to cure said unacceptable exceptions within the
time period above provided, on or before the earlier to occur of (A) ten (10)
days after the Transferor Partnership notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the
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Survey shall be deemed accepted by the BRI Partnership and the survey matters
shown on the Survey shall be included within the "Permitted Exceptions." If any
survey matters are unacceptable to the BRI Partnership and the BRI Partnership
timely notifies the Transferor Partnership in writing of such fact as above
provided, the Transferor Partnership shall have thirty (30) days from the date
the Transferor Partnership receives notice of such unacceptable survey matters,
at the option of the Transferor Partnership, to cure such unacceptable survey
matters. The Transferor Partnership shall be deemed to have refused to cure any
unacceptable survey matters unless the Transferor Partnership, within ten (10)
days after receipt of notice from the BRI Partnership, shall notify the BRI
Partnership in writing that the Transferor Partnership will attempt to cure such
unacceptable survey matters. If the Transferor Partnership fails or refuses to
cure said unacceptable survey matters within the time period provided, on or
before the earlier to occur of (A) ten (10) days after the Transferor
Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to
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rely upon the covenants, representations, warranties or agreements made by the
Transferor Partnership in this Agreement. Should the BRI Partnership decide, in
its sole judgment, during the Due Diligence Period that based upon the results
of the Environmental Inspection, it no longer desires to proceed with the
transactions contemplated hereby, the BRI Partnership shall have the right to
terminate this Agreement by giving written notice of its election to do so to
the Transferor Partnership on or before the last day of the Due Diligence
Period, and upon the giving of such notice this Agreement shall be of no further
force or effect. If the BRI Partnership shall fail to exercise such termination
right within the Due Diligence Period, the BRI Partnership shall be conclusively
deemed to have waived any right it may have had to terminate this Agreement
pursuant to this Section 1.04(b). The BRI Partnership shall pay when due all
fees and expenses incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that
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nothing contained herein is intended to obligate the BRI Partnership to
indemnify, pay or otherwise reimburse the Transferor Partners for any costs of
remediation or clean-up, fines, penalties, assessments or similar charges for
any condition existing at the Property solely by reason of the fact that the BRI
Partnership or its agents, contractors, consultants or other representatives
discover the existence of such condition during the course of conducting tests
or other activities on the Property. The provisions of this Section 1.04(d)
shall survive the Closing or any termination of this Agreement; provided,
however, that no claim by the Transferor Partners under this Section 1.04(d) for
damage to the Property shall be made if (i) the Closing occurs or (ii) more than
90 days after the termination of this Agreement if the Closing does not occur,
except for damage claims made by tenants as to which the time for asserting any
such claim shall be not later than 180 days after the termination of this
Agreement. If the Closing occurs, the BRI Partnership shall not have any claim
against the Transferor Partners by reason of any damage to the Property of the
nature specified above or by reason of any claim against which the BRI
Partnership is indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $6,844,284, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
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In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of The Patrician
Financial Company ("Lender"), securing the outstanding principal balance of the
Note dated October 29, 1996, in the original principal amount of $5,976,000 (the
"Note") evidencing the loan (the "Loan") made to the Borrower Partnership by
Lender. The Loan is also secured by the other Loan Documents (as defined in
Section 5.20 hereof) which shall be an obligation of the Borrower Partnership
and the Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein. The Transferor Partnership shall also remain as
obligor of the outstanding principal balance of the note dated October 29, 1996
in the original principal amount of the Note (the "Borrower Partnership Note"),
evidencing the loan made to the Transferor Partnership by the Borrower
Partnership (the "Borrower Partnership Loan").
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a fractional BRI Partnership Unit, the number of BRI Partnership Units shall
be rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit. At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"),
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at Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transferor Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
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(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
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SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
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4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
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5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby, the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental agency, commission,
board or public authority is required on the part of the Transferor Partners,
the Transferor Partnership or the Borrower Partnership in connection with the
valid execution and delivery of this Agreement by the Transferor Partners and
the performance of the Transferor Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners, and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
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Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated; or (ii) the rights
represented by the Transferor Partnership Interests or the partnership interests
in the Borrower Partnership. During the period commencing on the date hereof and
ending on the Closing Date, the Transferor Partnership will promptly inform the
BRI Partnership in writing of any material action, suit, proceeding or
investigation pending, or to the Transferor Partnership's knowledge, threat
thereof against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
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5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Guaranty and the Borrower Partnership Loan described in Schedule
5.10 and in such audited financial statements and provide evidence thereof to
the BRI Partnership. As of the Closing Date the Transferor Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Transferor Partnership's business which are either (i) in the
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aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts; and (c) liabilities under the
Guaranty or the Borrower Partnership Note and (d) a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Transferor Partnership has conducted its
business only in the ordinary course and, except for the Loan and the matters
disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
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(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases
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(the "Leases") described in the Rent Roll attached hereto as Schedule D (the
"Rent Roll"). The Rent Roll is true, accurate and correct in all material
respects as of the date hereof. Except as otherwise specifically set forth in
the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been
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furnished heretofore to the BRI Partnership. There are no notes, instruments,
agreements, mortgages, deeds of trust or other documents evidencing any material
agreement or obligation of the Transferor Partnership or the Borrower
Partnership to Lender or any other lender with respect to the Property other
than the Borrower Partnership Note and the Loan Documents listed on Schedule H.
The Loan Documents and the Borrower Partnership Note are in full force and
effect and none of the Loan Documents or the Borrower Partnership Note have been
modified, amended or extended except as disclosed on Schedule H. All payments of
principal, interest, and, if applicable, real estate tax escrow, insurance
escrow and any other payments required under the Loan Documents or the Borrower
Partnership Note which are due and payable, through the Closing Date, have been,
and will be, paid in full and no default exists thereunder which extends beyond
applicable grace or cure periods. Neither the Transferor Partnership nor the
Borrower Partnership has received any written notice of default under any of the
Loan Documents or the Borrower Partnership Note. The Lender is the sole holder
or designated servicer of the Note. The Borrower Partnership is the sole holder
of the Borrower Partnership Note, subject to any pledge thereof to Lender. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. No security has been taken or held in connection with the Borrower
Partnership Note. The Loan Documents do not secure any other indebtedness but
the Loan or the Borrower Partnership Loan. To the best knowledge of the
Transferor Partnership, the amounts of any real estate tax escrow, insurance
escrow and any other escrows and reserves held by Lender are as set forth on
Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity,
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where such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under the Property. To the Transferor
Partnership's knowledge, except as disclosed in the Environmental Reports or in
the BRI Environmental Reports, neither the Transferor Partnership nor the
Property is in violation in any material respect of any Environmental Laws and
there is no asbestos, PCB's or lead paint on the Property or any part thereof.
For purposes of this Agreement, "Environmental Laws" shall mean the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended by the
Hazardous and Solid Waste Amendments of 1984; the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), as
amended by the Superfund Amendments and Reauthorization Act of 1986; the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the Toxic
Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42 U.S.C.
ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all other
applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
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5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
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5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
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5.35 Investment Representations and Warranties. Each Transferor Partner
for itself, severally and not jointly, represents, warrants, acknowledges and
agrees as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI
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Partnership Units) for an indefinite period of time. Such Transferor Partner
acknowledges, represents and agrees that (i) its economic circumstances are such
that it is able to bear all risks of the investment in the BRI Partnership and
BRI for an indefinite period of time, including the risk of a complete loss of
its investment in the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units), (ii) it has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in the BRI Partnership Units and BRI, and (iii) it has consulted with
its own separate counsel and tax advisor, to the extent deemed necessary by it,
as to all legal and taxation matters covered by this Agreement and has not
relied upon the BRI Partnership or the Transferor Agent, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
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"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which
opinion and which counsel shall be acceptable to Berkshire Realty
Company, Inc.) that the proposed transaction will be exempt from
registration under the Act and its applicable state securities
laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all
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requisite power to maintain the Loan from Lender and to maintain the Borrower
Partnership Loan to the Transferor Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Partnership is duly qualified to do business in all jurisdictions in which the
failure to be so qualified would have a Material Adverse Effect on the Borrower
Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's knowledge the Borrower Partnership is not in violation of any
order, statute, rule or regulation applicable to it, except for such violations
which would not have a Material Adverse Effect. Neither the execution, delivery
and performance of this Agreement by the Transferor Partnership, nor the
contribution of the Transferor Partnership Interests by the Transferor Partners
hereunder, nor the assignment and transfer of the Borrower General Partnership
Interest by the Borrower Corporate General Partner to the Borrower LLC General
Partner will result in any Material Adverse Effect or be in conflict with or
constitute a default under the Borrower Partnership Agreement or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208. Each of the Transferor Partnership and the Borrower Corporate General
Partner owns a 50% general partnership interest in the Borrower Partnership. No
partner of the Borrower Partnership is in default with respect to any capital
contribution required to be paid by it pursuant to the Borrower Partnership
Agreement. A true, correct and complete copy of the Borrower Partnership
Agreement is attached hereto as Exhibit IX. The Borrower Partnership has no
commitment to issue any right to purchase or acquire or to issue or distribute
to the partners thereof any evidences of indebtedness or assets; and the
Borrower Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the Borrower Partnership or any
interest therein or to make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the
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Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Borrower Partnership has conducted its
business only in the ordinary course and, except for the Loan and the Borrower
Partnership Loan and the matters disclosed on Schedule 5.10, the Borrower
Partnership has not created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any
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taxes that might result in a determination materially adverse to the Borrower
Partnership. All taxes due with respect to completed and settled examinations or
concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
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5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and hold, the
Borrower General Partnership Interest free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party. Upon Closing, the Transfer Partnership shall own and hold its
interest in the Borrower Partnership free and clear of any liens, pledges and
encumbrances of any kind whatsoever, and free of any rights of assignment of any
third party. Prior to Closing, the Transferor Partnership shall assign and
transfer to the Transferor Agent all of the issued and outstanding stock of the
Borrower Corporate General Partner. Subsequent to such assignment and transfer
to the Transferor Agent but prior to Closing, the Transferor Agent shall cause
the Borrower Corporate General Partner to assign and transfer the Borrower
General Partnership Interest to the Borrower LLC General Partner (as defined in
Section 9.12 hereof) free and clear of any liens, pledges and encumbrances of
any kind whatsoever and free of any rights of assignment of any third party,
such that upon Closing the Transferor Partnership and the Borrower LLC General
Partner will each own and hold a fifty percent (50%) general partnership
interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO THE BORROWER CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will
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have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the acquisition of the Borrower General
Partnership Interest in the Borrower Partnership or any part thereof, except for
the rights of the Borrower LLC General Partner and the BRI Partnership under
this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
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SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all
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Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed by the
general partner of the Partnership with the Securities and Exchange Commission
since December 31, 1996 (the "SEC Filings"). The financial statements of the
general partner of the BRI Partnership included or incorporated by reference in
the SEC Filings and the PPM have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated assets, liabilities and financial
position of the general partner of the BRI Partnership as of the dates thereof
and the consolidated results of its operations and changes in cash flow for the
periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due
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with respect to completed and settled examinations or concluded litigation have
been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in
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connection with the transactions herein contemplated will be duly authorized,
validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. All issued and outstanding
shares of common stock of BRI were issued in compliance with or in transactions
exempt from the registration provisions of applicable federal and state
securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material
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approvals, consents, permits, licenses or certificates of occupancy (whether
governmental or otherwise) required for the current use and operation of any of
its properties have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such
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damage or destruction shall occur having a replacement cost of less than
$750,000.00 or if any eminent domain notice or proceeding is commenced which
does not affect any material portion of the Property, the BRI Partnership shall
proceed to accept the contribution and transfer of the Transferor Partnership
Interests in accordance with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant
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unless the lease is for a period of not more than one year and that the rent for
the amended, renewal or extension term shall not be less than the amount of rent
noted on the Rent Roll, for the respective apartment; or (d) terminate any Lease
except in the ordinary course of business or by reason of a default by the
tenant thereunder or by reason of the provisions contained in the Lease or as
required by applicable law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply)
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with all of the material terms and provisions of the Loan Documents up to the
Closing, (c) not alter or amend (or permit the Borrower Partnership to alter or
amend) the Loan Documents, or seek or accept (or permit the Borrower Partnership
to seek or accept) any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make (or permit the Borrower Partnership to make) any prepayment of
principal under the Note. Without limitation of the foregoing, the Transferor
Partnership shall (a) make all payments of interest and principal and, if
applicable, tax escrow, insurance escrow, and other amounts required under the
Borrower Partnership Note coming due thereunder prior to the Closing in
accordance with the terms thereof, (b) otherwise comply with all of the material
terms and provisions of the Borrower Partnership Note up to the Closing, (c) not
alter or amend the Borrower Partnership Note, or seek or accept any waivers or
extensions of time for payment or performance thereunder except as permitted and
set forth on Schedule 9.06 attached hereto and (d) not make any prepayment of
principal under the Borrower Partnership Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal
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1997 operating budget; (ii) waive or release any right or cancel or compromise
any debt or claim except in the ordinary course of business; or (iii) otherwise
enter into any contract, transaction or agreement which shall survive the
Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof,
enter into any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
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(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent,
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on behalf of the Transferor Partnership and pursuant to the power of attorney
granted to it under Section 19.04, shall transfer all of the issued and
outstanding stock in the Borrower Corporate General Partner to the Transferor
Agent. Immediately prior to Closing, (i) the Transferor Agent shall cause the
Borrower Corporate General Partner to assign its Borrower General Partnership
Interest in the Borrower Partnership to a limited liability company formed by
the BRI Partnership, all of the membership interests in which shall be owned by
the BRI Partnership or an affiliate thereof (the "Borrower LLC General Partner")
and (ii) the Transferor Agent shall cause the Borrower Corporate General Partner
to withdraw as a general partner of the Borrower Partnership, such that, at
Closing, the Borrower Partnership shall validly exist as a Maryland general
partnership, having as its sole general partners the Transferor Partnership and
the Borrower LLC General Partner, each of which shall hold a 50% general
partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the
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Amended and Restated Transferor Partnership Certificate in the form of Exhibit V
hereto duly executed and delivered by the Transferor Partners, pursuant to which
the Transferor Partners shall withdraw as partners from the Transferor
Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the Borrower Partnership Assignment has not been duly executed
and delivered by the Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all
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cash security deposits and credit to the BRI Partnership in the amount of such
security deposits, including interest thereon, if any, held by the Transferor
Partnership at the Closing Date under the Leases and a schedule updating the
Rent Roll and setting forth all arrears in rents and all prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
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(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been paid on the Note; and (D) the amount of
any real estate tax escrow, insurance escrow and other escrows or reserves held
by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
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10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI Partnership
and the Transferor Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
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(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any amounts in
excess of 50% of the fair market value of the BRI Partnership Units received by
such Transferor Partner as of the date such indemnification obligation is
satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
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Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
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10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower Corporate General
Partner in the Borrower Partnership to the Borrower LLC General Partner in such
a manner as not to result in the dissolution of the Borrower Partnership, in the
form of the Borrower Partnership Assignment attached hereto as Exhibit X, duly
executed and delivered by the Borrower Corporate General Partner, which shall
transfer such Borrower General Partnership Interest in the Borrower Partnership
to the Borrower LLC General Partner free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party (the "Borrower
Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
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11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Recorded Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the
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representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(i) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary
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Entity (as defined in the BRI Partnership Agreement), the BRI Partnership shall
cause such Subsidiary Entity, to take such actions as may be necessary to
effectuate the foregoing right granted by the BRI Partnership to the Transferor
Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI
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Partnership until the expiration of the No Transfer Period without the consent
of the Transferor Agent (which consent may only be granted if none of the
Transferor Partners is materially adversely affected unless the consent of such
materially adversely affected Transferor Partners is obtained), provided however
that in the event of a change in the Code, the Treasury Regulations, or
published Internal Revenue Service ("IRS") rulings, notices or other
administrative guidance, or in any private letter ruling issued to a taxpayer
other than the BRI Partnership (any such change, a "Change in Law") such that,
in the reasonable opinion of tax counsel to the BRI Partnership, based on such
Change in Law, either (i) the foregoing method is no longer legally permissible,
(ii) or an alternative method, not previously permitted, which results in more
favorable tax consequences to each of the limited partners, including the
Transferor Partners, of the BRI Partnership is currently permitted, the BRI
Partnership, shall be entitled, without the consent of the Transferor Agent, to
adopt an alternative method, provided further that, in the case of clause (i),
the BRI Partnership shall choose the alternative method that minimizes to the
extent reasonably possible, the adverse tax consequences to the Transferor
Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
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(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transferor Allocation Schedule (the "Transferor Allocation Schedule"), which
shall be based upon the Preliminary Transferor Allocation Schedule, shall
incorporate all adjustments and prorations to be made pursuant to Section 12,
and shall set forth (i) the name of each Transferor Partner, (ii) the number of
Unrestricted Distribution BRI Partnership Units to be received by each
Transferor Partner, and (iii) the number of Restricted Distribution BRI
Partnership Units to be received by each Transferor Partner. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Preliminary Transferor Allocation Schedule or the Transferor
Allocation Schedule or the distribution of the BRI Partnership Units or the BRI
Additional Payment, if applicable, to the Transferor Partners and the Transferor
Partners hereby release the BRI Partnership from any such obligation or
liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
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12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
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SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the
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Transferor Agent shall be entitled to terminate this Agreement by written notice
given to the BRI Partnership within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if all of the
Transferor Partners desire to accept the transfer of the BRI Partnership Units
in accordance with the terms of this Agreement and the BRI Partnership willfully
refuses to perform the BRI Partnership's obligations hereunder, the Transferor
Partners, jointly, but not severally, at their option, shall have the right to
compel specific performance by the BRI Partnership hereunder, in which event the
Transferor Partners shall have the right to recover from the BRI Partnership the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the Transferor Partners in connection with the exercise of their
right of specific performance. The remedies provided in this Section 13.04 shall
be the sole and exclusive remedies at law or in equity of the Transferor
Partners in the event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Partners may have against the BRI
Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
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SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or\ to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
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If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the
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Closing Date. Except as otherwise specifically provided in this Agreement, no
other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower Corporate General Partner set forth in this Agreement
shall be true and correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
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P (c) Consents. Any and all consents, authorizations and approvals
necessary to be obtained before Closing including the Lender Estoppel Letter and
the consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title to a fifty percent (50%) general partnership interest
in the Borrower General Partnership, free and clear of all liens, pledges, and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party; and the Borrower LLC General Partner shall own a fifty percent
(50%) general partnership interest in the Borrower Partnership, free and clear
of any liens, pledges and encumbrances of any kind whatsoever and free of any
rights of assignment of any third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of
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the Closing Date, any or all of which may be waived, only in writing, by the
Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of its interests in the Borrower Partnership to
the Borrower LLC General Partner, to the withdrawal from the Borrower
Partnership of the Borrower Corporate General Partner, and to the admission to
the Borrower Partnership of the Borrower LLC General Partner as a fifty percent
(50%) general partner, and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership, the transfer of
ownership of the
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Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of its interests in the Borrower Partnership to
the Borrower LLC General Partner, to the withdrawal from the Borrower
Partnership of the Borrower Corporate General Partner, and to the admission to
the Borrower Partnership of the Borrower LLC General Partner as a fifty percent
(50%) general partner. The BRI Partnership shall supply any and all
documentation and additional information required by Lender in order to promptly
complete the request for the consent of Lender to the transactions contemplated
hereunder. The Transferor Partnership shall request that Lender state in writing
any terms and requirements, including the amount of any Loan Assumption Fees, to
be imposed by Lender in connection with its consent to the transactions
contemplated hereby. It shall be a condition of Closing that prior to October
15, 1997, Lender shall have granted its consent to the transactions contemplated
hereunder on terms and requirements reasonably satisfactory to the BRI
Partnership, shall have issued the Lender Estoppel Letter and shall have agreed
to release the Transferor Partners from all liability under the Loan Documents.
In the event that any of the terms or requirements required by Lender for its
consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, including
the amount of any Loan Assumption Fees in excess of 1% of the unpaid principal
balance, and the BRI Partnership gives timely notice of termination hereunder to
the Transferor Agent, this Agreement shall terminate without further action by
any party, and, thereafter this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly stated to survive
termination of this Agreement. In the event the Lender shall not have agreed to
release the Transferor Partners from all liability under the Loan Documents or
the Lender shall have placed terms and conditions on the Transferor Partners
that are unacceptable to them, the Transferor Agent may terminate this Agreement
by written notice given to the BRI Partnership within fifteen (15) business days
after the Transferor Agent has received in writing notice that the Lender has
refused to release the Transferor Partners from liability under the Loan
Documents or has imposed such unacceptable terms and conditions. If the
Transferor Agent gives timely notice of termination to the BRI Partnership, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private
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placement of common stock or other equity securities of BRI (the "Private
Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
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SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The
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delivery by the BRI Partnership to the Transferor Partners of an executed
counterpart of this Agreement shall constitute an offer which may be accepted by
the delivery to the BRI Partnership of a duly executed counterpart of this
Agreement and the satisfaction of all conditions under which such offer is made,
but such offer may be revoked by the BRI Partnership by written notice given at
any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
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18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
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Notwithstanding anything to the contrary contained herein, for the proposes of
this Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI
shall be entitled to an aggregate administrative fee of $200,000 in connection
with the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out the
provisions of this Agreement and the transactions contemplated hereby including,
without limitation, execution of such title affidavits, non-imputation and gap
indemnities as are required by the terms of this Agreement and endorsement,
assignment and transfer of the issued and outstanding stock of the Borrower
Corporate General Partner currently owned by the Transferor Partnership to the
Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such agreements and, to the extent that any agreements or documents relating to
this Agreement (such as partnership assignments or other similar closing
documents) are
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executed prior to the Closing, the Transferor Agent is authorized on behalf of
each Transferor Partner and the Borrower Corporate General Partner to hold all
such agreements in escrow pending the Closing, at which time the Transferor
Agent shall be authorized to deliver such documents on behalf of the Transferor
Partners and the Borrower Corporate General Partner to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affilated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNERS:
_________________________ __________________________________________
John B. Colvin
_________________________ __________________________________________
Stephen M. Gorn
_________________________ __________________________________________
Samuel G. Gorn
_________________________ __________________________________________
Morton Gorn
WITNESS: TRANSFEROR LIMITED PARTNERS
_________________________ __________________________________________
Michael Laupheimer
_________________________ __________________________________________
Name:
For the Trust u/w/o of Robert H. Levi
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_________________________ __________________________________________
Bette Miller
_________________________ __________________________________________
Irvin Miller
_________________________ __________________________________________
M. Peter Moser
_________________________ __________________________________________
James D. Nolan
_________________________ __________________________________________
James A. Palmer
_________________________ __________________________________________
Carol Grief Sandler
_________________________ __________________________________________
H.N. Baetjer, Jr.
_________________________ __________________________________________
Name:
For the Estate of Howard Baetjer
_________________________ __________________________________________
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Karen G. Colvin
_________________________ __________________________________________
Gilbert Cullen
_________________________ __________________________________________
Irvin Gomprecht
_________________________ __________________________________________
Harold Graul, Jr.
_________________________ __________________________________________
Bernard Koteen
_________________________ __________________________________________
M. Richard Wyman
Second Rolling Road Associates
_________________________ By:_________________________________________
Louise Barber
_________________________ By:_________________________________________
John Colvin
_________________________ By:_________________________________________
Karen Colvin
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_________________________ By:_________________________________________
Morton Gorn
_________________________ By:_________________________________________
Stephen M. Gorn
_________________________ By:_________________________________________
Samuel G. Gorn
_________________________ By:_________________________________________
M. Peter Moser
_________________________ By:_________________________________________
James D. Nolan
_________________________ By:_________________________________________
M. Richard Wyman
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
_________________________ By:_________________________________________
Name:
Title:
BORROWER CORPORATE GENERAL PARTNER:
WITNESS: SECOND KINGSWOOD COMMON FUNDING,
INC., a Maryland corporation
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_________________________ By:_________________________________________
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
_________________________ By:_________________________________________
Name:
Title:
WITNESS:
_________________________ ____________________________________________
Morton Gorn, solely for the purposes of
Section 19.06
WITNESS:
_________________________ ____________________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
WITNESS:
_________________________ ____________________________________________
John Colvin, solely for the purposes of
Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow,
insurance escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Copy
Kingswood Common I
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Second Rolling Road Funding, Inc., a Maryland corporation
(the "Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Second Rolling Road Associates, a Maryland general partnership (the
"Transferor Partnership") pursuant to the Partnership Agreement dated as of
October 1, 1974, as amended (a copy of which, including all amendments, is
attached hereto as Exhibit II and is referred to as the "Transferor Partnership
Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 203-unit apartment complex, commonly known as Kingswood Common I
Apartments, which contains related improvements, facilities, amenities,
<PAGE>
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Second Rolling Road II
General Partnership, a Maryland general partnership ("Borrower Partnership")
pursuant to that certain Partnership Agreement dated as of October 18, 1989, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit IX and is referred to herein as the "Borrower Partnership Agreement"),
and the Transferor Partnership is also the legal and beneficial owner of all of
the issued and outstanding stock of the Borrower Corporate General Partner,
which owns the remaining fifty percent (50%) general
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partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
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cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
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terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $7,068,723, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of The Patrician
Financial Company ("Lender"), securing the outstanding principal balance of the
Note dated October 29, 1996, in the original principal amount of $6,043,000 (the
"Note") evidencing the loan (the "Loan") made to the Borrower Partnership by
Lender. The Loan is also secured by the other Loan Documents (as defined in
Section 5.20 hereof) which shall be an obligation of the Borrower Partnership
and the Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein. The Transferor Partnership shall also remain as
obligor of the outstanding principal balance of the note dated October 29,
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1996 in the original principal amount of the Note (the "Borrower Partnership
Note"), evidencing the loan made to the Transferor Partnership by the Borrower
Partnership (the "Borrower Partnership Loan").
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a fractional BRI Partnership Unit, the number of BRI Partnership Units shall
be rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit. At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"), at Closing, the BRI Partnership
shall pay the BRI Additional Payment to the Transferor Agent in accordance with
the election made by each Transferor Partner pursuant to Section 12.04. The
Transferor Agent shall be liable to distribute the BRI Partnership Units and if
applicable, a pro-rata share of the BRI Additional Payment to each of the
Transferor Partners in accordance with the Transferor Allocation Schedule. The
BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transferor Allocation Schedule or the distribution of the BRI Partnership Units
or the BRI Additional Payment, if applicable, to the Transferor Partners and the
Transferor Partners hereby release the BRI Partnership from any such obligation
or liability.
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The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
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2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
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4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
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4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the
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Transferor Partnership is not in violation of any order, statute, rule or
regulation applicable to it, except for such violations which would not have a
Material Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Transferor Partners, nor the contribution of the Transferor
Partnership Interests by the Transferor Partners hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Partnership Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Partnership, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners, and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated;
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or (ii) the rights represented by the Transferor Partnership Interests or the
partnership interests in the Borrower Partnership. During the period commencing
on the date hereof and ending on the Closing Date, the Transferor Partnership
will promptly inform the BRI Partnership in writing of any material action,
suit, proceeding or investigation pending, or to the Transferor Partnership's
knowledge, threat thereof against the Transferor Partners, the Transferor
Partnership, the Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
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5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Guaranty and the Borrower Partnership Loan described in Schedule
5.10 and in such audited financial statements and provide evidence thereof to
the BRI Partnership. As of the Closing Date the Transferor Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Transferor Partnership's business which are either (i) in the aggregate, not in
excess of $50,000, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Service Contracts; and (c) liabilities under the Guaranty or
the Borrower Partnership Note and (d) a contingent liability for recordation
taxes if the Transferor Partnership or the Borrower Partnership defaults on the
Loan after Closing. The Transferor Partnership has conducted its business only
in the ordinary course and, except for the Loan and the matters disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
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5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
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5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
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(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents and the Borrower Partnership Note are in full
force and effect and none of the Loan Documents or the Borrower Partnership Note
have been modified, amended or extended except as disclosed on Schedule H. All
payments of principal, interest, and, if applicable, real estate tax escrow,
insurance escrow and any other payments required under the Loan Documents or the
Borrower Partnership Note which are due and payable, through the Closing Date,
have been, and will be, paid in full and no default exists thereunder which
extends beyond applicable grace or cure periods. Neither the Transferor
Partnership nor the Borrower Partnership has received any written notice of
default under any of the Loan Documents or the Borrower Partnership Note. The
Lender is the sole holder or designated servicer of the Note. The Borrower
Partnership is the sole holder of the Borrower Partnership Note, subject to any
pledge thereof to Lender. The only security taken or held in connection with the
Note is evidenced in the
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Loan Documents. No security has been taken or held in connection with the
Borrower Partnership Note. The Loan Documents do not secure any other
indebtedness but the Loan or the Borrower Partnership Loan. To the best
knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended,
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supplemented or supplanted prior to the Closing, relating to regulation or
control of hazardous, toxic or dangerous substances, materials or wastes
(collectively, "Hazardous Materials"), or their handling, storage or disposal or
to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
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5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in
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Section 10.01 hereof) required to be executed and delivered by such Transferor
Partner under this Agreement, each in accordance with their respective terms,
and on the Closing Date the Transferor Partners Closing Documents will
constitute valid and binding obligations, enforceable against such Transferor
Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the
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accuracy and completeness of the representations and warranties of such
Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its affiliates or its other legal counsel and advisors for any
explanation of the application of the various United States or state securities
laws or tax laws with regard to its acquisition of the BRI Partnership Units.
Such Transferor Partner further acknowledges and represents that it has made its
own independent investigation of the BRI Partnership and the business conducted
or proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its
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management in connection with this Agreement and the transactions contemplated
hereby, (ii) received and read the BRI Partnership Agreement, as amended to
date, and has had the opportunity to review all documents and information
relevant to its decision to enter into this Agreement and to invest in the BRI
Partnership and BRI, including, without limitation, the Private Placement
Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and (iii) had the
opportunity to ask questions of the BRI Partnership and BRI and its management
concerning its investment in the BRI Partnership and the transactions
contemplated hereby, which questions were answered to its satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers
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thereof, in the absence of satisfying the conditions contained in the
foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's knowledge the Borrower Partnership is not in violation of any
order, statute, rule or regulation applicable to it, except for such violations
which would not have a Material Adverse Effect. Neither the execution, delivery
and performance of this Agreement by the Transferor Partnership, nor the
contribution of the Transferor Partnership Interests by the Transferor Partners
hereunder, nor the assignment and transfer of the Borrower General Partnership
Interest by the Borrower Corporate General Partner to the Borrower LLC General
Partner will result in any Material Adverse Effect or be in conflict with or
constitute a default under the Borrower Partnership Agreement or
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result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208. Each of the Transferor Partnership and the Borrower Corporate General
Partner owns a 50% general partnership interest in the Borrower Partnership. No
partner of the Borrower Partnership is in default with respect to any capital
contribution required to be paid by it pursuant to the Borrower Partnership
Agreement. A true, correct and complete copy of the Borrower Partnership
Agreement is attached hereto as Exhibit IX. The Borrower Partnership has no
commitment to issue any right to purchase or acquire or to issue or distribute
to the partners thereof any evidences of indebtedness or assets; and the
Borrower Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the Borrower Partnership or any
interest therein or to make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or
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indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Borrower Partnership has conducted its
business only in the ordinary course and, except for the Loan and the Borrower
Partnership Loan and the matters disclosed on Schedule 5.10, the Borrower
Partnership has not created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
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5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and hold, the
Borrower General Partnership Interest free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party. Upon Closing, the Transfer Partnership shall own and hold its
interest in the Borrower Partnership free and clear of any liens, pledges and
encumbrances of any kind whatsoever, and free of any rights of assignment of any
third party. Prior to Closing, the Transferor Partnership shall assign and
transfer to the Transferor Agent all of the issued and outstanding stock of the
Borrower Corporate General Partner. Subsequent to such assignment and transfer
to the Transferor Agent but prior to Closing, the Transferor Agent shall cause
the Borrower Corporate General Partner to assign and transfer the Borrower
General Partnership Interest to the Borrower LLC
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General Partner (as defined in Section 9.12 hereof) free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party, such that upon Closing the Transferor Partnership
and the Borrower LLC General Partner will each own and hold a fifty percent
(50%) general partnership interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE BORROWER
CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the
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acquisition of the Borrower General Partnership Interest in the Borrower
Partnership or any part thereof, except for the rights of the Borrower LLC
General Partner and the BRI Partnership under this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization,
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moratorium and other laws for the relief of debtors theretofore or hereafter
enacted to the extent that the same may be constitutionally applied; and (iv)
assuming compliance with the terms of this Agreement and the BRI Partnership
Agreement by the parties hereto and thereto other than the BRI Partnership, the
execution and delivery by the BRI Partnership of the BRI Partnership Units, this
Agreement and all other documents and instruments contemplated hereby and the
performance by the BRI Partnership of its obligations hereunder and thereunder
do not and will not constitute a default under, or conflict with or violate, any
provision of the BRI Partnership Agreement or any other material agreement to
which the BRI Partnership is a party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI
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Partnership (the "BRI Partners"), any evidences of indebtedness or assets and
the BRI Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the BRI Partnership or to make any
distribution in respect thereof. Upon the Closing, good, valid and marketable
title to the BRI Partnership Units shall be vested in the Transferor Partners
free and clear of any lien, claim, charge, pledge encumbrance, limitation,
agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to
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make the statements therein, in light of the circumstances under which they were
made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such
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properties in accordance with the BRI Partnership's past practices. Except as
disclosed in the SEC Filings, the BRI Partnership does not own, or otherwise
hold any interest in, any other material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in
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excess of $750,000.00) are damaged or destroyed by fire or casualty, or if any
material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such damage or
destruction shall occur having a replacement cost of less than $750,000.00 or if
any eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Partnership Interests in
accordance with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed
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$25,000.00, and the obligations of the Transferor Partnership with respect to
such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
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9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder except as permitted and set forth on
Schedule 9.06 attached hereto and (d) not make (or permit the Borrower
Partnership to make) any prepayment of principal under the Note. Without
limitation of the foregoing, the Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow, and other amounts required under the Borrower Partnership Note coming
due thereunder prior to the Closing in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Borrower
Partnership Note up to the Closing, (c) not alter or amend the Borrower
Partnership Note, or seek or accept any waivers or extensions of time for
payment or performance thereunder except as permitted and set forth on Schedule
9.06 attached hereto and (d) not make any prepayment of principal under the
Borrower Partnership Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
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9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least
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equal quality or make or permit to be made any material alterations to or upon
the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
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refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent, on behalf of the Transferor Partnership and pursuant to the
power of attorney granted to it under Section 19.04, shall transfer all of the
issued and outstanding stock in the Borrower Corporate General Partner to the
Transferor Agent. Immediately prior to Closing, (i) the Transferor Agent shall
cause the Borrower Corporate General Partner to assign its Borrower General
Partnership Interest in the Borrower Partnership to a limited liability company
formed by the BRI Partnership, all of the membership interests in which shall be
owned by the BRI Partnership or an affiliate thereof (the "Borrower LLC General
Partner") and (ii) the Transferor Agent shall cause the Borrower Corporate
General Partner to withdraw as a general partner of the Borrower Partnership,
such that, at Closing, the Borrower Partnership shall validly exist as a
Maryland general partnership, having as its sole general partners the Transferor
Partnership and the Borrower LLC General Partner, each of which shall hold a 50%
general partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
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10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the
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Borrower Partnership Assignment has not been duly executed and delivered by the
Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted
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under Section 19.04 in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and fairways endorsement and to omit from its title insurance policy all
exceptions for (i) judgments, bankruptcies or other returns against persons or
entities whose names are the same as or similar to the Transferor Partnership's
name; (ii) parties in possession other than under the rights to possession
granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been
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paid on the Note; and (D) the amount of any real estate tax escrow, insurance
escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI Partnership
and the Transferor Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
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10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any amounts in
excess of 50% of the fair market value of the BRI Partnership Units received by
such Transferor Partner as of the date such indemnification obligation is
satisfied (except for indemnification obligations with respect to
representations of each of the
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Transferor Partners in Section 5.34, which shall be limited to 100% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner) (collectively, the
"Cap"); and provided further that to the extent any of the Transferor Partners
have any indemnification obligation to the BRI Partnership, the Transferor
Partners may elect to satisfy such indemnification obligation by directing the
BRI Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Partner pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or cancelled)
equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the
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aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding $50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower
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Corporate General Partner in the Borrower Partnership to the Borrower LLC
General Partner in such a manner as not to result in the dissolution of the
Borrower Partnership, in the form of the Borrower Partnership Assignment
attached hereto as Exhibit X, duly executed and delivered by the Borrower
Corporate General Partner, which shall transfer such Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner free and clear of any lien, pledge, restriction, encumbrance or other
claim by any third party (the "Borrower Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant to which the BRI Partnership, or its designees, shall be admitted as
partners of the Transferor Partnership.
(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
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(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
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11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect
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to allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
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SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and
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prorations to be made pursuant to this Section 12. Transferor Agent and the BRI
Partnership shall cooperate in the furnishing of all information and
documentation necessary to prepare such calculations. Prior to Closing, the
Transferor Agent shall deliver to the BRI Partnership the final Transferor
Allocation Schedule (the "Transferor Allocation Schedule"), which shall be based
upon the Preliminary Transferor Allocation Schedule, shall incorporate all
adjustments and prorations to be made pursuant to Section 12, and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transferor Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued
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thereon at the rate of 4% as required by applicable state law or at such higher
rate, if any, as required by the terms of the leases, for each tenant as shown
on the Rent Roll and the BRI Partnership, or its designee, shall assume all
liability with respect to the tenant security deposits under applicable state
law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or
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similar agent who might have a claim or right to claim a commission or fee in
connection with this transaction. The Transferor Partnership understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of the Transferor Partners and
QPI in accordance with the provisions of Section 19 hereof. In no event shall
any commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall the BRI
Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
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With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
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representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower
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Corporate General Partner set forth in this Agreement shall be true and correct,
in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title to a fifty percent (50%) general partnership interest
in the Borrower General Partnership, free and clear of all liens, pledges, and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party; and the Borrower LLC General Partner shall own a fifty percent
(50%) general partnership interest in the Borrower Partnership, free and clear
of any liens, pledges and encumbrances of any kind whatsoever and free of any
rights of assignment of any third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all
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parties hereunder except for provisions which are expressly stated to survive
termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of
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its interests in the Borrower Partnership to the Borrower LLC General Partner,
to the withdrawal from the Borrower Partnership of the Borrower Corporate
General Partner, and to the admission to the Borrower Partnership of the
Borrower LLC General Partner as a fifty percent (50%) general partner, and to
obtain the Lender Estoppel Letter. The Transferor Partnership, with the BRI
Partnership's cooperation, shall immediately commence to obtain the consent of
Lender necessary to permit the contribution of the Transferor Partnership
Interests to the BRI Partnership, the transfer of ownership of the Transferor
Partnership to the BRI Partnership, to the assignment by the Borrower Corporate
General Partner of all of its interests in the Borrower Partnership to the
Borrower LLC General Partner, to the withdrawal from the Borrower Partnership of
the Borrower Corporate General Partner, and to the admission to the Borrower
Partnership of the Borrower LLC General Partner as a fifty percent (50%) general
partner. The BRI Partnership shall supply any and all documentation and
additional information required by Lender in order to promptly complete the
request for the consent of Lender to the transactions contemplated hereunder.
The Transferor Partnership shall request that Lender state in writing any terms
and requirements, including the amount of any Loan Assumption Fees, to be
imposed by Lender in connection with its consent to the transactions
contemplated hereby. It shall be a condition of Closing that prior to October
15, 1997, Lender shall have granted its consent to the transactions contemplated
hereunder on terms and requirements reasonably satisfactory to the BRI
Partnership, shall have issued the Lender Estoppel Letter and shall have agreed
to release the Transferor Partners from all liability under the Loan Documents.
In the event that any of the terms or requirements required by Lender for its
consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, including
the amount of any Loan Assumption Fees in excess of 1% of the unpaid principal
balance, and the BRI Partnership gives timely notice of termination hereunder to
the Transferor Agent, this Agreement shall terminate without further action by
any party, and, thereafter this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly stated to survive
termination of this Agreement. In the event the Lender shall not have agreed to
release the Transferor Partners from all liability under the Loan Documents or
the Lender shall have placed terms and conditions on the Transferor Partners
that are unacceptable to them, the Transferor Agent may terminate this Agreement
by written notice given to the BRI Partnership within fifteen (15) business days
after the Transferor Agent has received in writing notice that the Lender has
refused to release the Transferor Partners from liability under the Loan
Documents or has imposed such unacceptable terms and conditions. If the
Transferor Agent gives timely notice of termination to the BRI Partnership, this
Agreement shall terminate without further action by any party, and,
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thereafter this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive termination of this
Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
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SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
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18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
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18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it
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("Direct Costs") and (ii) those fees which cannot be so allocated ("Indirect
Costs"). Notwithstanding anything to the contrary contained herein, for the
proposes of this Section 19.03, each of the Transferor Partners hereby agrees
that: (i) QPI shall be entitled to an aggregate administrative fee of $200,000
in connection with the concurrent contribution of up to eighteen (18) properties
and the management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out the
provisions of this Agreement and the transactions contemplated hereby including,
without limitation, execution of such title affidavits, non-imputation and
fairways affidavits and gap indemnities as are required by the terms of this
Agreement and endorsement, assignment and transfer of the issued and outstanding
stock of the Borrower Corporate General Partner currently owned by the
Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such
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agreements and, to the extent that any agreements or documents relating to this
Agreement (such as partnership assignments or other similar closing documents)
are executed prior to the Closing, the Transferor Agent is authorized on behalf
of each Transferor Partner and the Borrower Corporate General Partner to hold
all such agreements in escrow pending the Closing, at which time the Transferor
Agent shall be authorized to deliver such documents on behalf of the Transferor
Partners and the Borrower Corporate General Partner to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
- ------------------------------ -----------------------------------
Louise Barber
WITNESS:
- ------------------------------ -----------------------------------
John Colvin
WITNESS:
- ------------------------------ -----------------------------------
Karen Colvin
WITNESS:
- ------------------------------ -----------------------------------
Stephen M. Gorn
WITNESS:
- ------------------------------ -----------------------------------
Morton Gorn
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<PAGE>
WITNESS:
- ------------------------------ -----------------------------------
Samuel G. Gorn
WITNESS:
- ------------------------------ -----------------------------------
M. Peter Moser
WITNESS:
- ------------------------------ -----------------------------------
James D. Nolan
WITNESS:
- ------------------------------ -----------------------------------
M. Richard Wyman
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
By:
- ------------------------------ --------------------------------
Name:
Title:
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<PAGE>
BORROWER CORPORATE GENERAL PARTNER:
WITNESS: SECOND ROLLING ROAD FUNDING, INC.,
a Maryland corporation
By:
- ------------------------------ --------------------------------
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
By:
- ------------------------------ --------------------------------
Name:
Title:
WITNESS:
- ------------------------------ -----------------------------------
Morton Gorn, solely for the
purposes of Section 19.06
WITNESS:
- ------------------------------ -----------------------------------
Stephen Gorn, solely for the
purposes of Section 19.06
WITNESS:
- ------------------------------ -----------------------------------
John Colvin, solely for the
purposes of Section 19.06
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<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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<PAGE>
Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Copy
Jamestowne
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Frederick Road Funding, Inc., a Maryland corporation (the
"Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Frederick Road Associates, a Maryland general partnership (the
"Transferor Partnership") pursuant to the Joint Venture Agreement dated as of
December 17, 1963, as amended (a copy of which, including all amendments, is
attached hereto as Exhibit II and is referred to as the "Transferor Partnership
Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the
general partner and Berkshire Realty Company, Inc. ("BRI") is a special limited
partner of the BRI Partnership, pursuant to the Amended and Restated Agreement
of Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore City,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 335-unit apartment complex, commonly known as Jamestowne Apartments,
which contains related improvements, facilities, amenities, structures,
<PAGE>
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Frederick Road II General
Partnership, a Maryland general partnership ("Borrower Partnership") pursuant to
that certain Partnership Agreement dated as of October 18, 1989, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit IX and is
referred to herein as the "Borrower Partnership Agreement"), and the Transferor
Partnership is also the legal and beneficial owner of all of the issued and
outstanding stock of the Borrower Corporate General Partner, which owns the
remaining fifty percent (50%) general
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<PAGE>
partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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<PAGE>
Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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<PAGE>
(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
-5-
<PAGE>
cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
-6-
<PAGE>
terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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<PAGE>
damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $8,097,227, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing and, minus (Z) the amount required to pay the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"), but in any
event, the total amount to be deducted under this clause (Z) shall not exceed an
amount equal to the difference between the Consideration Amount minus the
outstanding principal balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of CPC Mortgage
Capital, LLC, as successor to Maryland National Mortgage Corporation ("Lender"),
securing the outstanding principal balance of the Note dated October 19, 1989,
in the original
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<PAGE>
principal amount of $8,000,000 (the "Note") evidencing the loan (the "Loan")
made to the Borrower Partnership by Lender. The Loan is also secured by the
other Loan Documents (as defined in Section 5.20 hereof) which shall be an
obligation of the Borrower Partnership and the Transferor Partnership as of the
Closing subject to any exculpation from liability provisions therein. The
Transferor Partnership shall also remain as obligor of the outstanding principal
balance of the note dated October 19, 1989 in the original principal amount of
the Note (the "Borrower Partnership Note"), evidencing the loan made to the
Transferor Partnership by the Borrower Partnership (the "Borrower Partnership
Loan").
At the Closing, the BRI Partnership shall pay the amount required to
satisfy the Other Loans, provided that the amount to be paid by the BRI
Partnership shall not exceed the Other Loans BRI Cap. If the amount paid by the
BRI Partnership is not sufficient to pay the Other Loans in full, the Transferor
Partnership shall pay, from funds otherwise allocable under this Agreement to
the Transferor Partners, all additional amounts required to pay off the Other
Loans in full. At least fifteen (15) days prior to the Closing, the Transferor
Agent shall deliver a pay-off letter from each holder of an Other Loan stating
the amount required to pay-off such Other Loan in full, and at Closing, the
Transferor shall deliver the original note evidencing each such Other Loan
marked "Paid in Full," or in the event that the original of any such note is not
available, such other evidence of the satisfaction of such note and release of
liability under such Other Loan as the BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor
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<PAGE>
questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire")
for each Transferor Partner. In the event that any Transferor Partner would be
entitled to a fractional BRI Partnership Unit, the number of BRI Partnership
Units shall be rounded up or down, as the case may be, to the nearest whole BRI
Partnership Unit. At Closing, the BRI Partnership shall deliver to the
Transferor Agent all of the BRI Partnership Confirmations evidencing the
issuance of the BRI Partnership Units to the Transferor Partners in accordance
with the Transferor Allocation Schedule. In addition, if pursuant to Section 12,
the BRI Partnership owes any amounts to the Transferor Partners as a result of
prorations and apportionments (the "BRI Additional Payment"), at Closing, the
BRI Partnership shall pay the BRI Additional Payment to the Transferor Agent in
accordance with the election made by each Transferor Partner pursuant to Section
12.04. The Transferor Agent shall be liable to distribute the BRI Partnership
Units and if applicable, a pro-rata share of the BRI Additional Payment to each
of the Transferor Partners in accordance with the Transferor Allocation
Schedule. The BRI Partnership shall have no obligation or liability with respect
to the preparation or accuracy of the Preliminary Transferor Allocation Schedule
or the Transferor Allocation Schedule or the distribution of the BRI Partnership
Units or the BRI Additional Payment, if applicable, to the Transferor Partners
and the Transferor Partners hereby release the BRI Partnership from any such
obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such
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terms and conditions as are specified in the BRI Partnership Agreement. Each
Transferor Partner shall have such additional rights with respect to its BRI
Partnership Units as are contained in the Registration Rights Agreement, the
form of which is attached hereto as Exhibit 4; at Closing, the Transferor
Partners and BRI Apartments shall execute and deliver an Amendment to the BRI
Partnership, in the form and substance of Exhibit 3 attached hereto (the "BRI
Partnership Amendment") and the BRI Partnership shall deliver to the Transferor
Partners a certified copy of the Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the
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Transferor Agent pursuant to a Power of Attorney for all Transferor Partners
granted under Section 19.04 of a so-called Gap Indemnity in the form of Exhibit
VI with respect to the gap in time period between policy issuance and recording,
all as provided in a letter of instruction executed by counsel for the BRI
Partnership and counsel for the Transferor Partners. It is agreed that time is
of the essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
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4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
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SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not
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been amended or modified. Exhibit I sets forth an accurate and complete list of
the names of all of the Transferor Partners, and the Transferor Partners'
respective partnership interests in the Transferor Partnership. Except as set
forth on Exhibit I, no other person or party owns any partnership interest in
the Transferor Partnership. Except as set forth on Schedule 5.04, no Transferor
Partner is in default with respect to any capital contribution required to be
paid by him or it pursuant to the Transferor Partnership Agreement. A true,
correct and complete copy of the Transferor Partnership Agreement is attached
hereto as Exhibit II. The Transferor Partnership has no commitment to issue any
right to purchase or acquire or to issue or distribute to any of the Transferor
Partners, any evidences of indebtedness or assets; and the Transferor
Partnership has no obligation, contingent or otherwise, to purchase, redeem or
otherwise acquire any interest in the Transferor Partnership or any interest
therein or to make any distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated; or (ii) the rights
represented by the Transferor Partnership Interests or the partnership interests
in the Borrower Partnership. During the period commencing on the date hereof and
ending on the Closing Date, the Transferor Partnership will promptly inform the
BRI Partnership in writing of any material action, suit, proceeding or
investigation pending, or to the Transferor Partnership's knowledge, threat
thereof against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
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Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. Legal title to the Property is
currently held in the name of some or all of the partners of the Partnership who
are holding title on behalf of and for the benefit of the Transferor Partnerhip.
Except as disclosed on the Financial Statements, the Transferor Partnership does
not own, or otherwise hold any interest in, any material assets other than its
interest Property. On or before the Closing Date, the Transferor Partnership
shall cause legal and equitable title to the Property to be in the name of the
Transferor Partnership, and it shall be a condition to the BRI Partnership's
obligation to close that legal and equitable title to the Property be in the
name of the Transferor Partnership on or before the Closing Date. The Transferor
Partners shall pay all costs in connection with the transfer of title to the
Property to the Transferor Partnership, including, without limitation, any
transfer taxes and documentary stamps.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or
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indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except as
disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, no Transferor Partner, nor any affiliate of any
Transferor Partner nor any employee of the Transferor Partnership is presently
indebted to the Transferor Partnership for borrowed money and the Transferor
Partnership is not presently indebted for borrowed money to any of the foregoing
persons. Prior to Closing, the Transferor Partnership shall pay-off and
discharge in full all indebtedness and liabilities other than the Guaranty, the
Borrower Partnership Loan and the Other Loans described in Schedule 5.10 and in
such audited financial statements and provide evidence thereof to the BRI
Partnership. As of the Closing Date the Transferor Partnership shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Partnership's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts; and (c) liabilities under the Guaranty or the Borrower
Partnership Note and (d) a contingent liability for recordation taxes if the
Transferor Partnership or the Borrower Partnership defaults on the Loan after
Closing. The Transferor Partnership has conducted its business only in the
ordinary course and, except for the Loan and the matters disclosed on Schedule
5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
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5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no
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representative of the Transferor Partners shall be a signatory on any other
account or safe deposit box of the Transferor Partnership or shall have the
power to borrow, discount debt obligations, cash or draw checks, or otherwise
act on behalf of the Transferor Partnership in any dealings with any banks or
other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
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(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents and the Borrower Partnership Note are in full
force and effect and none of the Loan Documents or the Borrower Partnership Note
have been or shall be modified, amended or extended except as disclosed on
Schedule H and except for extension of the maturity of the Loan and the Borrower
Partnership Loan as provided in Section 9.06. All payments of principal,
interest, and, if applicable, real estate tax escrow, insurance escrow and any
other payments required under the Loan Documents or the Borrower Partnership
Note which are due and payable, through the Closing Date, have been, and will
be, paid in full and no default exists thereunder which extends beyond
applicable grace or cure periods. Neither the Transferor Partnership nor the
Borrower Partnership has received any written notice of default under any of the
Loan Documents or the Borrower Partnership Note. The Lender is the sole holder
or designated servicer of the Note. The Borrower Partnership is the sole holder
of the Borrower Partnership Note, subject to any pledge thereof to Lender. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. No security has been taken or held in connection with the Borrower
Partnership Note. The Loan Documents do not secure any other indebtedness but
the Loan or the Borrower Partnership Loan. To the best knowledge of the
Transferor Partnership, the amounts of any real estate tax escrow, insurance
escrow and any other escrows and reserves held by Lender are as set forth on
Schedule H.
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5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that
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(i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
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5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
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5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be
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offered, sold, transferred, pledged, or otherwise disposed of by such Transferor
Partner except (i) pursuant to an effective registration statement under the Act
and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter issued by
the Securities and Exchange Commission to the effect that a proposed transfer of
the BRI Partnership Units (or shares of common stock issued upon exchange of the
BRI Partnership Units) may be made without registration under the Act, together
with either registration or an exemption under applicable Blue Sky Laws, or
(iii) upon the BRI Partnership or BRI, as the case may be, receiving an opinion
of counsel knowledgeable in securities law matters (and which opinion and
counsel shall be reasonably acceptable to both the BRI Partnership and BRI) to
the effect that the proposed transfer is exempt from the registration
requirements of the Act and any applicable Blue Sky Laws, and that, accordingly,
such Transferor Partner must bear the economic risk of an investment in the BRI
Partnership Units (and the shares of common stock issued upon exchange of the
BRI Partnership Units) for an indefinite period of time. Such Transferor Partner
acknowledges, represents and agrees that (i) its economic circumstances are such
that it is able to bear all risks of the investment in the BRI Partnership and
BRI for an indefinite period of time, including the risk of a complete loss of
its investment in the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units), (ii) it has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in the BRI Partnership Units and BRI, and (iii) it has consulted with
its own separate counsel and tax advisor, to the extent deemed necessary by it,
as to all legal and taxation matters covered by this Agreement and has not
relied upon the BRI Partnership or the Transferor Agent, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI
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Partnership and BRI and its management concerning its investment in the BRI
Partnership and the transactions contemplated hereby, which questions were
answered to its satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction
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other than the country and state in which such principal residence or principal
place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's knowledge the Borrower Partnership is not in violation of any
order, statute, rule or regulation applicable to it, except for such violations
which would not have a Material Adverse Effect. Neither the execution, delivery
and performance of this Agreement by the Transferor Partnership, nor the
contribution of the Transferor Partnership Interests by the Transferor Partners
hereunder, nor the assignment and transfer of the Borrower General Partnership
Interest by the Borrower Corporate General Partner to the Borrower LLC General
Partner will result in any Material Adverse Effect or be in conflict with or
constitute a default under the Borrower Partnership Agreement or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has
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not been amended or modified. The Transferor Partnership and the Borrower
Corporate General Partner are the sole partners of the Borrower Partnership. The
address of the Transferor Partnership and the Borrower Corporate General Partner
is 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208. Each of the
Transferor Partnership and the Borrower Corporate General Partner owns a 50%
general partnership interest in the Borrower Partnership. No partner of the
Borrower Partnership is in default with respect to any capital contribution
required to be paid by it pursuant to the Borrower Partnership Agreement. A
true, correct and complete copy of the Borrower Partnership Agreement is
attached hereto as Exhibit IX. The Borrower Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to the partners
thereof any evidences of indebtedness or assets; and the Borrower Partnership
has no obligation, contingent or otherwise, to purchase, redeem or otherwise
acquire any interest in the Borrower Partnership or any interest therein or to
make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the
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Closing Date the Borrower Partnership shall have no liabilities or obligations
(absolute or contingent) of any kind, other than liabilities under the Loan
Documents and a contingent liability for recordation taxes if the Transferor
Partnership or the Borrower Partnership defaults on the Loan after Closing. The
Borrower Partnership has conducted its business only in the ordinary course and,
except for the Loan and the Borrower Partnership Loan and the matters disclosed
on Schedule 5.10, the Borrower Partnership has not created, permitted or allowed
any mortgage, pledge, lien, security interest, encumbrance, restriction or
charge of any kind with respect to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
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5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and hold, the
Borrower General Partnership Interest free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party. Upon Closing, the Transfer Partnership shall own and hold its
interest in the Borrower Partnership free and clear of any liens, pledges and
encumbrances of any kind whatsoever, and free of any rights of assignment of any
third party. Prior to Closing, the Transferor Partnership shall assign and
transfer to the Transferor Agent all of the issued and outstanding stock of the
Borrower Corporate General Partner. Subsequent to such assignment and transfer
to the Transferor Agent but prior to Closing, the Transferor Agent shall cause
the Borrower Corporate General Partner to assign and transfer the Borrower
General Partnership Interest to the Borrower LLC General Partner (as defined in
Section 9.12 hereof) free and clear of any liens, pledges and encumbrances of
any kind whatsoever and free of any rights of assignment of any third party,
such that upon Closing the Transferor Partnership and the Borrower LLC General
Partner will each own and hold a fifty percent (50%) general partnership
interest in the Borrower Partnership.
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D. REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO THE BORROWER CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the acquisition of the Borrower General
Partnership Interest in the Borrower Partnership or any part thereof, except for
the rights of the Borrower LLC General Partner and the BRI Partnership under
this Agreement.
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5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the
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BRI Partnership of the BRI Partnership Units, this Agreement and all other
documents and instruments contemplated hereby and the performance by the BRI
Partnership of its obligations hereunder and thereunder do not and will not
constitute a default under, or conflict with or violate, any provision of the
BRI Partnership Agreement or any other material agreement to which the BRI
Partnership is a party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI
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Partnership Units shall be vested in the Transferor Partners free and clear of
any lien, claim, charge, pledge encumbrance, limitation, agreement or instrument
whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a
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"real estate investment trust" and its method of operation has enabled and to
BRI's knowledge should enable it to meet the requirements for qualification and
taxation as a "real estate investment trust" under the Internal Code of 1986, as
amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
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6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership
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shall have the option, exercisable by written notice given to the Transferor
Partners at or prior to the Time of Closing, either to (a) terminate this
Agreement, whereupon all obligations of all parties hereto shall cease, and this
Agreement shall be void and without recourse to the parties hereto except for
provisions which are expressly stated to survive such termination; or (b)
proceed with the contribution and transfer of the Transferor Partnership
Interests, and in such case, unless the Transferor Partners shall have
previously restored the Property to its condition prior to the occurrence of any
such damage or destruction, the Transferor Partners shall pay over or assign to
the BRI Partnership, on behalf of the Transferor Partnership and the Borrower
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur
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or any subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the Closing Date
which are attributable to (i) the fiscal tax year during which the Closing
occurs shall be apportioned between Transferor Partners and the BRI Partnership,
based upon the relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs shall be paid
to the Transferor Partners, in either case after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder, except that the Transferor Partnership
(and the Borrower Partnership) may extend the maturity date of the Loan to
January 31, 1998 and shall use its good faith efforts to do so, and (d) not make
(or permit the Borrower Partnership to make) any prepayment of principal under
the Note. Without limitation of the foregoing, the Transferor Partnership shall
(a) make all payments of interest and principal and, if applicable, tax escrow,
insurance escrow, and other amounts required under the Borrower Partnership Note
coming due thereunder prior to the Closing in accordance with the terms thereof,
(b) otherwise comply with all of the material terms and provisions of the
Borrower Partnership Note up to the Closing, (c) not alter or amend the Borrower
Partnership Note, or seek or accept any waivers or extensions of time for
payment or performance thereunder, except that the maturity date of the Borrower
Partnership Loan may be extended to January 31, 1998 in the event that the
maturity date of the Loan is extended to January 31, 1998 as provided above, and
(d) not make any prepayment of principal under the Borrower Partnership Note.
All costs incurred in extending the maturity date of the Loan and the Borrower
Partnership Loan shall be paid by the Transferor Partnership.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
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9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least
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equal quality or make or permit to be made any material alterations to or upon
the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
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refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent, on behalf of the Transferor Partnership and pursuant to the
power of attorney granted to it under Section 19.04, shall transfer all of the
issued and outstanding stock in the Borrower Corporate General Partner to the
Transferor Agent. Immediately prior to Closing, (i) the Transferor Agent shall
cause the Borrower Corporate General Partner to assign its Borrower General
Partnership Interest in the Borrower Partnership to a limited liability company
formed by the BRI Partnership, all of the membership interests in which shall be
owned by the BRI Partnership or an affiliate thereof (the "Borrower LLC General
Partner") and (ii) the Transferor Agent shall cause the Borrower Corporate
General Partner to withdraw as a general partner of the Borrower Partnership,
such that, at Closing, the Borrower Partnership shall validly exist as a
Maryland general partnership, having as its sole general partners the Transferor
Partnership and the Borrower LLC General Partner, each of which shall hold a 50%
general partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
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10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the
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Borrower Partnership Assignment has not been duly executed and delivered by the
Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted
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under Section 19.04 in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and fairways endorsement and to omit from its title insurance policy all
exceptions for (i) judgments, bankruptcies or other returns against persons or
entities whose names are the same as or similar to the Transferor Partnership's
name; (ii) parties in possession other than under the rights to possession
granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been
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paid on the Note; and (D) the amount of any real estate tax escrow, insurance
escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
all loan assumption fees, all transfer taxes and documentary stamps, if any, in
connection with the transfer of title to the Property to the Transferor
Partnership described in Section 5.08 hereof, and one-half of all: (i) Title
Insurance and Survey costs, (ii) escrow and recording costs (iii) transfer taxes
and documentary stamps, if any, in connection with the assignment and transfer
of the Transferor Partnership Interests as contemplated herein, and (iv) UCC
Search costs. The Transferor Partners also shall pay their pro rata share of the
fees and expenses attributable to the transactions contemplated by this
Agreement in accordance with the provisions of Section 19.03 and all of the fees
and expenses of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI
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Partnership and the Transferor Partnership shall be entitled to rely on the
agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any
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amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
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(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower Corporate General
Partner in the Borrower Partnership to the Borrower LLC General Partner in such
a manner as not to result in the dissolution of the Borrower Partnership, in the
form of the Borrower Partnership Assignment attached hereto as Exhibit X, duly
executed and delivered by the Borrower Corporate General Partner, which shall
transfer such Borrower General Partnership Interest in the Borrower Partnership
to the Borrower LLC General Partner free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party (the "Borrower
Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant to which the BRI Partnership, or its designees, shall be admitted as
partners of the Transferor Partnership.
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(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
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consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees and one-half of all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs and (iii) transfer taxes and documentary stamps, if any, in
connection with the assignment and transfer of the Transferor Partnership
Interests as contemplated herein, and (iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments, or except as contemplated in Section
11.04 hereof, or as otherwise required by the holder of the Loan under the Loan
Documents, or change the
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terms in a manner that would change the Loan from nonrecourse to recourse within
the meaning of Section 752 of the Code and the regulations promulgated
thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
11.04 Post-Closing Refinancing. Notwithstanding the provisions of Section
11.03(c) hereof, the BRI Partnership and BRI shall cause the Transferor
Partnership within 90 days after the Closing Date to refinance the Loan with a
new non-recourse loan (the "New Loan") for an amount not less than $5,630,000
for a term not less than
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seven years, for an interest rate not to exceed that available under the Tier 2
FNMA Underwriting Guidelines and upon such other terms and conditions as may be
satisfactory to the BRI Partnership and BRI. The Transferor Partners shall pay
all costs and expenses incurred by the Transferor Partnership, the BRI
Partnership or BRI in connection with such refinancing, including, without
limitation, loan origination fees, lender legal fees and all other expenses
charged by the refinancing lender and the Transferor Partnership's, the BRI
Partnership's or BRI's attorneys' fees and costs (collectively, "Refinancing
Costs"), but excluding any escrow required to be established with the
refinancing lender and the cost of any repairs or replacements required by the
refinancing lender. At Closing, the Transferor Partners shall deposit in escrow
a sum (the "Refinancing Escrow Amount") equal to the lesser of (a) two (2%)
percent of the principal amount of the New Loan as estimated by the BRI
Partnership at the time of Closing (but in any event not more than $112,700), or
(b) an amount mutually agreed to by the Transferor Agent and the BRI
Partnership, with a mutually acceptable escrow agent and pursuant to a mutually
acceptable escrow agreement. The Refinancing Escrow Amount shall be used to pay
for the Refinancing Costs. The amount to be deposited by each Transferor Partner
shall be proportionate to the number of BRI Partnership Units to be received by
each Transferor Partner at Closing in accordance with the Transferor Allocation
Schedule. In the event that the actual Refinancing Costs are less than the
Refinancing Escrow Amount, the difference shall be refunded to the Transferor
Agent who shall distribute such refund to the Transferor Partners in proportion
to their respective contributions to the Refinancing Escrow Amount. Once the
Loan is refinanced under this Section, the provisions of Section 11.03(c) shall
apply to the New Loan as fully and completely as if all references in Section
11.03(c) to the Loan instead referred to the New Loan and all references to the
Loan shall be deemed to refer to the New Loan.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be
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based on the last available reading, subject to adjustment after the Closing on
a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transferor Allocation Schedule (the "Transferor Allocation Schedule"), which
shall be based upon the Preliminary Transferor Allocation Schedule, shall
incorporate all adjustments and prorations to be made pursuant to Section 12,
and shall set forth (i) the name of each Transferor Partner, (ii) the number of
Unrestricted Distribution BRI Partnership Units to be received by each
Transferor Partner, and (iii) the number of Restricted Distribution BRI
Partnership Units to be received by each Transferor Partner. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Preliminary Transferor Allocation Schedule or the Transferor
Allocation Schedule or the distribution of the BRI Partnership Units or the BRI
Additional Payment, if applicable, to the Transferor
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Partners and the Transferor Partners hereby release the BRI Partnership from any
such obligation or liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01 and the escrow required to be
established under Section 11.04, the Transferor Partners owe an amount to the
BRI Partnership or into escrow, the Transferor Partnership shall have the right
to elect on behalf of the Transferor Partners to adjust for such amounts owing
by the Transferor Partners to the BRI Partnership or the escrow in the form of
BRI Partnership Units rather than cash. In addition, if as a result of the
prorations and apportionments set forth in Section 12.01, the BRI Partnership
owes an amount to the Transferor Partners, such amount shall be
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paid in the form of BRI Partnership Units rather than cash. The Transferor Agent
shall have the right to elect to adjust for amounts owing to the Transferor
Partners or the BRI Partnership, as the case may be, in the form of cash and/or
BRI Partnership Units. The Transferor Agent shall notify the BRI Partnership at
least seven (7) business days prior to the Closing Date of the manner in which
the Transferor Partnership shall have elected to settle adjustments under
Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and
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exclusive remedies at law or in equity of the BRI Partnership in the event of a
default by the Transferor Partners in lieu of all other rights and remedies
which the BRI Partnership may have against the Transferor Partners at law or in
equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
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14.02 Loan Assumption Fees. The Transferor Partners will pay any
assumption or transfer fee and other related costs and expenses required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
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If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the
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Closing Date and thereafter during the pendency of any claim based upon a breach
thereof, and no action based thereon shall be commenced more than twelve (12)
months after the Closing Date. Except as otherwise specifically provided in this
Agreement, no other representations, warranties, covenants or other obligations
of the Transferor Partners or the BRI Partnership set forth in this Agreement
shall survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower Corporate General Partner set forth in this Agreement
shall be true and correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
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(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title to a fifty percent (50%) general partnership interest
in the Borrower General Partnership, free and clear of all liens, pledges, and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party; and the Borrower LLC General Partner shall own a fifty percent
(50%) general partnership interest in the Borrower Partnership, free and clear
of any liens, pledges and encumbrances of any kind whatsoever and free of any
rights of assignment of any third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of
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the Closing Date, any or all of which may be waived, only in writing, by the
Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of its interests in the Borrower Partnership to
the Borrower LLC General Partner, to the withdrawal from the Borrower
Partnership of the Borrower Corporate General Partner, and to the admission to
the Borrower Partnership of the Borrower LLC General Partner as a fifty percent
(50%) general partner, and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership, the transfer of
ownership of the
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Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of its interests in the Borrower Partnership to
the Borrower LLC General Partner, to the withdrawal from the Borrower
Partnership of the Borrower Corporate General Partner, and to the admission to
the Borrower Partnership of the Borrower LLC General Partner as a fifty percent
(50%) general partner. The BRI Partnership shall supply any and all
documentation and additional information required by Lender in order to promptly
complete the request for the consent of Lender to the transactions contemplated
hereunder. The Transferor Partnership shall request that Lender state in writing
any terms and requirements, including the amount of any Loan Assumption Fees, to
be imposed by Lender in connection with its consent to the transactions
contemplated hereby. It shall be a condition of Closing that prior to October
15, 1997, Lender shall have granted its consent to the transactions contemplated
hereunder on terms and requirements reasonably satisfactory to the BRI
Partnership, shall have issued the Lender Estoppel Letter and shall have agreed
to release the Transferor Partners from all liability under the Loan Documents.
In the event that any of the terms or requirements required by Lender for its
consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, and the BRI
Partnership gives timely notice of termination hereunder to the Transferor
Agent, this Agreement shall terminate without further action by any party, and,
thereafter this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive termination of this
Agreement. In the event the Lender shall not have agreed to release the
Transferor Partners from all liability under the Loan Documents or the Lender
shall have placed terms and conditions on the Transferor Partners that are
unacceptable to them, the Transferor Agent may terminate this Agreement by
written notice given to the BRI Partnership within fifteen (15) business days
after the Transferor Agent has received in writing notice that the Lender has
refused to release the Transferor Partners from liability under the Loan
Documents or has imposed such unacceptable terms and conditions. If the
Transferor Agent gives timely notice of termination to the BRI Partnership, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement").
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The Transferor Partners shall supply any documentation and additional
information required by BRI in order to complete the offering materials in
connection with the Public Offering or the Private Placement. The obligation of
the BRI Partnership to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the successful completion of the
Public Offering and the Private Placement raising a minimum of $75,000,000.00.
If the Public Placement and the Private Placement do not in the aggregate
complete offerings which raise a minimum of $75,000,000 as aforesaid prior to
the Closing Date hereunder, the BRI Partnership shall have the right to
terminate this Agreement effective as of the Closing Date, and, thereafter this
Agreement shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be
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permitted to designate any one or more subsidiary entities, which are wholly
owned by the BRI Partnership or BRI, to receive title to all or any portion of
the Transferor Partnership Interests as its designee, provided further that
notwithstanding any such designation, the BRI Partnership shall continue to
remain liable for the performance of all of its obligations under this
Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
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18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
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SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the proposes of
this Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI
shall be entitled to an aggregate administrative fee of $200,000 in connection
with the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is
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determined) shall be included as Indirect Costs, with any such fee in excess of
$1,000,000 to APC being the sole responsibility of QPI; and (iii) all legal and
accounting fees of counsel and advisors to the Transferor Agent and the Related
Entities shall also be Indirect Costs. Each of the Transferor Partners
acknowledges and agrees that (i) any and all Direct Costs shall be allocated
based on the pro rata number of BRI Partnership Units allocated to each of them
with respect to their interest in the Transferor Partnership and (ii) any and
all Indirect Costs shall be allocated among the Transferor Partners and the
Related Entities at Closing based on the pro rata number of BRI Partnership
Units allocated at Closing to each of them. Each of the Transferor Partners
further acknowledges and agrees that the Transferor Agent shall be authorized to
determine the allocations of the transaction costs and expenses to be allocated
in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out the
provisions of this Agreement and the transactions contemplated hereby including,
without limitation, execution of such title affidavits, non-imputation and
fairways affidavits and gap indemnities as are required by the terms of this
Agreement and endorsement, assignment and transfer of the issued and outstanding
stock of the Borrower Corporate General Partner currently owned by the
Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such agreements and, to the extent that any agreements or documents relating to
this Agreement (such as partnership assignments or other similar closing
documents) are executed prior to the Closing, the Transferor Agent is authorized
on behalf of each Transferor Partner and the Borrower Corporate General Partner
to hold all such agreements in escrow pending the Closing, at which time the
Transferor Agent shall be authorized to deliver such documents on behalf of the
Transferor Partners and the Borrower Corporate General Partner to the BRI
Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of
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the Transferor Partners (i) consents to the transactions contemplated by this
Agreement, including the transfer of the Transferor Partnership interest of each
of the other Transferor Partners, and waives any provisions contained in the
Partnership Agreement for the Transferor Partnership inconsistent with anything
contained in this Agreement, (ii) waives all conditions precedent to the
transactions contemplated by this Agreement set forth in the organizational
documents of Transferor Partnership, (iii) except as set forth in Schedule 19.06
and except as specifically provided herein or in any of the Closing documents
implementing the transactions contemplated hereby, releases the Transferor Agent
and Morton Gorn, Stephen Gorn and John Colvin and their affiliated entities and
spouses (collectively, the "GGC Parties") from any and all liability arising out
of the transactions contemplated hereby and the operation of Transferor
Partnership prior to the Closing, including, but not limited to, all matters
relating to the management of the property owned by the Transferor Partnership
by the management company for the Transferor Partnership and any affiliated
persons or entities thereto, and (iv) agrees, severally and not jointly, subject
to the provisions of Section 10.05, to indemnify and hold harmless the
Transferor Agent and the GGC Parties from and against any and all costs,
damages, fees, and expenses, including reasonable attorney's fees, that the
Transferor Agent and/or the GGC Parties may incur in carrying out its, his, or
their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
- ------------------------- ----------------------------------
Donald Brown
WITNESS:
- ------------------------- ----------------------------------
Karen G. Colvin
WITNESS:
- ------------------------- ----------------------------------
Joseph B. Gildenhorn
WITNESS:
- ------------------------- ----------------------------------
Name:
As Trustee of
Irving Gisner u/w/o Trust
WITNESS:
- ------------------------- ----------------------------------
Slova Gisner
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WITNESS:
- ------------------------- ----------------------------------
Morton Gorn
WITNESS:
- ------------------------- ----------------------------------
Stephen M. Gorn
WITNESS:
- ------------------------- ----------------------------------
Arlene Gorn
WITNESS:
- ------------------------- ----------------------------------
Samuel G. Gorn
WITNESS:
- ------------------------- ----------------------------------
Bette Miller
WITNESS:
- ------------------------- ----------------------------------
Name:
For the Estate of Harry S. Miller
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WITNESS:
- ------------------------- ----------------------------------
Irvin Miller
WITNESS:
- ------------------------- ----------------------------------
Name:
For the Estate of Judith Miller
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
By:
- ------------------------- ---------------------------------
Name:
Title:
BORROWER CORPORATE GENERAL PARTNER:
WITNESS: FREDERICK ROAD FUNDING, INC.,
a Maryland corporation
By:
- ------------------------- ---------------------------------
Name:
Title:
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BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
By:
- ------------------------- ---------------------------------
Name:
Title:
WITNESS:
- ------------------------- ----------------------------------
Morton Gorn, solely for the purposes
of Section 19.06
WITNESS:
- ------------------------- ----------------------------------
Stephen Gorn, solely for the
purposes of Section 19.06
WITNESS:
- ------------------------- ----------------------------------
John Colvin, solely for the purposes
of Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Version of 8/27/97
Hilltop
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Gorn
Properties, Inc., a Maryland corporation (the "Transferor Corporation"), with an
address c/o Questar Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore,
Maryland 21208, Attention: Mr. Stephen M. Gorn, and Questar Investment
Corporation, a Maryland corporation (the "Transferor Agent"), with an address of
124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen
M. Gorn and BRI OP Limited Partnership, a Delaware limited partnership (the "BRI
Partnership") with an address c/o Berkshire Realty Company, Inc., 470 Atlantic
Avenue, Boston, Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Corporation is the owner of the following:
a. that certain tract or parcel of land located in Baltimore City,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 50-unit apartment complex, commonly known as Hilltop
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Corporation in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Corporation in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
<PAGE>
all the estate and rights of the Transferor Corporation in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Corporation
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Corporation's interest in any intangible
property now or hereafter, owned by the Transferor Corporation and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Corporation
pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Corporation desires to become a limited partner of
the BRI Partnership and in connection therewith to contribute the Property to
the BRI Partnership, and the BRI Partnership desires to admit the Transferor
Corporation as a limited partner in the BRI Partnership and to accept such
contribution from the Transferor Corporation; and
WHEREAS, in exchange for such contribution, the Transferor Corporation
desires to receive BRI Partnership Units in accordance with the terms of this
Agreement and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Corporation and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
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1.01 Agreement to Contribute; Assignment. The Transferor Corporation
shall contribute to the BRI Partnership, and the BRI Partnership
shall accept from the Transferor Corporation, in exchange for BRI
Partnership Units and upon the terms and conditions set forth in
this Agreement, the Property. At the Closing (as defined in Section
3.01), the Transferor Corporation shall, contribute, assign,
transfer and deliver the Property to the BRI Partnership, or its
designees as provided in Section 18.01 hereof, by a Limited Warranty
Deed in the form of Exhibit III attached hereto (the "Deed").
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B
Owner's Title Insurance Policy (the "Commitment") from Lawyers Title
Insurance Corporation (the "Title Insurer") and copies of all
instruments and plans mentioned therein as exceptions to good and
marketable fee simple title, as well as copies of any instruments
referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title
Policy"). The BRI Partnership shall provide a copy of the Commitment
to the Transferor Corporation promptly after its receipt thereof.
The Commitment shall insure fee simple title to the Property in the
sole name of the BRI Partnership and shall be in the amount of the
Consideration Amount (as defined in Section 2.01(a) hereof). The
Commitment shall provide for a title insurance policy which shall
contain coverage against all mechanics' liens, shall have full
survey coverage, shall have deleted therefrom all "printed standard
exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement and such other endorsements as are reasonably required
by the BRI Partnership (provided, that the cost of any such other
endorsements shall be paid by the BRI Partnership) and are available
under the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Corporation on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Corporation of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Corporation
in writing of such fact as above provided, the Transferor Corporation shall have
thirty (30) days from the date the Transferor Corporation receives notice of
such unacceptable exceptions, at the option of the Transferor
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Corporation, to remove or cure such exceptions, provided further, the Transferor
Agent may, but shall not be required to, make any monetary expenditures in
connection with the removal or cure of such exceptions. All mortgages and deeds
of trust, mechanics liens, tax liens, attachments and all other monetary liens
against the Property (other than liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Corporation at Closing.
The Transferor Corporation shall be deemed to have refused to cure any
unacceptable exceptions unless the Transferor Corporation, within ten (10) days
after receipt of notice from the BRI Partnership, shall notify the BRI
Partnership in writing that the Transferor Corporation will attempt to cure such
unacceptable exceptions. If the Transferor Corporation fails or refuses to cure
said unacceptable exceptions within the time period above provided, on or before
the earlier to occur of (A) ten (10) days after the Transferor Corporation
notifies the BRI Partnership that it refuses to cure such unacceptable
exceptions, and (B) Closing Date, the BRI Partnership may, in accordance with
the provisions of Section 13 hereof, (i) terminate this Agreement by giving
written notice to the Transferor Corporation or (ii) waive such exceptions and
accept title subject thereto, in which event there shall be a reduction in the
Consideration Amount (as defined in Section 2.01(a)) in an amount necessary to
enable the BRI Partnership to remove all Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the
"Survey") of the Land and the Improvements by a registered land
surveyor (the "Surveyor") acceptable to the BRI Partnership, which
Survey shall include (i) all existing buildings, improvements,
fences, encumbrances, encroachments, conflicts, party walls,
protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent
to the Land, or affecting the Land or the Improvements), and any
visible evidence of all water, sewer, gas, telephone and electric
lines, (ii) the exact area of the Land to the nearest hundredth of
an acre, (iii) all buildings set back and other restriction lines,
(iv) property corners and boundary lines of the Property (including
the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to
the monument from which it is fixed, (vi) recorded or otherwise
known easements (stating the recording book and page references in
the case of any such recorded easements), (vii) a metes and bounds
written description of the Land, and (viii) a notation of any
discrepancies between the Survey and the recorded legal description.
The BRI Partnership shall provide a copy of the Survey to the
Transferor Corporation promptly after its receipt
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thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Corporation on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Corporation of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Corporation in writing of such fact as above provided, the Transferor
Corporation shall have thirty (30) days from the date the Transferor Corporation
receives notice of such unacceptable survey matters, at the option of the
Transferor Corporation, to cure such unacceptable survey matters. The Transferor
Corporation shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Corporation, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Corporation will attempt to cure such unacceptable survey
matters. If the Transferor Corporation fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Corporation notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Corporation or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including October 1,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Corporation, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property
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with Environmental Laws (as defined in Section 5.21) and in connection therewith
to conduct such tests and observations and compile such information as the BRI
Partnership, in its sole discretion may deem appropriate (the "Environmental
Inspection"). The BRI Partnership shall provide a copy of any third party
environmental reports obtained by the BRI Partnership, without representation or
warranty, and subject to the limitations on use set forth therein, to the
Transferor Corporation promptly after its receipt thereof. No such inspection,
however, shall constitute a waiver or relinquishment on the part of the BRI
Partnership of its right to rely upon the covenants, representations, warranties
or agreements made by the Transferor Corporation in this Agreement. Should the
BRI Partnership decide, in its sole judgment, during the Due Diligence Period
that based upon the results of the Environmental Inspection, it no longer
desires to proceed with the transactions contemplated hereby, the BRI
Partnership shall have the right to terminate this Agreement by giving written
notice of its election to do so to the Transferor Corporation on or before the
last day of the Due Diligence Period, and upon the giving of such notice this
Agreement shall be of no further force or effect. If the BRI Partnership shall
fail to exercise such termination right within the Due Diligence Period, the BRI
Partnership shall be conclusively deemed to have waived any right it may have
had to terminate this Agreement pursuant to this Section 1.04(b). The BRI
Partnership shall pay when due all fees and expenses incurred in the performance
of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Corporation
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Corporation's books, financial records, Service
Contracts, Leases and tenant files pertaining to the operation of the Property
prior to the Closing. The BRI Partnership's agents and representatives shall be
permitted access to such records and files during regular business hours. To the
extent that any of the Transferor Corporation's financial records relating to
the Property have been audited, the Transferor Corporation agrees to deliver any
reports relating to such audits to the BRI Partnership. The Transferor
Corporation shall provide the BRI Partnership with such information as the
Transferor Corporation may have with respect to actual expenditures made for all
repairs, maintenance, operation and upkeep of the Property, including, without
limitation, to the extent in the possession of the Transferor Corporation, all
taxes and utility payments made within three (3) years prior to the Closing and
dates of construction, installation and major repairs to the Property. All
information obtained by the BRI Partnership or its agents and representatives
pursuant to this Section 1.04(c) shall be treated as confidential, shall not be
disclosed to others until and unless the Closing occurs, and if such information
is in written form, such information shall be returned to the Transferor
Corporation if the Closing does not occur.
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(d) The BRI Partnership shall indemnify the Transferor Corporation against
and from all damage to the Property and/or claims of tenants or other third
parties resulting from any entry on the Property by the BRI Partnership or any
agent, contractor, consultant or other representative of the BRI Partnership, or
any tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Corporation by
reason thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Corporation for any costs of remediation or clean-up, fines,
penalties, assessments or similar charges for any condition existing at the
Property solely by reason of the fact that the BRI Partnership or its agents,
contractors, consultants or other representatives discover the existence of such
condition during the course of conducting tests or other activities on the
Property. The provisions of this Section 1.04(d) shall survive the Closing or
any termination of this Agreement; provided, however, that no claim by the
Transferor Corporation under this Section 1.04(d) for damage to the Property
shall be made if (i) the Closing occurs or (ii) more than 90 days after the
termination of this Agreement if the Closing does not occur, except for damage
claims made by tenants as to which the time for asserting any such claim shall
be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Corporation by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Corporation hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Property by the Transferor Corporation to the BRI Partnership in
accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free
contribution to capital pursuant to Section 721 of the Internal
Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor
Corporation agree to report such transaction for federal and
applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
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SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Corporation and the BRI Partnership agree that, subject
to the prorations and adjustments as provided in this Agreement, the
consideration (the "Consideration") for the contribution of the Property by the
Transferor Corporation to the BRI Partnership pursuant to this Agreement shall
be $1,250,311, which shall consist of BRI Partnership Units, to be issued by the
BRI Partnership to the Transferor Corporation as of the Closing, equal in value
(as such value is determined at the time and in the manner provided hereinbelow)
to the excess of (X) $1,250,311, subject to the prorations and adjustments as
provided in this Agreement, (the "Consideration Amount") minus (Y) the amount
required to pay the Loan in full.
At the Closing, the BRI Partnership shall pay in full the outstanding
principal balance of the Note dated April 15, 1993, in the original principal
amount of $1,000,000 (the "Note") evidencing the loan (the "Loan") made to the
Transferor Corporation by Crestar Bank (successor to Loyola Federal Savings
Bank) ("Lender") and secured by the Loan Documents.
At Closing, the Transferor Corporation will receive BRI Partnership Units
which will be entitled to distributions from the date of issuance (the "BRI
Partnership Units").
At the Closing, the Transferor Agent shall deliver an investor
questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire")
for the Transferor Corporation. In the event that the Transferor Corporation
would be entitled to a fractional BRI Partnership Unit, the number of BRI
Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent the BRI Partnership Confirmation evidencing the
issuance of the BRI Partnership Units to the Transferor Corporation. In
addition, if pursuant to Section 12, the BRI Partnership owes any amounts to the
Transferor Corporation as a result of prorations and apportionments (the "BRI
Additional Payment"), at Closing, the BRI Partnership shall pay the BRI
Additional Payment to the Transferor Agent in accordance with the election made
by the Transferor Corporation pursuant to Section 12.04. The Transferor Agent
shall be liable to distribute the BRI Partnership Units and if applicable, the
BRI Additional Payment to Transferor Corporation.
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The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement. At the time that the Transferor Corporation elects to
convert BRI Partnership Units to shares as provided in the BRI Partnership
Agreement, the holder of each BRI Partnership Unit shall have the right to have
the BRI Partnership Unit either (i) exchanged for one share of common stock of
BRI pursuant to the transfer provisions of the BRI Partnership Agreement, or
(ii) redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. The Transferor Corporation shall
have such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Corporation and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Corporation a certified copy of
the Registration Rights Agreement.
(c) The Transferor Corporation acknowledges and agrees that after the
execution hereof, the price of the common stock of BRI may increase or decrease
in value as the result of market fluctuations prior to the Public Offering, and
that any such fluctuations will have an impact on the value of the BRI
Partnership Units. Notwithstanding these fluctuations, once the value and number
of BRI Partnership Units have been established as provided in Section 2.01(a),
the BRI Partnership will not be required to increase or permitted to decrease
the number of BRI Partnership Units to be issued to the Transferor Corporation
in the event of a decrease or increase in the market value of the common stock
of BRI subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire
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transfer.
2.03 Retention of Escrow. At the Closing, the Transferor Corporation
shall retain the escrow deposits set forth on Schedule C attached
hereto.
SECTION 3
CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the
delivery of all documents necessary for the closing of the
transactions contemplated by this Agreement (the "Closing") shall
take place in the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts 02109, or such other place as the Transferor
Corporation and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the
parties but in any event not later than October 31, 1997 the
("Closing Date"). The "Time of Closing" shall be at such time as all
recordable instruments necessary for the closing of the transactions
contemplated by this Agreement shall be placed in escrow with the
Title Insurer, who will thereupon issue the Title Policy referred to
in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for the Transferor Corporation
granted under Section 19.04 of a so-called Gap Indemnity in the form
of Exhibit VI with respect to the gap in time period between policy
issuance and recording, all as provided in a letter of instruction
executed by counsel for the BRI Partnership and counsel for the
Transferor Corporation. It is agreed that time is of the essence of
this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Corporation has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any
memoranda of leases or other documents of record relating thereto.
In addition, the Transferor Corporation shall provide the BRI
Partnership with access on-site to the originals of all leases and
related lease files.
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4.02 Permits. Copies of all material building permits, zoning variances
(if any), certificates of occupancy (if any), subdivision plats,
governmental permits, approvals, certificates and other licenses
lawfully required for the construction, use, occupancy and operation
of the Property and all other correspondence with governmental
authorities (including, without limitation, any default notices), to
the extent in the Transferor Corporation's possession.
4.03 Taxes. To the extent in the Transferor Corporation's possession, a
copy of real estate and personal property tax statements and special
assessments for the Property for the past three (3) years and, all
correspondence, notices or other written communication with taxing
authorities relating to the taxes currently assessed and/or to be
assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Corporation's possession, a copy of the plans and specifications,
and a copy of all unexpired guaranties and warranties made by any
person for the benefit of the Transferor Corporation with respect to
all or any part of the Property in connection with the construction
and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income
and expense records relating thereto for 1995 and 1996 and all
months of operation of 1997, and detailed operating statements for
1995 and 1996 and all months of operation of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related
documents and agreements in respect of all pending litigation, if
any, relating to the Property (excluding litigation commenced
against tenants in the ordinary course of business for evictions or
collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being
collected on each of the apartment units in the Improvements which
includes: apartment number, unit status, tenant name, commencement
and termination dates, lease rent, deposits and details of any
concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease
used in connection with the leasing of each unit of the
Improvements.
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4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance
and/or operation of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month
period (excluding bills for utilities which are directly metered and
sent to tenants) to the extent in the possession of the Transferor
Corporation, the Transferor Agent or any of Transferor Agent's
affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or
studies in the possession of the Transferor Corporation conducted
with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by
the Transferor Corporation which shall be attached hereto as
Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other
documents in connection with the Loan, together with any and all
modifications and amendments thereto as set forth on Schedule H
attached hereto (collectively, the "Loan Documents").
SECTION 5
REPRESENTATIONS AND WARRANTIES
OF TRANSFEROR CORPORATION
The Transferor Corporation represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Corporation. The
Transferor Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Maryland. The Transferor Corporation has all requisite power to own
and operate the Property and to carry on its business as presently
being conducted and as proposed to be conducted. The Transferor
Corporation is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a material adverse
effect on the Transferor Corporation's business (a
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"Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Corporation is not in violation
of any term contained in the Transferor Corporation's articles of
incorporation or bylaws or to the Transferor Corporation's knowledge
in any other material instrument or contract to which the Transferor
Corporation is a party relating to the Property, and to the
Transferor Corporation's knowledge the Transferor Corporation is not
in violation of any order, statute, rule or regulation applicable to
it, except for such violations which would not have a Material
Adverse Effect. Neither the execution, delivery and performance of
this Agreement by the Transferor Corporation, nor the contribution
of the Property by the Transferor Corporation hereunder, will result
in any Material Adverse Effect or be in conflict with or constitute
a default under the Transferor Corporation's articles of
incorporation or bylaws or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or
assets of the Transferor Corporation, except for Permitted
Exceptions.
5.03 Governmental Consent, etc. No consent, approval or authorization of,
or designation, declaration or filing with, any governmental agency,
commission, board or public authority is required on the part of the
Transferor Corporation in connection with the valid execution and
delivery of this Agreement by the Transferor Corporation and the
performance of the Transferor Corporation's obligations hereunder.
5.04 Corporate Documents. A true, correct and complete copy of the
Transferor Corporation's articles of incorporation and bylaws are
attached hereto as Exhibits I and II, respectively.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Corporation's knowledge,
proceeding or investigation pending or, to the Transferor
Corporation's knowledge, any threat thereof, against the Transferor
Corporation or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor
Corporation to enter into it, or which might result in or have,
either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Corporation as such is
presently contemplated; or (ii) the Property. During the period
commencing on the date hereof and ending on the Closing Date, the
Transferor Corporation will promptly inform the BRI Partnership in
writing of any material action, suit, proceeding or investigation
pending, or to the Transferor
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Corporation's knowledge, threat thereof against the Transferor
Corporation or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including
all amendments thereto), oral or written, other than the Leases, to
which the Transferor Corporation is a party or to which any agent of
the Transferor Corporation is a party on behalf of the Transferor
Corporation or has entered into on behalf of the Transferor
Corporation, relating to the Property or otherwise affecting the
Property, including without limitation, all material management,
maintenance, brokerage, supply and service contracts and any
material contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the
Transferor Corporation for the Property (collectively "Service
Contracts"). Except as noted on Schedule E, each Service Contract is
cancelable on thirty (30) days notice. The Transferor Corporation
has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Corporation will
have paid all amounts due under each Service Contract, other than
payments for which an adjustment shall be made pursuant to Section
12 hereof.
5.07 Intentionally Deleted.
5.08 Title to Properties and Assets. The Transferor Corporation is the
sole owner of the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Corporation, no
other material license, permit or authorization is necessary to own
and operate the Transferor Corporation's business as such is
presently conducted and neither the conduct of the Transferor
Corporation's business nor any material portion thereof is dependent
on the issuance or obtaining of any other license, permit or
authorization.
5.10 Intentionally Deleted.
5.11 Intentionally Deleted.
5.12 Intentionally Deleted.
5.13 Intentionally Deleted.
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5.14 Intentionally Deleted.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency
agreement with the Transferor Corporation with respect to the
Property.
5.16 Intentionally Deleted.
5.17 Ownership. The Transferor Corporation has not received any written
notice challenging the validity of the Transferor Corporation's
title to the Property. The Transferor Corporation has not granted
any rights, options, rights of first refusal or entered into other
agreements of any kind which are currently in effect for the
acquisition of the Property or any part thereof, except for the
rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy
agreements (written or verbal) which grant any possessory interest
in and to any space situated on or in the Improvements or that
otherwise give rights with regard to use of the Improvements other
than the leases (the "Leases") described in the Rent Roll attached
hereto as Schedule D (the "Rent Roll"). The Rent Roll is true,
accurate and correct in all material respects as of the date hereof.
Except as otherwise specifically set forth in the Rent Roll or
elsewhere in this Agreement:
(a) to the Transferor Corporation's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Corporation;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Corporation, except as set
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forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Corporation by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any
rent subsidies or rental assistance programs. To the best knowledge
of the Transferor Corporation, no apartment unit is subject to any
rent control law, ordinance or regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents.
True and complete copies of the Loan Documents, including each
modification and amendment thereof, have been furnished heretofore
to the BRI Partnership. There are no notes, instruments, agreements,
mortgages, deeds of trust or other documents evidencing any material
agreement or obligation of the Transferor Corporation to Lender or
any other lender with respect to the Property other than as listed
on Schedule H. The Loan Documents are in full force and effect and
none of the Loan Documents have been modified, amended or extended
except as disclosed on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"),
which Schedule sets forth a list of all material reports, studies,
analyses, notices from any governmental authority, or agreements
with any person or governmental authority and similar material
documents relating to environmental matters in the possession of the
Transferor Corporation, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property
(collectively, the "Environmental Reports"). The Transferor
Corporation has heretofore either furnished to the BRI Partnership
or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in
the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI
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Environmental Reports"), the Transferor Corporation has not received
any written notice from any governmental entity or other person that
the Property, or current or former operations on the Property, are
not or have not been in material compliance with any Environmental
Laws or that the Transferor Corporation has any material liability
with respect thereto. To the Transferor Corporation's knowledge,
except as set forth in the Environmental Reports or in the BRI
Environmental Reports, there are no underground tanks for Hazardous
Materials, active or abandoned, at the Property and no Hazardous
Materials are present or have been released in a reportable
quantity, where such a quantity has been established by statute,
ordinance, rule, regulation or order, at, on or under the Property.
To the Transferor Corporation's knowledge, except as disclosed in
the Environmental Reports or in the BRI Environmental Reports,
neither the Transferor Corporation nor the Property is in violation
in any material respect of any Environmental Laws and there is no
asbestos, PCB's or lead paint on the Property or any part thereof.
For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.),
as amended by the Hazardous and Solid Waste Amendments of 1984; the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. ss. 9601 et seq.), as amended by the Superfund Amendments
and Reauthorization Act of 1986; the Hazardous Materials
Transportation Act (49 U.S.C. ss. 1801 et seq.); the Toxic Substance
Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et
seq.); the Federal Insecticide, Fungicide and Rodenticide Act (7
U.S.C. ss. 136 et seq.); the Occupational Safety and Health Act (29
U.S.C. ss. 651 et seq.); and all other applicable federal, state and
local environmental laws (including, without limitation, obligations
under the common law), ordinances, orders, rules and regulations, as
any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control
of hazardous, toxic or dangerous substances, materials or wastes
(collectively, "Hazardous Materials"), or their handling, storage or
disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Corporation has not
received written notice, and the Transferor Corporation has no
actual knowledge, that (i) any approvals, consents, permits,
licenses or certificates of occupancy (whether governmental or
otherwise) required for the current use and operation of the
Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be
revoked; (ii) any fees and charges therefor have not been fully
paid; (iii) the Property, including the current use and
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occupancy thereof, is in violation in any material respect of any
laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change
of grade or limitation on use of streets, a special assessment or
a change in zoning classification, that would adversely affect
the continued use and operation of the Property as currently used
and operated except, in the case of clauses (i), (ii), (iii) and
(iv) as would not have a Material Adverse Effect. To the
Transferor Corporation's knowledge the Property and the current
use thereof comply in all material respects with (a) all
applicable laws and (b) all restrictive covenants and title
encumbrances affecting the Property. The Transferor Corporation
holds all material licenses, permits and authorizations required
for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with
Environmental Laws shall be covered by Section 5.21 and not by
this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Corporation, all
utilities and all public and quasi-public improvements upon or
adjacent to the Property (including, without limitation, all
applicable electric lines, sewer and water lines, and telephone
lines) are adequate to service the requirements of the Property. To
the knowledge of the Transferor Corporation, all necessary
easements, permits, licenses and agreements in respect of any of the
foregoing are installed and operating and all installation and
connection charges, to the extent due and payable, have been paid
for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the
BRI Partnership pursuant to Section 4.03 hereof, to the knowledge of
the Transferor Corporation, no special assessments for public
improvements have been made against the Property which are unpaid,
including, without limitation, those for construction of sewer and
water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by
the Transferor Corporation to the BRI Partnership pursuant to
Section 4 or attached hereto as Schedules or Exhibits are true,
accurate and complete in all material respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or
other similar proceedings are pending or, to the Transferor
Corporation's knowledge, threatened against the Transferor
Corporation, nor are any of
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such proceedings, against or by the Transferor Corporation,
anticipated or contemplated by the Transferor Corporation.
5.27 Liens. To the Transferor Corporation's knowledge, and subject to
such matters as may be disclosed by the Commitment, the Property
currently is free from mechanics' and materialmen's liens or other
liens other than the Permitted Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any
facilities (other than facilities covered by Permitted Exceptions or
facilities of municipalities or public or private utility and water
companies) located on any property not included in the Property to
fulfill any municipal or governmental requirement or for the
furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not
included in the Property relies for its operation, maintenance or
legal compliance on any facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Corporation, all
necessary curb cuts, access permits and other governmental approvals
required to provide such access have been issued and are in full
force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Corporation, there are no written or proposed plans to widen,
modify, or realign any street or highway or any existing or proposed
eminent domain proceedings which would affect the Property in any
way whatsoever. To the best knowledge of the Transferor Corporation,
there are no presently planned public improvements which would
result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Deleted.
5.32 Intentionally Deleted.
5.33 Intentionally Deleted.
5.34 Intentionally Deleted.
5.35 Investment Representations and Warranties. The Transferor
Corporation represents, warrants, acknowledges and agrees as
follows:
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(a) The Transferor Corporation is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) The Transferor Corporation understands that the BRI Partnership Units
to be issued to it will not be registered under the Act, or the securities laws
of any state ("Blue Sky Laws") by reason of a specific exemption or exemptions
from registration under the Act and applicable Blue Sky Laws and that BRI's and
the BRI Partnership's reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and warranties of the
Transferor Corporation.
(c) The Transferor Corporation acknowledges and agrees that, for the
reasons set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units
(or shares of common stock issued upon exchange of the BRI Partnership Units)
may not be offered, sold, transferred, pledged, or otherwise disposed of by the
Transferor Corporation except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-action letter issued by the Securities and Exchange Commission to the effect
that a proposed transfer of the BRI Partnership Units (or shares of common stock
issued upon exchange of the BRI Partnership Units) may be made without
registration under the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the
case may be, receiving an opinion of counsel knowledgeable in securities law
matters (and which opinion and counsel shall be reasonably acceptable to both
the BRI Partnership and BRI) to the effect that the proposed transfer is exempt
from the registration requirements of the Act and any applicable Blue Sky Laws,
and that, accordingly, the Transferor Corporation must bear the economic risk of
an investment in the BRI Partnership Units (and the shares of common stock
issued upon exchange of the BRI Partnership Units) for an indefinite period of
time. The Transferor Corporation acknowledges, represents and agrees that (i)
its economic circumstances are that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its
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affiliates or its other legal counsel and advisors for any explanation of the
application of the various United States or state securities laws or tax laws
with regard to its acquisition of the BRI Partnership Units. The Transferor
Corporation further acknowledges and represents that it has made its own
independent investigation of the BRI Partnership and the business conducted or
proposed to be conducted by the BRI Partnership.
(d) The Transferor Corporation is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) The Transferor Corporation understands that an investment in the BRI
Partnership and BRI involves substantial risks. The Transferor Corporation
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) The Transferor Corporation acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws,
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receipt of a no-action letter issued by the Securities and
Exchange Commission (together with either registration or an,
exemption under applicable state securities laws) or an opinion
of counsel (which opinion and which counsel shall be acceptable
to Berkshire Realty Company, Inc.) that the proposed transaction
will be exempt from registration under the Act and its applicable
state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in the first paragraph of this Agreement is the
address of the Transferor Corporation's principal place of business, and the
Transferor Corporation has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. The Transferor Corporation has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Corporation as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the
Transferor Agent prior to the execution of this Agreement, is a
true, correct and complete copy of said BRI Partnership Agreement as
amended to date. The BRI Partnership Agreement, as so delivered or
made available, has not been modified and is in full force and
effect in accordance with its terms as of the date hereof.
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6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing
under the laws of the State of Delaware with full power and
authority to carry on its business; (ii) the BRI Partnership has the
right, power and authority to issue the BRI Partnership Units and to
operate its properties and to carry on its business as is presently
being conducted and to enter into and perform all of the agreements
and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto;
(iii) this Agreement and the documents to be executed and delivered
by the BRI Partnership at Closing, upon execution and delivery will
have been duly and validly authorized and executed by the BRI
Partnership and will constitute the valid and binding obligations of
the BRI Partnership, enforceable in accordance with their respective
terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors
theretofore or hereafter enacted to the extent that the same may be
constitutionally applied; and (iv) assuming compliance with the
terms of this Agreement and the BRI Partnership Agreement by the
parties hereto and thereto other than the BRI Partnership, the
execution and delivery by the BRI Partnership of the BRI Partnership
Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of
its obligations hereunder and thereunder do not and will not
constitute a default under, or conflict with or violate, any
provision of the BRI Partnership Agreement or any other material
agreement to which the BRI Partnership is a party or by which the
BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to
the Transferor Corporation true and complete copies of the Annual
Report on Form 10-K (and those portions of the Annual Report to
Stockholders which are incorporated by reference therein) of the
general partner of the BRI Partnership for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange
Commission, and all Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K filed by the general partner of the Partnership
with the Securities and Exchange Commission since December 31, 1996
(the "SEC Filings"). The financial statements of the general partner
of the BRI Partnership included or incorporated by reference in the
SEC Filings and the PPM have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the
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consolidated assets, liabilities and financial position of the
general partner of the BRI Partnership as of the dates thereof and
the consolidated results of its operations and changes in cash flow
for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no
consent, approval or authorization of, or designation, declaration
or filing with, any governmental agency, commission, board or public
authority is required on the part of the BRI Partnership in
connection with the valid execution and delivery of this Agreement
by the BRI Partnership and the performance of the BRI Partnership's
obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization,
operation, or management of the BRI Partnership, (ii) is in full
force and effect and (iii) has not been amended or modified. A true,
correct and complete copy of the BRI Partnership Agreement is
attached hereto as Exhibit 1. Except as contemplated hereby or set
forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to
any of the owners of partnership interests in the BRI Partnership
(the "BRI Partners"), any evidences of indebtedness or assets and
the BRI Partnership has no obligation, contingent or otherwise, to
purchase, redeem or otherwise acquire any interest in the BRI
Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership
Units shall be vested in the Transferor Corporation free and clear
of any lien, claim, charge, pledge encumbrance, limitation,
agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
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currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Corporation a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or
other similar proceedings are pending or, to the BRI Partnership's
knowledge, threatened against the BRI Partnership, nor are any of
such proceedings anticipated or contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue
statement of material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of
operation has enabled and to BRI's knowledge should enable it to
meet the requirements for qualification and taxation as a "real
estate investment trust" under the Internal Code of 1986, as
amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior
to Closing will provide, for the issuance of the BRI Partnership
Units. The BRI Partnership Units to be issued in connection with the
transactions herein contemplated have been, or prior to their
issuance will have been, duly authorized for issuance by the BRI
Partnership to the Transferor Corporation, and on the date of their
issuance pursuant to the terms and conditions hereof will be validly
issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares
of common stock of BRI exchangeable for BRI Partnership Units issued
in connection with the transactions herein contemplated will be duly
authorized, validly issued, fully paid and non-
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assessable, free and clear of any liens, pledges and encumbrances of
any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions
exempt from the registration provisions of applicable federal and
state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto
(unless it has notified the Transferor Corporation otherwise in
writing) and represents that there are no other documents known to
the BRI Partnership which are required to be delivered hereunder
which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge,
proceeding or investigation pending or, to the BRI Partnership's
knowledge, any threat thereof, against the BRI Partners, the BRI
Partnership or its properties or any part thereof which questions
the validity of this Agreement and the transactions contemplated
hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a
material adverse effect on the business of the BRI Partnership as
such is presently conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC
Filings with good title to its properties as described in the SEC
Filings, subject to such financings, easements, restrictions and
other matters which do not have a material adverse effect on the
operation of such properties in accordance with the BRI
Partnership's past practices. Except as disclosed in the SEC
Filings, the BRI Partnership does not own, or otherwise hold any
interest in, any other material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has
not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the
payment of any material amount of borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a
material adverse effect on the BRI Partnership and BRI is not in
material violation of any Environmental Laws to such an extent that
it would have
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a material adverse effect on the BRI Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that
(i) any material approvals, consents, permits, licenses or
certificates of occupancy (whether governmental or otherwise)
required for the current use and operation of any of its properties
have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of
its properties, including the current use and occupancy thereof are
in violation in any material respect of any laws or (iv) any
governmental authority has a current plan that would adversely
affect the continued use and operation of any of its properties as
currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Corporation shall maintain its present insurance on the Property
which insurance in respect of fire and casualty shall be covered by
a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to
the BRI Partnership upon written request by the BRI Partnership.
Subject to the provisions of Section 7.02, the risk of loss in and
to the Property shall remain vested in the Transferor Corporation
until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement
cost equal to or in excess of $100,000.00) are damaged or destroyed
by fire or casualty, or if any material part of the Property is
subject to any eminent domain notice or proceeding by any
governmental entity (which shall mean for purposes of this Section
7.02 a proceeding which affects any units, parking spaces or
material amenities), then the BRI Partnership shall have the option,
exercisable by written notice given to the Transferor Corporation at
or prior to the Time of Closing, either to (a) terminate this
Agreement, whereupon all obligations of all parties hereto shall
cease, and this Agreement shall be void and without recourse to the
parties hereto except for provisions which are expressly stated to
survive such
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termination; or (b) proceed with the contribution and transfer of
the Property, and in such case, unless the Transferor Corporation
shall have previously restored the Property to its condition
prior to the occurrence of any such damage or destruction, the
Transferor Corporation shall pay over or assign to the BRI
Partnership, on behalf of the Transferor Corporation, all amounts
received or due (plus an amount equal to any deductible under any
insurance policy covering the Property) from, and all claims
against, any insurance company or governmental entity as a result
of such destruction or taking and there shall be no adjustment to
the Consideration hereunder. If prior to the Time of Closing, any
such damage or destruction shall occur having a replacement cost
of less than $100,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material
portion of the Property, the BRI Partnership shall proceed to
accept the contribution and transfer of the Property in
accordance with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations
of Law"), which are issued or sent prior to the Closing Date by any
governmental department, agency or bureau having jurisdiction as to
conditions affecting the Property shall, to the extent reasonably
practical be removed or complied with by the Transferor Corporation,
at the expense of the Transferor Corporation, but in any event not
to exceed $25,000.00, prior to the Closing Date; provided, however,
that if Transferor Corporation is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with
such notices by the Closing Date, the BRI Partnership shall have the
option to (i) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease and this Agreement shall be void and
without recourse to the parties hereto, except for provisions which
are expressly stated to survive such termination, or (ii) proceed
with the transaction contemplated hereby in which event there shall
be a reduction in the Consideration Amount in an amount necessary to
enable the BRI Partnership to remove such Violations of Law,
provided such reduction shall not in any event exceed $25,000.00,
and the obligations of the Transferor Corporation with respect to
such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Corporation covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Corporation shall not,
without the BRI Partnership's prior written consent (a) enter into
any new lease for an apartment unit with a first-time tenant unless
the lease is for a period of no more than one year and the rent
shall be not less than the amount of the market rent noted on the
Rent Roll for the respective apartment; or (b) amend any Lease for
an apartment unit with an existing tenant, or (c) renew or extend
any Lease for an apartment unit with an existing tenant unless the
lease is for a period of not more than one year and that the rent
for the amended, renewal or extension term shall not be less than
the amount of rent noted on the Rent Roll, for the respective
apartment; or (d) terminate any Lease except in the ordinary course
of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by
applicable law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall be maintained in
accordance with the Transferor Corporation's usual and customary
practice without regard to the Closing contemplated by this
Agreement. Except as otherwise specifically provided herein, the BRI
Partnership acknowledges and agrees that all properties with units
will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Corporation shall
not modify or amend any Service Contract or enter into any new
service contract for the Property, without the prior written consent
of the BRI Partnership which consent shall not be unreasonably
withheld or delayed, provided no consent shall be required with
respect to any of the foregoing so long as such service contract is
terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the
same is replaced with similar items of at least equal quality prior
to the Closing Date.
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9.05 Tax Procedure. Except as to the proceedings, if any, noted on
Schedule 9.05 attached hereto, the Transferor Corporation shall not
withdraw, settle or otherwise compromise any protest or reduction
proceeding affecting real estate taxes assessed against the Property
for any fiscal period in which the Closing Date is to occur or any
subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the
Closing Date which are attributable to (i) the fiscal tax year
during which the Closing occurs shall be apportioned between the
Transferor Corporation and the BRI Partnership, based upon the
relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Corporation, in either case after
deducting the expenses of collection thereof, which obligation shall
survive the Closing.
9.06 Loan Compliance. The Transferor Corporation shall (a) make all
payments of interest and principal and, if applicable, tax escrow,
insurance escrow and other amounts required under the Note and other
Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply with all of
the material terms and provisions of the Loan Documents up to the
Closing, and (c) not alter or amend the Loan Documents, or seek or
accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06
attached hereto.
9.07 Property Maintenance. The Transferor Corporation, in accordance with
its normal practices and procedures, shall continue to maintain and
to make all repairs and replacements to the Property so as to keep
the Property in substantially its present condition, subject to the
provisions of Section 7 hereof, and the Transferor Corporation shall
operate and manage the Property in the same manner as it has
operated the Property prior to the date hereof.
9.08 Intentionally Deleted.
9.09 Conduct of Business. Except with the prior written consent of BRI
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Partnership, on and after the date hereof the Transferor Corporation
shall conduct its business only in the ordinary course as heretofore
conducted and do the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Corporation in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Corporation shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Corporation will give the BRI
Partnership and their attorneys, accountants, and other
representatives reasonable access to Transferor Corporation's
personnel and all properties, documents, contracts, books, and
records of the Transferor Corporation, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI
Partnership with copies of such documents (certified by the
Transferor Corporation if so requested) and with such information
with respect to the affairs of the Transferor Corporation as the BRI
Partnership may from time to time reasonably request.
9.11 Audited Financial Statements. In connection with the Public Offering
and
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the Private Placement (each as defined in Section 17.04 hereof)
the Transferor Corporation shall provide the BRI Partnership such
additional documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR CORPORATION'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Corporation shall deliver the following to the BRI
Partnership (the "Transferor Corporation Closing Documents"):
(a) Deed. The Deed and a General Assignment and Bill of Sale, in form
reasonably satisfactory to the parties' respective counsel, duly executed and
acknowledged, which together convey the Property to the BRI Partnership, subject
only to the Permitted Exceptions.
(b) Assignment and Assumption of Leases and Security Deposits. An
Assignment and Assumption of the Leases and an Assignment and Assumption of the
Security Deposits in form reasonably satisfactory to the parties' respective
counsel.
(c) Assignment and Assumption of Service Contracts. An Assignment and
Assumption of the Service Contracts in form reasonably satisfactory to the
parties' respective counsel.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Corporation has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that the Transferor Corporation Closing Documents have been duly executed and
delivered and as to such other matters as are customarily required in Baltimore,
Maryland in connection with the transactions contemplated under this Agreement.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Corporation and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by the Transferor Corporation.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
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(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Corporation. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Corporation at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Corporation, original copies (or photocopies if
original copies are unavailable to the Transferor Corporation) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Corporation shall also deliver, to the extent in the
possession of the Transferor Corporation: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from the Transferor
Corporation executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibit VIII as required by the Title
Insurer in order to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Corporation's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Property to the BRI Partnership and directing that all rents
and other payments thereafter becoming due under the Leases be sent as the BRI
Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by
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the Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Corporation set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Corporation.
(n) Non-Foreign Affidavit. The Transferor Corporation shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Corporation with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Intentionally Deleted.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Corporation with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Corporation and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Corporation are required to deliver to the BRI Partnership
pursuant to any other provisions of this Agreement or which the BRI Partnership
may, either at or subsequent to the Closing, deem reasonably necessary in order
to consummate the transactions contemplated by this Agreement or to better vest
in the BRI Partnership title to the Property. The provisions of this Section
10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Corporation's Expenses. The Transferor Corporation
shall pay one-half of all: (i) Title Insurance and Survey costs,
(ii) escrow and recording costs, and (iii) UCC Search costs. The
Transferor Corporation shall also pay all transfer taxes and
documentary stamps, if any. The Transferor Corporation also shall
pay its pro rata share of the fees and expenses attributable to the
transactions contemplated by this Agreement in accordance with the
provisions of Section 19.03 and all of the fees and expenses of its
own separate legal, tax or other advisors.
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10.03 Accuracy of Representations and Warranties. The Transferor
Corporation agrees that the Transferor Corporation will notify the
BRI Partnership in writing on or prior to the Closing Date if any of
the representations and warranties of the Transferor Corporation
cease to be true and correct on and as of the Closing Date. The
Transferor Corporation further agrees that, subject to Section
10.05(g), if no such notice is given to the BRI Partnership, the
representations and warranties of the Transferor Corporation shall
be deemed to be true and correct on and as of the Closing Date and
that the BRI Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Corporation. In order to
induce the BRI Partnership to enter into this Agreement, the
Transferor Corporation hereby agrees that until the tenth (10th) day
following the first anniversary of the Closing:
(a) the Transferor Corporation shall continue to own and hold, and shall
not assign, transfer, distribute to its shareholders or otherwise dispose of any
of the BRI Partnership Units received by it pursuant to this Agreement except to
the extent permitted under Section 9 of the BRI Partnership Agreement;
(b) the Transferor Corporation shall not transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), the
Transferor Corporation shall not mortgage, pledge, create a security interest in
or lien on or otherwise hypothecate or encumber any of such BRI Partnership
Units except as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Corporation's Indemnity. In the event the parties
proceed to Closing, the Transferor Corporation agrees to indemnify and hold the
BRI Partnership harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the BRI Partnership subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the Transferor Corporation set forth in Section 5
or (B) resulting from any breach or default
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by the Transferor Corporation of any obligation of the Transferor Corporation
under this Agreement or (ii) from liabilities for borrowed money incurred by the
Transferor Corporation or the Property prior to the Closing; provided that the
Transferor Corporation shall not be required to indemnify the BRI Partnership
for any amounts in excess of 50% of the fair market value of the BRI Partnership
Units received by the Transferor Corporation as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of the Transferor Corporation in Section 5.34, which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by the Transferor
Corporation) (collectively, the "Cap"); and provided further that to the extent
the Transferor Corporation has any indemnification obligation to the BRI
Partnership, the Transferor Corporation may elect to satisfy such
indemnification obligation by directing the BRI Partnership to cancel such
amount of BRI Partnership Units acquired by the Transferor Corporation pursuant
to this Agreement having a fair market value (measured at the time such BRI
Partnership Units are returned or cancelled) equal to the indemnification
obligation of the Transferor Corporation.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Corporation harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Corporation, subsequent
to the Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Property after
the Closing (except for such liabilities resulting from a breach or default by
the Transferor Corporation for which the BRI Partnership is indemnified under
Section 10.05(a) above); provided that the BRI Partnership shall not be required
to indemnify the Transferor Corporation under Section 10.05(b)(i) for any
amounts in excess of 50% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
the Transferor Corporation (except for indemnification obligations with respect
to Sections 6.10 and 11.03 which shall be limited to 100% of the fair market
value as of the date such indemnification obligation is satisfied of the BRI
Partnership Units received by the Transferor Corporation).
(c) The indemnification obligations of the Transferor Corporation and the
BRI Partnership, respectively, with respect to any representation or warranty,
shall be limited to claims made prior to the last date of survival thereof set
forth in Section 16. No such claim for indemnification shall be deemed due and
payable unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
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(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor the Transferor Corporation shall have
any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Corporation for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Corporation or the Property.
(g) Each of the Transferor Corporation and the BRI Partnership acknowledge
and agree that, unless otherwise agreed to in writing by all the parties, from
and after the Closing, each of the parties hereto will be deemed to have waived
any right to seek indemnification hereunder from the other party for any breach
or default of a representation, warranty or obligation hereunder by such other
party to the extent that the party seeking indemnification had actual knowledge
of such breach or default by such other party on or prior to Closing.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Corporation (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmation in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights
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Agreement in the form attached hereto as Exhibit 4 duly executed by BRI.
(b) Assumption. Deliver to the Transferor Corporation signed counterparts
of the Assignment and Assumption of Leases, the Assignment and Assumption of
Security Deposits and the Assignment and Assumption of Service Contracts.
(c) Record Deed. Cause the Deed to be recorded with the appropriate
recording office.
(d) Opinion. An opinion of counsel satisfactory to the Transferor
Corporation to the effect that the BRI Partnership has been duly formed in
accordance with Delaware law and is validly existing and in good standing under
such laws, that the BRI Partnership Amendment has been duly executed and
delivered, that no state transfer taxes, sales tax, excise tax or transfer
stamps are required in connection with the issuance of the BRI Partnership Units
to the Transferor Corporation as contemplated by this Agreement and as to such
other matters as are customarily required in Baltimore, Maryland in connection
with the transactions contemplated under this Agreement. The opinion shall also
provide that, based solely on a certification of BRI, commencing with BRI's
taxable year ending December 31, 1991, BRI has been organized in conformity with
the requirements for qualifications as a "real estate investment trust" and its
method of operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Corporation a certificate by the BRI Partnership to the effect that
all of the representations and warranties of the BRI Partnership set forth in
this Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Corporation a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor
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Corporation pursuant to any other provisions of this Agreement or which the
Transferor Corporation may, either at or subsequent to the Closing, deem
reasonably necessary in order to consummate the transactions contemplated by
this Agreement or to better vest in the Transferor Corporation title to the BRI
Partnership Units. The provisions of this Section 11.01(h) shall survive the
Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and one-half of all (i) Title Insurance and Survey
costs, (ii) escrow and recording costs and (iii) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Corporation, in its
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Corporation has not dissolved, terminated or liquidated, the right to
receive the Property as a distribution in kind in satisfaction of the Transferor
Corporation's distribution rights under Section 8.2 of the BRI Partnership
Agreement. If the Property is contributed by the BRI Partnership to a Subsidiary
Entity (as defined in the BRI Partnership Agreement), the BRI Partnership shall
cause such Subsidiary Entity, to take such actions as may be necessary to
effectuate the foregoing right granted by the BRI Partnership to the Transferor
Corporation.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Corporation redeemed all
of the BRI Partnership Units received by the Transferor Corporation hereunder
for cash or for shares of BRI common stock or (II) seven (7) years from the
Closing Date, neither the BRI Partnership nor BRI shall allow the sale or
transfer of the Property, except for (i) transfers that are fully tax-free to
partnerships in which the BRI Partnership has an interest, (ii) exchanges that
are fully tax-free pursuant to Section 1031 of the Code and (iii) involuntary
transfers which shall include, without limitation, a foreclosure, a deed-in-lieu
of foreclosure, a condemnation or a liquidation of the BRI Partnership or BRI,
provided that in the event of a condemnation, the BRI Partnership shall use
reasonable efforts to reinvest the net condemnation proceeds in accordance with
Section 1033 of the Code and hold the same until the expiration of the No
Transfer Period.
(c) Intentionally Deleted.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
the Property or any interest therein.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
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allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
Apportionments. The following apportionments shall be made between the parties
on the Closing Date as of the close of the business day prior to the Closing
Date and the net amount of such prorations and apportionments shall be settled
in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that
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if there is a water meter on the Property, apportionment on the Closing Date
shall be based on the last available reading, subject to adjustment after the
Closing on a per diem basis, when the next reading is available;
(c) intentionally deleted;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. The
Transferor Agent and the BRI Partnership shall cooperate in the furnishing of
all information and documentation necessary to prepare such calculations.
Subject to Section 12.04, all cash shall be used by the Transferor
Corporation to pay amounts payable by the Transferor Corporation and/or
distributed to the Transferor Corporation prior to Closing, and if any of such
cash applicable to pre-closing periods is not removed from the Transferor
Corporation prior to Closing, all such cash shall remain the property of the
Transferor Corporation.
12.01 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Corporation
shall retain the right to receive such rent. The BRI Partnership
shall act as agent for the Transferor Corporation in collecting such
rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month
in which the Closing occurred; (b) then to any month or months
following the month in which the Closing occurred until all
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unpaid rents have been paid in full; and (c) then to the period
prior to the month in which the Closing occurred. After Closing, the
BRI Partnership shall use reasonable efforts to collect delinquent
rents attributable to the period prior to the month in which Closing
occurred, provided such efforts shall not require the commencement
of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Corporation or the BRI
Partnership after the Closing are payable to the other party by
reason of this allocation or otherwise, the appropriate sum shall be
paid to the other party within thirty (30) days from the receipt
thereof, which obligation shall survive the Closing.
12.02 Security Deposits. The Transferor Corporation shall assign and
deliver to the BRI Partnership all of the tenant security deposits,
including interest accrued thereon at the rate of 4% as required by
applicable state law or at such higher rate, if any, as required by
the terms of the leases, for each tenant as shown on the Rent Roll
and the BRI Partnership, or its designee, shall assume all liability
with respect to the tenant security deposits under applicable state
law and/or the terms of the Leases.
12.03 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor
Corporation owe an amount to the BRI Partnership, the Transferor
Corporation shall have the right to elect to adjust for such amounts
owing by the Transferor Corporation to the BRI Partnership in the
form of BRI Partnership Units rather than cash. In addition, if as a
result of the prorations and apportionments set forth in Section
12.01, the BRI Partnership owes an amount to the Transferor
Corporation, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have
the right to elect to adjust for amounts owing to the Transferor
Corporation or the BRI Partnership, as the case may be, in the form
of cash and/or BRI Partnership Units. The Transferor Agent shall
notify the BRI Partnership at least seven (7) business days prior to
the Closing Date of the manner in which the Transferor Corporation
shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Corporation is
unable to give title or to contribute and transfer the Property, or
to satisfy all of the
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terms and conditions precedent to closing as set forth in this
Agreement, all as herein stipulated, or if on the scheduled closing
the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor
Agent on or before the Closing Date either (a) to take title as
provided in Section 13.02, or (b) to terminate this Agreement as
provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right
to elect, in its sole discretion, on the Closing Date, to accept
such title as the Transferor Corporation can deliver to the Property
in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by
the amounts required to remove all Monetary Liens.
13.03 Transferor Corporation's Default. If on the Closing Date, the
Transferor Corporation has failed to perform all of the material
obligations of the Transferor Corporation under this Agreement, the
Transferor Corporation shall be in default under this Agreement and
the BRI Partnership shall be entitled to terminate this Agreement by
written notice given to the Transferor Agent within seven (7) days
after the Closing Date and thereafter this Agreement shall be void
and without recourse to any party hereunder except for provisions
which are expressly stated to survive termination of this Agreement.
In addition to the foregoing, if the BRI Partnership desires to
accept the contribution and transfer of the Property in accordance
with the terms of this Agreement and the Transferor Corporation
willfully refuses to perform the Transferor Corporation's
obligations hereunder, the BRI Partnership, at its option, shall
have the right to compel specific performance by the Transferor
Corporation hereunder, in which event the BRI Partnership shall have
the right to recover from the Transferor Corporation the amount of
all reasonable legal fees, court costs and other litigation expenses
incurred by the BRI Partnership in connection with the exercise of
its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in
equity of the BRI Partnership in the event of a default by the
Transferor Corporation in lieu of all other rights and remedies
which the BRI Partnership may have against the Transferor
Corporation at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of
the BRI Partnership under this Agreement, the BRI Partnership shall
be in default under this Agreement and the Transferor Agent shall be
entitled to terminate this
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Agreement by written notice given to the BRI Partnership within
seven (7) days after the Closing Date and thereafter this Agreement
shall be void and without recourse to any party hereunder except for
provisions which are expressly stated to survive termination of this
Agreement. In addition to the foregoing, if the Transferor
Corporation desires to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI
Partnership willfully refuses to perform the BRI Partnership's
obligations hereunder, the Transferor Corporation, at its option,
shall have the right to compel specific performance by the BRI
Partnership hereunder, in which event the Transferor Corporation
shall have the right to recover from the BRI Partnership the amount
of all reasonable legal fees, court costs and other litigation
expenses incurred by the Transferor Corporation in connection with
the exercise of its right of specific performance. The remedies
provided in this Section 13.04 shall be the sole and exclusive
remedies at law or in equity of the Transferor Corporation in the
event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Corporation may have
against the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN PREPAYMENT
14.01 Brokerage Fees. The Transferor Corporation and the BRI Partnership
mutually represent and warrant that neither of them has retained a
broker, finder or similar agent who might have a claim or right to
claim a commission or fee in connection with this transaction. The
Transferor Corporation understands that American Property
Consultants ("APC") had entered into a fee arrangement with Questar
Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that
a commission or fee is owed to APC, it shall be the obligation of
the Transferor Corporation and QPI in accordance with the provisions
of Section 19 hereof. In no event shall any commission be due unless
and until Closing has occurred and the transactions contemplated
hereby have been consummated and in no event shall the BRI
Partnership have any obligation to pay any commission to APC.
14.02 Loan Prepayment. The Transferor Corporation shall pay any prepayment
or other penalty and all other amounts required to repay the Loan in
full at Closing.
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SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with
original by first class mail, sent by Federal Express or other
reputable overnight delivery service, or sent by prepaid registered
or certified mail, return receipt requested, addressed as follows
(or to such address as the Transferor Agent or the BRI Partnership
shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
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If to the Transferor Corporation Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.35, 10.01(q), 10.04,
10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI
Partnership contained in Sections 6.02, 6.05, 6.10, 10.05 (subject
to the provisions of Section 10.05(c)) and 11.03 shall survive the
Closing indefinitely and an action based thereon may be brought at
any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the
expiration of the applicable statute of limitations. The
representations, warranties, covenants and other obligations of the
Transferor Corporation set forth in Sections 4, 5.01 through and
including 5.36 (except for 5.02 and 5.35), 9, 10 (except for
10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
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warranties, covenants and other obligations of the BRI Partnership
contained in Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09
and 6.10), 10 (except 10.05), 11 (except 11.03), 12 and 14 shall
survive until twelve (12) months after the Closing Date and
thereafter during the pendency of any claim based upon a breach
thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise
specifically provided in this Agreement, no other representations,
warranties, covenants or other obligations of the Transferor
Corporation or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced
after Closing.
16.02 Merger. The delivery of the Deed by the Transferor Corporation
(subject to the provisions of Section 12 hereof), and the acceptance
and filing thereof by the BRI Partnership and the delivery of the
BRI Confirmation and the acceptance thereof by the Transferor
Corporation, shall be deemed the full performance and discharge of
every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except
as provided in Section 16.01 and except for such other obligations
which are expressly provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI
Partnership to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the
fulfillment of each of the conditions listed below as of the Closing
Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Corporation shall have performed or complied with, in all
material respects, all of its covenants, agreements and obligations under this
Agreement, (ii) the Transferor Corporation shall have delivered the Transferor
Corporation Closing Documents and (iii) all of the representations and
warranties of the Transferor Corporation set forth in this Agreement shall be
true and correct, in all material respects, as of the Closing Date.
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(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the condition of the Property.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) Intentionally Deleted.
(e) Property Title. The Transferor Corporation shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Corporation shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(f) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Corporation contained herein, the
obligation of the Transferor Corporation to proceed with the Closing
of the transactions contemplated by this Agreement is expressly
conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived,
only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
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(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Corporation and
shall be free and clear of any liens, pledges and encumbrances of any kind
whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Corporation
shall be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Intentionally Deleted.
17.04 Public Offering Condition. BRI has informed the Transferor
Corporation that in connection with the consummation of the various
Related Transactions (as defined in Section 17.05 hereof), BRI
intends to undertake either or both of (i) a public offering of
common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other
equity securities of BRI (the "Private Placement"). The Transferor
Corporation shall supply any documentation and additional
information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private
Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the successful completion of the Public
Offering and the Private Placement raising a minimum of
$75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of
$75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement
effective as of the Closing Date, and, thereafter this Agreement
shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this
Agreement, for the conveyance of partnership interests or property
interests or other assets and for the making of certain secured
loans, which
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agreements are more particularly described on Schedule K attached
hereto (collectively the "Related Agreements"). (The transactions
described in the Related Agreements, including this Agreement, are
collectively the "Related Transactions"). Except to the extent the
parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the
Transferor Agent attached hereto as Exhibit 6 (the "Kickout
Agreement"), in the event that any of the Related Agreements is
terminated pursuant to any termination provision of any other
Related Agreement or does not become effective due to the failure
of all of the other parties to the Related Agreement to execute
the Related Agreement on or before September 22, 1997, this
Agreement shall terminate automatically simultaneously with the
termination of any such Related Agreement or upon the failure of
all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, whereupon this
Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the
termination of this Agreement. The Closing under this Agreement
shall be simultaneous with the closings under the Related
Agreements. Except as provided in the Kickout Agreement, in the
event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be
cancelled or postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor
Corporation shall assign all or any portion of its interest under
this Agreement without the prior written consent of the other party
hereto; provided that the BRI Partnership shall be permitted to
designate any one or more subsidiary entities, which are wholly
owned by the BRI Partnership or BRI, to receive title to the
Property as its designee, provided further that notwithstanding any
such designation, the BRI Partnership shall continue to remain
liable for the performance of all of its obligations under this
Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties
with respect to the transactions contemplated herein, and all prior
agreements, understandings, representations and statements, oral or
written, are merged into this Agreement. Neither this Agreement nor
any provision
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hereof may be waived, modified, amended, discharged or terminated
except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or
termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor
Corporation, Transferor Agent and the BRI Partnership consent to the
personal jurisdiction of the federal and state courts of the State
of Maryland and agree that service of process may be made upon each
of them by certified mail, return receipt requested or in any other
manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or
limit the scope or intent of this Agreement or any of the provisions
hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of
and shall be enforceable by the parties hereto and their respective
successors and permitted assigns. In no event shall the Transferor
Corporation have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Transferor Corporation and
the BRI Partnership. The delivery by the BRI Partnership to the
Transferor Corporation of an executed counterpart of this Agreement
shall constitute an offer which may be accepted by the delivery to
the BRI Partnership of a duly executed counterpart of this Agreement
and the satisfaction of all conditions under which such offer is
made, but such offer may be revoked by the BRI Partnership by
written notice given at any time prior to such acceptance and
satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the
plural and the plural shall include the singular, as the context may
require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed
in any manner to
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modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be
to the specified Section or paragraph of this Agreement, unless
stated to the contrary, and all references to Schedules and
Exhibits shall be to the specified Schedules and Exhibits annexed
hereto. All Schedules and Exhibits annexed hereto are made a part
hereof. All terms defined herein shall have the same meanings in
the Schedules and Exhibits, except as otherwise provided therein.
All references in this Agreement shall be deemed to include the
Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Corporation or
the BRI Partnership issue any press release or otherwise communicate
to any third party any information regarding this Agreement or the
transactions contemplated hereby unless the other party has
consented thereto and to the form and substance of any such
statement, announcement or release; provided, however, that nothing
herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated
hereby to the accountants, attorneys or other authorized agents of
such party or as such party deems necessary or desirable pursuant to
any court or governmental order or applicable securities regulations
or financial reporting requirements, nor shall the BRI Partnership
or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any
securities laws or in connection with the Public Offering or Private
Placement, or from filing this Agreement, the Exhibits hereto and
the Schedules as exhibits to any filings by the BRI Partnership or
BRI required by any securities laws. Notwithstanding the foregoing,
no party hereunder shall have any liability by reason of the details
of the transactions contemplated hereby becoming known by means
beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth
herein, the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01,
5.07, 17.03 and 17.05 may be extended only by the mutual written
agreement of the Transferor Agent and the BRI Partnership, in each
case, to a date no later than November 30, 1997.
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SECTION 19
ADDITIONAL PROVISIONS RELATING TO TRANSFEROR CORPORATION
19.01 Intentionally Deleted.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the
administrative activities to be performed under this Agreement,
including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners and the Transferor Partnership,
preparing the Transferor Allocation Schedule, waiving conditions to
closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the
Transferor Agent) and/or effecting or refraining to effect a
termination of this Agreement pursuant to the terms hereof and the
Kickout Agreement, agreeing to extend any of the dates by which
certain events must occur in accordance with Section 18.11,
calculation of apportionment amounts under Section 12, electing on
behalf of the Transferor Partners which pro-rations will be adjusted
with cash and/or BRI Partnership Units and acting as distribution
agent with respect to the apportionments and adjustments under
Section 12 hereof and such other administrative activities as are
described in this Agreement.
19.03 Allocation of Transaction Costs. The Transferor Corporation hereby
acknowledges and agrees that a portion of the amount due to the
Transferor Corporation will be used to pay the fees and expenses
attributable to the transaction contemplated by this Agreement. The
Transferor Corporation hereby agrees that the fees and expenses
attributable to this transaction will be divided into two
categories: (i) those fees which can be specifically allocated to
the Transferor Corporation due to said fees solely benefiting it
("Direct Costs") and (ii) those fees which cannot be so allocated
("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, the
Transferor Corporation hereby agrees that: (i) QPI shall be entitled
to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and
the management companies, as described in the PPM, by the other
Transferor Partnerships and related entities (collectively, the
"Related Entities"), which shall be
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Indirect Costs; (ii) to the extent it is determined that APC is
due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back
in an escrow account by the Transferor Agent until such time as
the amount of such fee, if any, is determined) shall be included
as Indirect Costs, with any such fee in excess of $1,000,000 to
APC being the sole responsibility of QPI; and (iii) all legal and
accounting fees of counsel and advisors to the Transferor Agent
and the Related Entities shall also be Indirect Costs. The
Transferor Corporation acknowledges and agrees that any and all
Indirect Costs shall be allocated among the Transferor
Corporation and the Related Entities at Closing based on the pro
rata number of BRI Partnership Units allocated at Closing to each
of them. The Transferor Corporation further acknowledges and
agrees that the Transferor Agent shall be authorized to determine
the allocations of the transaction costs and expenses to be
allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, the Transferor Corporation
hereby irrevocably constitutes and appoints the Transferor Agent
with unrestricted power of substitution and resubstitution, as the
attorney-in-fact for the undersigned, coupled with an interest, with
power and authority to act in its name and on its behalf to execute,
acknowledge, deliver, swear to, file, or record in the appropriate
public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry
out the provisions of this Agreement and the transactions
contemplated hereby including, without limitation, execution of such
title affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Corporation acknowledges and
agrees that this Agreement and the agreements attached as Exhibits
hereto will not be binding and effective unless and until all of the
parties hereto and thereto have executed counterparts to such
agreements and, to the extent that any agreements or documents
relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the
Transferor Agent is authorized on behalf of the Transferor
Corporation to hold all such agreements in escrow pending the
Closing, at which time the Transferor Agent shall be authorized to
deliver such documents on behalf of the Transferor Corporation to
the BRI Partnership.
19.06 Release and Indemnification by and between the Transferor
Corporation,
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the Transferor Agent and certain Affiliates thereof. By executing
this Agreement, the Transferor Corporation (i) consents to the
transactions contemplated by this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this
Agreement set forth in the organizational documents of Transferor
Corporation, (iii) except as set forth in Schedule 19.06 and
except as specifically provided herein or in any of the Closing
documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and
John Colvin and their affiliated entities and spouses
(collectively, the "GGC Parties") from any and all liability
arising out of the transactions contemplated hereby and the
operation of Transferor Corporation prior to the Closing,
including, but not limited to, all matters relating to the
management of the property owned by the Transferor Partnership by
the management company for the Transferor Partnership and any
affiliated persons or entities thereto, and (iv) agrees, subject
to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and
against any and all costs, damages, fees, and expenses, including
reasonable attorney's fees, that the Transferor Agent and/or the
GGC Parties may incur in carrying out its, his, or their
responsibilities in good faith and in accordance with the terms
of this Agreement; provided that the indemnity granted under this
Section 19.06 shall not extend to any act of gross negligence or
willful malfeasance on the part of the Transferor Agent and/or
the GGC Parties.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR CORPORATION:
WITNESS: GORN PROPERTIES, INC.
_________________________ By:_______________________________________
Name:
Title:
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TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:______________________________________
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By:Berkshire Apartments, Inc.
Its General Partner
By:________________________________
Name:
Title:
WITNESS:
_________________________________________
Morton Gorn, solely for the purposes of
Section 19.06
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_________________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
_________________________________________
John Colvin, solely for the purposes of
Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Corporation 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Corporation by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Corporation Exhibits
Exhibit I - Articles of Incorporation
Exhibit II - Bylaws
Exhibit III - Limited Warranty Deed
Exhibit IV - Intentionally Deleted
Exhibit V - Intentionally Deleted
Exhibit VI - Gap Indemnity
Exhibit VII - Intentionally Deleted
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Exhibit VIII - Title Affidavit
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Execution Copy
Heraldry Square
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Rolling Road Funding, Inc., a Maryland corporation (the
"Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Rolling Road Associates, a Maryland general partnership (the
"Transferor Partnership") pursuant to a Partnership Agreement dated as of
January 4, 1970, as amended (a copy of which, including all amendments, is
attached hereto as Exhibit II and is referred to as the "Transferor Partnership
Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 270-unit apartment complex, commonly known as Heraldry Square
Apartments, which contains related improvements, facilities, amenities,
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structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Rolling Road II General
Partnership, a Maryland general partnership ("Borrower Partnership") pursuant to
that certain agreement of General Partnership dated as of October 18, 1989, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit IX and is referred to herein as the "Borrower Partnership Agreement"),
and the Transferor Partnership is also the legal and beneficial owner of all of
the issued and outstanding stock of the Borrower Corporate General Partner,
which owns the remaining fifty percent (50%) general
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partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
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cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
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terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $9,615,177, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of The Patrician
Financial Company ("Lender"), securing the outstanding principal balance of the
Note dated October 29, 1996, in the original principal amount of $8,000,000 (the
"Note") evidencing the loan (the "Loan") made to the Borrower Partnership by
Lender. The Loan is also secured by the other Loan Documents (as defined in
Section 5.20 hereof) which shall be an obligation of the Borrower Partnership
and the Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein. The Transferor Partnership shall also remain as
obligor of the outstanding principal balance of the note dated October 29,
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1996 in the original principal amount of the Note (the "Borrower Partnership
Note"), evidencing the loan made to the Transferor Partnership by the Borrower
Partnership (the "Borrower Partnership Loan").
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a fractional BRI Partnership Unit, the number of BRI Partnership Units shall
be rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit. At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"), at Closing, the BRI Partnership
shall pay the BRI Additional Payment to the Transferor Agent in accordance with
the election made by each Transferor Partner pursuant to Section 12.04. The
Transferor Agent shall be liable to distribute the BRI Partnership Units and if
applicable, a pro-rata share of the BRI Additional Payment to each of the
Transferor Partners in accordance with the Transferor Allocation Schedule. The
BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transferor Allocation Schedule or the distribution of the BRI Partnership Units
or the BRI Additional Payment, if applicable, to the Transferor Partners and the
Transferor Partners hereby release the BRI Partnership from any such obligation
or liability.
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The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
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2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
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4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
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4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the
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Transferor Partnership is not in violation of any order, statute, rule or
regulation applicable to it, except for such violations which would not have a
Material Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Transferor Partners, nor the contribution of the Transferor
Partnership Interests by the Transferor Partners hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Partnership Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Partnership, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners, and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated;
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or (ii) the rights represented by the Transferor Partnership Interests or the
partnership interests in the Borrower Partnership. During the period commencing
on the date hereof and ending on the Closing Date, the Transferor Partnership
will promptly inform the BRI Partnership in writing of any material action,
suit, proceeding or investigation pending, or to the Transferor Partnership's
knowledge, threat thereof against the Transferor Partners, the Transferor
Partnership, the Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
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5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Guaranty and the Borrower Partnership Loan described in Schedule
5.10 and in such audited financial statements and provide evidence thereof to
the BRI Partnership. As of the Closing Date the Transferor Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Transferor Partnership's business which are either (i) in the aggregate, not in
excess of $50,000, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Service Contracts; and (c) liabilities under the Guaranty or
the Borrower Partnership Note and (d) a contingent liability for recordation
taxes if the Transferor Partnership or the Borrower Partnership defaults on the
Loan after Closing. The Transferor Partnership has conducted its business only
in the ordinary course and, except for the Loan and the matters disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
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5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
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5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
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(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents and the Borrower Partnership Note are in full
force and effect and none of the Loan Documents or the Borrower Partnership Note
have been modified, amended or extended except as disclosed on Schedule H. All
payments of principal, interest, and, if applicable, real estate tax escrow,
insurance escrow and any other payments required under the Loan Documents or the
Borrower Partnership Note which are due and payable, through the Closing Date,
have been, and will be, paid in full and no default exists thereunder which
extends beyond applicable grace or cure periods. Neither the Transferor
Partnership nor the Borrower Partnership has received any written notice of
default under any of the Loan Documents or the Borrower Partnership Note. The
Lender is the sole holder or designated servicer of the Note. The Borrower
Partnership is the sole holder of the Borrower Partnership Note, subject to any
pledge thereof to Lender. The only security taken or held in connection with the
Note is evidenced in the
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Loan Documents. No security has been taken or held in connection with the
Borrower Partnership Note. The Loan Documents do not secure any other
indebtedness but the Loan or the Borrower Partnership Loan. To the best
knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended,
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supplemented or supplanted prior to the Closing, relating to regulation or
control of hazardous, toxic or dangerous substances, materials or wastes
(collectively, "Hazardous Materials"), or their handling, storage or disposal or
to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
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5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in
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Section 10.01 hereof) required to be executed and delivered by such Transferor
Partner under this Agreement, each in accordance with their respective terms,
and on the Closing Date the Transferor Partners Closing Documents will
constitute valid and binding obligations, enforceable against such Transferor
Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the
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accuracy and completeness of the representations and warranties of such
Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its affiliates or its other legal counsel and advisors for any
explanation of the application of the various United States or state securities
laws or tax laws with regard to its acquisition of the BRI Partnership Units.
Such Transferor Partner further acknowledges and represents that it has made its
own independent investigation of the BRI Partnership and the business conducted
or proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its
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management in connection with this Agreement and the transactions contemplated
hereby, (ii) received and read the BRI Partnership Agreement, as amended to
date, and has had the opportunity to review all documents and information
relevant to its decision to enter into this Agreement and to invest in the BRI
Partnership and BRI, including, without limitation, the Private Placement
Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and (iii) had the
opportunity to ask questions of the BRI Partnership and BRI and its management
concerning its investment in the BRI Partnership and the transactions
contemplated hereby, which questions were answered to its satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which
opinion and which counsel shall be acceptable to Berkshire Realty
Company, Inc.) that the proposed transaction will be exempt from
registration under the Act and its applicable state securities
laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers
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thereof, in the absence of satisfying the conditions contained in the
foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's knowledge the Borrower Partnership is not in violation of any
order, statute, rule or regulation applicable to it, except for such violations
which would not have a Material Adverse Effect. Neither the execution, delivery
and performance of this Agreement by the Transferor Partnership, nor the
contribution of the Transferor Partnership Interests by the Transferor Partners
hereunder, nor the assignment and transfer of the Borrower General Partnership
Interest by the Borrower Corporate General Partner to the Borrower LLC General
Partner will result in any Material Adverse Effect or be in conflict with or
constitute a default under the Borrower Partnership Agreement or
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result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208. Each of the Transferor Partnership and the Borrower Corporate General
Partner owns a 50% general partnership interest in the Borrower Partnership. No
partner of the Borrower Partnership is in default with respect to any capital
contribution required to be paid by it pursuant to the Borrower Partnership
Agreement. A true, correct and complete copy of the Borrower Partnership
Agreement is attached hereto as Exhibit IX. The Borrower Partnership has no
commitment to issue any right to purchase or acquire or to issue or distribute
to the partners thereof any evidences of indebtedness or assets; and the
Borrower Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the Borrower Partnership or any
interest therein or to make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or
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indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Borrower Partnership has conducted its
business only in the ordinary course and, except for the Loan and the Borrower
Partnership Loan and the matters disclosed on Schedule 5.10, the Borrower
Partnership has not created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
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5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and hold, the
Borrower General Partnership Interest free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party. Upon Closing, the Transfer Partnership shall own and hold its
interest in the Borrower Partnership free and clear of any liens, pledges and
encumbrances of any kind whatsoever, and free of any rights of assignment of any
third party. Prior to Closing, the Transferor Partnership shall assign and
transfer to the Transferor Agent all of the issued and outstanding stock of the
Borrower Corporate General Partner. Subsequent to such assignment and transfer
to the Transferor Agent but prior to Closing, the Transferor Agent shall cause
the Borrower Corporate General Partner to assign and transfer the Borrower
General Partnership Interest to the Borrower LLC
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General Partner (as defined in Section 9.12 hereof) free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party, such that upon Closing the Transferor Partnership
and the Borrower LLC General Partner will each own and hold a fifty percent
(50%) general partnership interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO THE BORROWER CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for
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the acquisition of the Borrower General Partnership Interest in the Borrower
Partnership or any part thereof, except for the rights of the Borrower LLC
General Partner and the BRI Partnership under this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization,
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moratorium and other laws for the relief of debtors theretofore or hereafter
enacted to the extent that the same may be constitutionally applied; and (iv)
assuming compliance with the terms of this Agreement and the BRI Partnership
Agreement by the parties hereto and thereto other than the BRI Partnership, the
execution and delivery by the BRI Partnership of the BRI Partnership Units, this
Agreement and all other documents and instruments contemplated hereby and the
performance by the BRI Partnership of its obligations hereunder and thereunder
do not and will not constitute a default under, or conflict with or violate, any
provision of the BRI Partnership Agreement or any other material agreement to
which the BRI Partnership is a party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI
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Partnership (the "BRI Partners"), any evidences of indebtedness or assets and
the BRI Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the BRI Partnership or to make any
distribution in respect thereof. Upon the Closing, good, valid and marketable
title to the BRI Partnership Units shall be vested in the Transferor Partners
free and clear of any lien, claim, charge, pledge encumbrance, limitation,
agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to
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make the statements therein, in light of the circumstances under which they were
made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such
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properties in accordance with the BRI Partnership's past practices. Except as
disclosed in the SEC Filings, the BRI Partnership does not own, or otherwise
hold any interest in, any other material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in
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excess of $750,000.00) are damaged or destroyed by fire or casualty, or if any
material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such damage or
destruction shall occur having a replacement cost of less than $750,000.00 or if
any eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Partnership Interests in
accordance with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed
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$25,000.00, and the obligations of the Transferor Partnership with respect to
such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
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9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder except as permitted and set forth on
Schedule 9.06 attached hereto and (d) not make (or permit the Borrower
Partnership to make) any prepayment of principal under the Note. Without
limitation of the foregoing, the Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow, and other amounts required under the Borrower Partnership Note coming
due thereunder prior to the Closing in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Borrower
Partnership Note up to the Closing, (c) not alter or amend the Borrower
Partnership Note, or seek or accept any waivers or extensions of time for
payment or performance thereunder except as permitted and set forth on Schedule
9.06 attached hereto and (d) not make any prepayment of principal under the
Borrower Partnership Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
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9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least
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equal quality or make or permit to be made any material alterations to or upon
the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
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refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent, on behalf of the Transferor Partnership and pursuant to the
power of attorney granted to it under Section 19.04, shall transfer all of the
issued and outstanding stock in the Borrower Corporate General Partner to the
Transferor Agent. Immediately prior to Closing, (i) the Transferor Agent shall
cause the Borrower Corporate General Partner to assign its Borrower General
Partnership Interest in the Borrower Partnership to a limited liability company
formed by the BRI Partnership, all of the membership interests in which shall be
owned by the BRI Partnership or an affiliate thereof (the "Borrower LLC General
Partner") and (ii) the Transferor Agent shall cause the Borrower Corporate
General Partner to withdraw as a general partner of the Borrower Partnership,
such that, at Closing, the Borrower Partnership shall validly exist as a
Maryland general partnership, having as its sole general partners the Transferor
Partnership and the Borrower LLC General Partner, each of which shall hold a 50%
general partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
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10.01 Closing, Deliveries and Obligations. At or prior to the Closing,
the Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the
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Borrower Partnership Assignment has not been duly executed and delivered by the
Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted
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under Section 19.04 in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and fairways endorsement and to omit from its title insurance policy all
exceptions for (i) judgments, bankruptcies or other returns against persons or
entities whose names are the same as or similar to the Transferor Partnership's
name; (ii) parties in possession other than under the rights to possession
granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been
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paid on the Note; and (D) the amount of any real estate tax escrow, insurance
escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI Partnership
and the Transferor Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
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10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any amounts in
excess of 50% of the fair market value of the BRI Partnership Units received by
such Transferor Partner as of the date such indemnification obligation is
satisfied (except for indemnification obligations with respect to
representations of each of the
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Transferor Partners in Section 5.34, which shall be limited to 100% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner) (collectively, the
"Cap"); and provided further that to the extent any of the Transferor Partners
have any indemnification obligation to the BRI Partnership, the Transferor
Partners may elect to satisfy such indemnification obligation by directing the
BRI Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Partner pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or cancelled)
equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the
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aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding $50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower
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Corporate General Partner in the Borrower Partnership to the Borrower LLC
General Partner in such a manner as not to result in the dissolution of the
Borrower Partnership, in the form of the Borrower Partnership Assignment
attached hereto as Exhibit X, duly executed and delivered by the Borrower
Corporate General Partner, which shall transfer such Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner free and clear of any lien, pledge, restriction, encumbrance or other
claim by any third party (the "Borrower Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant to which the BRI Partnership, or its designees, shall be admitted as
partners of the Transferor Partnership.
(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
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(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
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11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect
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to allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
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SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and
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prorations to be made pursuant to this Section 12. Transferor Agent and the BRI
Partnership shall cooperate in the furnishing of all information and
documentation necessary to prepare such calculations. Prior to Closing, the
Transferor Agent shall deliver to the BRI Partnership the final Transferor
Allocation Schedule (the "Transferor Allocation Schedule"), which shall be based
upon the Preliminary Transferor Allocation Schedule, shall incorporate all
adjustments and prorations to be made pursuant to Section 12, and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transferor Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued
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thereon at the rate of 4% as required by applicable state law or at such higher
rate, if any, as required by the terms of the leases, for each tenant as shown
on the Rent Roll and the BRI Partnership, or its designee, shall assume all
liability with respect to the tenant security deposits under applicable state
law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or
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similar agent who might have a claim or right to claim a commission or fee in
connection with this transaction. The Transferor Partnership understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of the Transferor Partners and
QPI in accordance with the provisions of Section 19 hereof. In no event shall
any commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall the BRI
Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
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With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
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representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower
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Corporate General Partner set forth in this Agreement shall be true and correct,
in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title to a fifty percent (50%) general partnership interest
in the Borrower General Partnership, free and clear of all liens, pledges, and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party; and the Borrower LLC General Partner shall own a fifty percent
(50%) general partnership interest in the Borrower Partnership, free and clear
of any liens, pledges and encumbrances of any kind whatsoever and free of any
rights of assignment of any third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all
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parties hereunder except for provisions which are expressly stated to survive
termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of
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its interests in the Borrower Partnership to the Borrower LLC General Partner,
to the withdrawal from the Borrower Partnership of the Borrower Corporate
General Partner, and to the admission to the Borrower Partnership of the
Borrower LLC General Partner as a fifty percent (50%) general partner, and to
obtain the Lender Estoppel Letter. The Transferor Partnership, with the BRI
Partnership's cooperation, shall immediately commence to obtain the consent of
Lender necessary to permit the contribution of the Transferor Partnership
Interests to the BRI Partnership, the transfer of ownership of the Transferor
Partnership to the BRI Partnership, to the assignment by the Borrower Corporate
General Partner of all of its interests in the Borrower Partnership to the
Borrower LLC General Partner, to the withdrawal from the Borrower Partnership of
the Borrower Corporate General Partner, and to the admission to the Borrower
Partnership of the Borrower LLC General Partner as a fifty percent (50%) general
partner. The BRI Partnership shall supply any and all documentation and
additional information required by Lender in order to promptly complete the
request for the consent of Lender to the transactions contemplated hereunder.
The Transferor Partnership shall request that Lender state in writing any terms
and requirements, including the amount of any Loan Assumption Fees, to be
imposed by Lender in connection with its consent to the transactions
contemplated hereby. It shall be a condition of Closing that prior to October
15, 1997, Lender shall have granted its consent to the transactions contemplated
hereunder on terms and requirements reasonably satisfactory to the BRI
Partnership, shall have issued the Lender Estoppel Letter and shall have agreed
to release the Transferor Partners from all liability under the Loan Documents.
In the event that any of the terms or requirements required by Lender for its
consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, including
the amount of any Loan Assumption Fees in excess of 1% of the unpaid principal
balance, and the BRI Partnership gives timely notice of termination hereunder to
the Transferor Agent, this Agreement shall terminate without further action by
any party, and, thereafter this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly stated to survive
termination of this Agreement. In the event the Lender shall not have agreed to
release the Transferor Partners from all liability under the Loan Documents or
the Lender shall have placed terms and conditions on the Transferor Partners
that are unacceptable to them, the Transferor Agent may terminate this Agreement
by written notice given to the BRI Partnership within fifteen (15) business days
after the Transferor Agent has received in writing notice that the Lender has
refused to release the Transferor Partners from liability under the Loan
Documents or has imposed such unacceptable terms and conditions. If the
Transferor Agent gives timely notice of termination to the BRI Partnership, this
Agreement shall terminate without further action by any party, and,
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thereafter this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive termination of this
Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
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SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
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18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
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18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it
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("Direct Costs") and (ii) those fees which cannot be so allocated ("Indirect
Costs"). Notwithstanding anything to the contrary contained herein, for the
proposes of this Section 19.03, each of the Transferor Partners hereby agrees
that: (i) QPI shall be entitled to an aggregate administrative fee of $200,000
in connection with the concurrent contribution of up to eighteen (18) properties
and the management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out the
provisions of this Agreement and the transactions contemplated hereby including,
without limitation, execution of such title affidavits, non-imputation and
fairways affidavits and gap indemnities as are required by the terms of this
Agreement and endorsement, assignment and transfer of the issued and outstanding
stock of the Borrower Corporate General Partner currently owned by the
Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such
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agreements and, to the extent that any agreements or documents relating to this
Agreement (such as partnership assignments or other similar closing documents)
are executed prior to the Closing, the Transferor Agent is authorized on behalf
of each Transferor Partner and the Borrower Corporate General Partner to hold
all such agreements in escrow pending the Closing, at which time the Transferor
Agent shall be authorized to deliver such documents on behalf of the Transferor
Partners and the Borrower Corporate General Partner to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
_________________________ ___________________________________
Karen G. Colvin
WITNESS:
_________________________ ___________________________________
W. Lee Thomas, Trustee
WITNESS:
_________________________ ___________________________________
Gail G. Cooper, Trustee
WITNESS:
_________________________ ___________________________________
Rolendis C. Crismer
WITNESS:
_________________________ ___________________________________
Sandra L. Gerstung
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<PAGE>
WITNESS:
_________________________ ___________________________________
Robert Goldman
WITNESS:
_________________________ ___________________________________
Irvin Gomprecht
WITNESS:
_________________________ ___________________________________
Morton Gorn
WITNESS:
_________________________ ___________________________________
Stephen M. Gorn
WITNESS:
_________________________ ___________________________________
Samuel G. Gorn
WITNESS:
_________________________ ___________________________________
M. Peter Moser
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<PAGE>
WITNESS:
_________________________ ___________________________________
James D. Nolan
WITNESS:
_________________________ ___________________________________
Wilbert H. Sirota
WITNESS:
_________________________ ___________________________________
M. Richard Wyman
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
_________________________ By:________________________________
Name:
Title:
BORROWER CORPORATE GENERAL PARTNER:
WITNESS: ROLLING ROAD FUNDING, INC., a
Maryland corporation
_________________________ By:________________________________
Name:
Title:
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<PAGE>
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
__________________________ By:_________________________________
Name:
Title:
WITNESS:
_________________________ ___________________________________
Morton Gorn, solely for the purposes of
Section 19.06
WITNESS:
_________________________ ___________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
WITNESS:
_________________________ ___________________________________
John Colvin, solely for the purposes of
Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow,
insurance escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Copy
Henley/Rolling Wind
(08-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Tremaine
Associates Limited Partnership, a Maryland limited partnership (the "Transferor
General Partner") and the individuals and entities listed on Exhibit I attached
hereto (the "Transferor Limited Partners"), with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (the Transferor General Partner and the
Transferor Limited Partners are sometimes collectively referred to as the
"Transferor Partners"), and Questar Investment Corporation, a Maryland
corporation (the "Transferor Agent"), with an address of 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in Henley
Associates Limited Partnership, a Maryland Limited Partnership (the "Transferor
Partnership") pursuant to the Certificate and Agreement of Limited Partnership
dated as of July 15, 1993, as amended (a copy of which, including all
amendments, is attached hereto as Exhibit II and is referred to as the
"Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 280-unit apartment complex, commonly known as Rolling Wind
Apartments, which contains related improvements, facilities, amenities,
<PAGE>
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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<PAGE>
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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<PAGE>
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $19,503,043, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated August 1, 1993,
in the original principal amount of $19,024,400 (the "Note") evidencing the loan
(the "Loan") made to the Transferor Partnership by Washington Capital ("Lender")
and secured by the Loan Documents which shall be an obligation of the Transferor
Partnership as of the Closing subject to any exculpation from liability
provisions therein.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
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Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
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(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
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SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
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4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
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4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or
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result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Transferor Partnership, except for
Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor
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Partnership's knowledge, threat thereof against the Transferor Partners, the
Transferor Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's
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business nor any material portion thereof is dependent on the issuance or
obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan described in Schedule 5.10 and
in such audited financial statements and provide evidence thereof to the BRI
Partnership. As of the Closing Date the Transferor Partnership shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Partnership's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts and (c) liabilities under the Loan Documents. The Transferor
Partnership has conducted its business only in the ordinary course and, except
for the Loan and the matters disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, the Transferor
Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
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5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no
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representative of the Transferor Partners shall be a signatory on any other
account or safe deposit box of the Transferor Partnership or shall have the
power to borrow, discount debt obligations, cash or draw checks, or otherwise
act on behalf of the Transferor Partnership in any dealings with any banks or
other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
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(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents which are due and payable, through the Closing
Date, have been, and will be, paid in full and no default exists thereunder
which extends beyond applicable grace or cure periods. The Transferor
Partnership has not received any written notice of default under any of the Loan
Documents. The Lender is the sole holder or designated servicer of the Note. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. The Loan Documents secure no other indebtedness but the Loan. To the
best knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be
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obtained by the BRI Partnership in accordance with Section 1.04 hereof (the "BRI
Environmental Reports"), the Transferor Partnership has not received any written
notice from any governmental entity or other person that the Property, or
current or former operations on the Property, are not or have not been in
material compliance with any Environmental Laws or that the Transferor
Partnership has any material liability with respect thereto. To the Transferor
Partnership's knowledge, except as set forth in the Environmental Reports or in
the BRI Environmental Reports, there are no underground tanks for Hazardous
Materials, active or abandoned, at the Property and no Hazardous Materials are
present or have been released in a reportable quantity, where such a quantity
has been established by statute, ordinance, rule, regulation or order, at, on or
under the Property. To the Transferor Partnership's knowledge, except as
disclosed in the Environmental Reports or in the BRI Environmental Reports,
neither the Transferor Partnership nor the Property is in violation in any
material respect of any Environmental Laws and there is no asbestos, PCB's or
lead paint on the Property or any part thereof. For purposes of this Agreement,
"Environmental Laws" shall mean the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), as amended by the Hazardous and Solid Waste Amendments
of 1984; the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.), as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49
U.S.C. ss. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. ss. 2601 et
seq.; the Clean Air Act (42 U.S.C. ss. 9402 et seq.); the Clean Water Act (33
U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. ss. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.); and all other applicable federal, state and local
environmental laws (including, without limitation, obligations under the common
law), ordinances, orders, rules and regulations, as any of the foregoing may
have been amended, supplemented or supplanted prior to the Closing, relating to
regulation or control of hazardous, toxic or dangerous substances, materials or
wastes (collectively, "Hazardous Materials"), or their handling, storage or
disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would
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not have a Material Adverse Effect. To the Transferor Partnership's knowledge
the Property and the current use thereof comply in all material respects with
(a) all applicable laws and (b) all restrictive covenants and title encumbrances
affecting the Property. The Transferor Partnership holds all material licenses,
permits and authorizations required for the lawful use, operation and occupancy
of the Property. The parties agree that all matters relating to compliance with
Environmental Laws shall be covered by Section 5.21 and not by this Section
5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property
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not included in the Property relies for its operation, maintenance or legal
compliance on any facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and complete copy of all material correspondence submitted to and issued
by HUD in connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person
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not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any
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applicable Blue Sky Laws, (ii) pursuant to a no-action letter issued by the
Securities and Exchange Commission to the effect that a proposed transfer of the
BRI Partnership Units (or shares of common stock issued upon exchange of the BRI
Partnership Units) may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon the BRI Partnership or BRI, as the case may be, receiving an opinion of
counsel knowledgeable in securities law matters (and which opinion and counsel
shall be reasonably acceptable to both the BRI Partnership and BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Transferor Partner must bear the economic risk of an investment in the BRI
Partnership Units (and the shares of common stock issued upon exchange of the
BRI Partnership Units) for an indefinite period of time. Such Transferor Partner
acknowledges, represents and agrees that (i) its economic circumstances are such
that it is able to bear all risks of the investment in the BRI Partnership and
BRI for an indefinite period of time, including the risk of a complete loss of
its investment in the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units), (ii) it has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in the BRI Partnership Units and BRI, and (iii) it has consulted with
its own separate counsel and tax advisor, to the extent deemed necessary by it,
as to all legal and taxation matters covered by this Agreement and has not
relied upon the BRI Partnership or the Transferor Agent, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI
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Partnership and the transactions contemplated hereby, which questions were
answered to its satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which
opinion and which counsel shall be acceptable to Berkshire Realty
Company, Inc.) that the proposed transaction will be exempt from
registration under the Act and its applicable state securities
laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
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(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other
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material agreement to which the BRI Partnership is a party or by which the BRI
Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
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6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
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6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
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6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and
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without recourse to the parties hereto except for provisions which are expressly
stated to survive such termination; or (b) proceed with the contribution and
transfer of the Transferor Partnership Interests, and in such case, unless the
Transferor Partners shall have previously restored the Property to its condition
prior to the occurrence of any such damage or destruction, the Transferor
Partners shall pay over or assign to the BRI Partnership, on behalf of the
Transferor Partnership, all amounts received or due (plus an amount equal to any
deductible under any insurance policy covering the Property) from, and all
claims against, any insurance company or governmental entity as a result of such
destruction or taking and there shall be no adjustment to the Consideration
hereunder. If prior to the Time of Closing, any such damage or destruction shall
occur having a replacement cost of less than $750,000.00 or if any eminent
domain notice or proceeding is commenced which does not affect any material
portion of the Property, the BRI Partnership shall proceed to accept the
contribution and transfer of the Transferor Partnership Interests in accordance
with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur
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or any subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the Closing Date
which are attributable to (i) the fiscal tax year during which the Closing
occurs shall be apportioned between Transferor Partners and the BRI Partnership,
based upon the relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs shall be paid
to the Transferor Partners, in either case after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
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(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
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(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor
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Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V hereto duly
executed and delivered by the Transferor Partners, pursuant to which the
Transferor Partners shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
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(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
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(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, and to the transfer of the ownership of the
Transferor Partnership to the BRI Partnership and (ii) the following matters:
(A) the Note and other Loan Documents are in full force and effect; (B) to the
Lender's knowledge, no default exists; (C) the amount of the outstanding unpaid
principal balance of the Note, and the date to which interest and principal have
been paid on the Note; and (D) the amount of any real estate tax escrow,
insurance escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the
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BRI Partnership title to the Transferor Partnership Interests. The provisions of
this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the Transferor Partnership shall
be entitled to rely on the agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
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(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor
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Partner under Section 10.05(b)(i) for any amounts in excess of 50% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
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708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
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(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
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11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect
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to allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
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(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor
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Partner, and (iii) the number of the Restricted Distribution BRI Partnership
Units to be received by each Transferor Partner. The BRI Partnership shall have
no obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the
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Transferor Partners to adjust for such amounts owing by the Transferor Partners
to the BRI Partnership in the form of BRI Partnership Units rather than cash. In
addition, if as a result of the prorations and apportionments set forth in
Section 12.01, the BRI Partnership owes an amount to the Transferor Partners,
such amount shall be paid in the form of BRI Partnership Units rather than cash.
The Transferor Agent shall have the right to elect to adjust for amounts owing
to the Transferor Partners or the BRI Partnership, as the case may be, in the
form of cash and/or BRI Partnership Units. The Transferor Agent shall notify the
BRI Partnership at least seven (7) business days prior to the Closing Date of
the manner in which the Transferor Partnership shall have elected to settle
adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such distribution of surplus cash
relates only to the period prior to the Closing Date, all such surplus cash
shall be distributed to the Transferor Partners prior to Closing; provided
however, if as a result of the 1997 annual HUD audit (it being agreed that the
BRI Partnership shall consult with the Transferor Agent during the HUD audit
procedure), HUD (after final adjudication by regulatory and judicial
authorities) determines that all or any portion of such distribution of surplus
cash to the Transferor Partners was improper, the Transferor Partners,
severally, agree to reimburse the Transferor Partnership immediately upon demand
for all amounts so designated by HUD as improper and to indemnify, defend and
hold the Transferor Partnership and the BRI Partnership harmless from and
against all loss, cost, damage or expense (including reasonable legal fees)
suffered or incurred as a result of such improper distribution of surplus cash.
In all other cases, there shall be no adjustment at Closing regarding surplus
cash, but at such time as HUD approves the distribution of surplus cash for
fiscal 1997, the BRI Partnership shall receive all such surplus cash and
thereafter the BRI Partnership shall promptly pay to the Transferor Agent, as
distribution agent for the Transferor Partners, the Transferor Partners pro-rata
share of such surplus cash allocable to the period prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled
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closing the Transferor Partnership Interests or the Property does not conform
with the provisions hereof, the BRI Partnership may elect by written notice
given to the Transferor Agent on or before the Closing Date either (a) to take
title as provided in Section 13.02, or (b) to terminate this Agreement as
provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to
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compel specific performance by the BRI Partnership hereunder, in which event the
Transferor Partners shall have the right to recover from the BRI Partnership the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the Transferor Partners in connection with the exercise of their
right of specific performance. The remedies provided in this Section 13.04 shall
be the sole and exclusive remedies at law or in equity of the Transferor
Partners in the event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Partners may have against the BRI
Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail,
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sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Transferor Agent or the BRI Partnership shall
otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with
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the Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate
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this Agreement by written notice given to the Transferor Agent within seven (7)
days after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the
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Transferor Partners, to the transfer of ownership of the Transferor Partnership
to the BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of
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common stock or other equity securities of BRI (the "Public Offering"), or (ii)
a private placement of common stock or other equity securities of BRI (the
"Private Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the
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Transferor Partners pursuant to the terms of this Agreement. Each Transferor
Partner and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed
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counterparts to such agreements and, to the extent that any agreements or
documents relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the Transferor
Agent is authorized on behalf of each Transferor Partner to hold all such
agreements in escrow pending the Closing, at which time the Transferor Agent
shall be authorized to deliver such documents on behalf of the Transferor
Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the managment of the property owned by the
Transferor Partnership by the management company for the Transfereor Parntership
and any affilaited persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNER
TREMAINE ASSOCIATES LIMITED
PARTNERSHIP
_______________________________ By: ______________________________
Name:
Its:
WITNESS: EACH TRANSFEROR LIMITED PARTNER
______________________________ ____________________________________
John B. Colvin
______________________________ ____________________________________
Stephen M. Gorn
______________________________ ____________________________________
Morton Gorn
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
______________________________ By: ______________________________
Name:
Title:
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BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.,
Its General Partner
______________________________ By: ________________________
Name:
Title:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited
Partners (with address and partnership interest of each
partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Hazelcrest
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Plainfield Funding, Inc., a Maryland corporation (the
"Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Plainfield Associates, a Maryland general partnership (the
"Transferor Partnership") pursuant to a Joint Venture Agreement dated as of May
6, 1965, as amended (a copy of which, including all amendments, is attached
hereto as Exhibit II and is referred to as the "Transferor Partnership
Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore City,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 48-unit apartment complex, commonly known as Hazelcrest Apartments,
which contains related improvements, facilities, amenities, structures,
<PAGE>
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Plainfield II General
Partnership, a Maryland general partnership ("Borrower Partnership") pursuant to
that certain Partnership Agreement dated as of October 18, 1989, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit IX and is
referred to herein as the "Borrower Partnership Agreement"), and the Transferor
Partnership is also the legal and beneficial owner of all of the issued and
outstanding stock of the Borrower Corporate General Partner, which owns the
remaining fifty percent (50%) general
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partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
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cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
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terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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damage claims made by tenants as to which thetime for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $1,108,230, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of The Patrician
Financial Company ("Lender"), securing the outstanding principal balance of the
Note dated October 29, 1996, in the original principal amount of $825,000 (the
"Note") evidencing the loan (the "Loan") made to the Borrower Partnership by
Lender. The Loan is also secured by the other Loan Documents (as defined in
Section 5.20 hereof) which shall be an obligation of the Borrower Partnership
and the Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein. The Transferor Partnership shall also remain as
obligor of the outstanding principal balance of the note dated October 29,
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1996 in the original principal amount of the Note (the "Borrower Partnership
Note"), evidencing the loan made to the Transferor Partnership by the Borrower
Partnership (the "Borrower Partnership Loan").
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a fractional BRI Partnership Unit, the number of BRI Partnership Units shall
be rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit. At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"), at Closing, the BRI Partnership
shall pay the BRI Additional Payment to the Transferor Agent in accordance with
the election made by each Transferor Partner pursuant to Section 12.04. The
Transferor Agent shall be liable to distribute the BRI Partnership Units and if
applicable, a pro-rata share of the BRI Additional Payment to each of the
Transferor Partners in accordance with the Transferor Allocation Schedule. The
BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transferor Allocation Schedule or the distribution of the BRI Partnership Units
or the BRI Additional Payment, if applicable, to the Transferor Partners and the
Transferor Partners hereby release the BRI Partnership from any such obligation
or liability.
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The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
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2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
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4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
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4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the
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Transferor Partnership is not in violation of any order, statute, rule or
regulation applicable to it, except for such violations which would not have a
Material Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Transferor Partners, nor the contribution of the Transferor
Partnership Interests by the Transferor Partners hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Partnership Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Partnership, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners, and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated;
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or (ii) the rights represented by the Transferor Partnership Interests or the
partnership interests in the Borrower Partnership. During the period commencing
on the date hereof and ending on the Closing Date, the Transferor Partnership
will promptly inform the BRI Partnership in writing of any material action,
suit, proceeding or investigation pending, or to the Transferor Partnership's
knowledge, threat thereof against the Transferor Partners, the Transferor
Partnership, the Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. Legal title to the Property is
currently held in the name of some or all of the partners of the Partnership who
are holding title on behalf of and for the benefit of the Transferor Partnerhip.
Except as disclosed on the Financial Statements, the Transferor Partnership does
not own, or otherwise hold any
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interest in, any material assets other than its interest Property. On or before
the Closing Date, the Transferor Partnership shall cause legal and equitable
title to the Property to be in the name of the Transferor Partnership, and it
shall be a condition to the BRI Partnership's obligation to close that legal and
equitable title to the Property be in the name of the Transferor Partnership on
or before the Closing Date. The Transferor Partners shall pay all costs in
connection with the transfer of title to the Property to the Transferor
Partnership, including, without limitation, any transfer taxes and documentary
stamps.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Guaranty and the Borrower Partnership Loan described in Schedule
5.10 and in such audited financial statements and provide evidence thereof to
the BRI Partnership. As of the Closing Date the Transferor Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Transferor Partnership's business which are either (i) in the aggregate, not in
excess of $50,000, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Service Contracts; and (c) liabilities under the Guaranty or
the Borrower Partnership Note and (d) a contingent liability for recordation
taxes if the Transferor Partnership or the Borrower Partnership defaults on the
Loan after Closing. The Transferor Partnership has conducted its business only
in the ordinary course and, except for the Loan and the matters disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
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(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
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5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
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(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents and the Borrower Partnership Note are in full
force and effect and none of the Loan Documents or the Borrower Partnership Note
have been modified, amended or extended except as disclosed on Schedule H. All
payments of principal, interest, and, if
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applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents or the Borrower Partnership Note which are due
and payable, through the Closing Date, have been, and will be, paid in full and
no default exists thereunder which extends beyond applicable grace or cure
periods. Neither the Transferor Partnership nor the Borrower Partnership has
received any written notice of default under any of the Loan Documents or the
Borrower Partnership Note. The Lender is the sole holder or designated servicer
of the Note. The Borrower Partnership is the sole holder of the Borrower
Partnership Note, subject to any pledge thereof to Lender. The only security
taken or held in connection with the Note is evidenced in the Loan Documents. No
security has been taken or held in connection with the Borrower Partnership
Note. The Loan Documents do not secure any other indebtedness but the Loan or
the Borrower Partnership Loan. To the best knowledge of the Transferor
Partnership, the amounts of any real estate tax escrow, insurance escrow and any
other escrows and reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
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Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
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Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
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B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI
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Partnership Units except in compliance with the registration requirements
or exemption provisions of any applicable securities laws and in accordance with
the terms of the BRI Partnership Agreement and the Registration Rights
Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its affiliates or its other legal counsel and advisors for any
explanation of the application of the various United States or state securities
laws or tax laws with regard to its acquisition of the BRI Partnership Units.
Such Transferor Partner further acknowledges and represents that it has made its
own independent investigation of the BRI
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Partnership and the business conducted or proposed to be conducted by the BRI
Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as amended
(the "Act"), or the securities laws of any state. The
securities may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration
statement under the Act and under any applicable state
securities laws, receipt of a no-action letter issued by the
Securities and Exchange Commission (together with either
registration or an, exemption under applicable state
securities laws) or an opinion of counsel (which opinion and
which counsel shall
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be acceptable to Berkshire Realty Company, Inc.) that the
proposed transaction will be exempt from registration under
the Act and its applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's
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knowledge the Borrower Partnership is not in violation of any order, statute,
rule or regulation applicable to it, except for such violations which would not
have a Material Adverse Effect. Neither the execution, delivery and performance
of this Agreement by the Transferor Partnership, nor the contribution of the
Transferor Partnership Interests by the Transferor Partners hereunder, nor the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner will
result in any Material Adverse Effect or be in conflict with or constitute a
default under the Borrower Partnership Agreement or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208. Each of the Transferor Partnership and the Borrower Corporate General
Partner owns a 50% general partnership interest in the Borrower Partnership. No
partner of the Borrower Partnership is in default with respect to any capital
contribution required to be paid by it pursuant to the Borrower Partnership
Agreement. A true, correct and complete copy of the Borrower Partnership
Agreement is attached hereto as Exhibit IX. The Borrower Partnership has no
commitment to issue any right to purchase or acquire or to issue or distribute
to the partners thereof any evidences of indebtedness or assets; and the
Borrower Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the Borrower Partnership or any
interest therein or to make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
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5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Borrower Partnership has conducted its
business only in the ordinary course and, except for the Loan and the Borrower
Partnership Loan and the matters disclosed on Schedule 5.10, the Borrower
Partnership has not created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
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(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and
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hold, the Borrower General Partnership Interest free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Upon Closing, the Transferor Partnership shall
own and hold its interest in the Borrower Partnership free and clear of any
liens, pledges and encumbrances of any kind whatsoever, and free of any rights
of assignment of any third party. Prior to Closing, the Transferor Partnership
shall assign and transfer to the Transferor Agent all of the issued and
outstanding stock of the Borrower Corporate General Partner. Subsequent to such
assignment and transfer to the Transferor Agent but prior to Closing, the
Transferor Agent shall cause the Borrower Corporate General Partner to assign
and transfer the Borrower General Partnership Interest to the Borrower LLC
General Partner (as defined in Section 9.12 hereof) free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party, such that upon Closing the Transferor Partnership
and the Borrower LLC General Partner will each own and hold a fifty percent
(50%) general partnership interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO THE BORROWER CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
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5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the acquisition of the Borrower General
Partnership Interest in the Borrower Partnership or any part thereof, except for
the rights of the Borrower LLC General Partner and the BRI Partnership under
this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
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6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
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governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $100,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such damage or
destruction shall occur having a replacement cost of less than $100,000.00 or if
any eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Partnership Interests in
accordance with the provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder except as permitted and set forth on
Schedule 9.06 attached hereto and (d) not make (or permit the Borrower
Partnership to make) any prepayment of principal under the Note.
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Without limitation of the foregoing, the Transferor Partnership shall (a) make
all payments of interest and principal and, if applicable, tax escrow, insurance
escrow, and other amounts required under the Borrower Partnership Note coming
due thereunder prior to the Closing in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Borrower
Partnership Note up to the Closing, (c) not alter or amend the Borrower
Partnership Note, or seek or accept any waivers or extensions of time for
payment or performance thereunder except as permitted and set forth on Schedule
9.06 attached hereto and (d) not make any prepayment of principal under the
Borrower Partnership Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
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(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
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(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent, on behalf of the Transferor Partnership and pursuant to the
power of attorney granted to it under Section 19.04, shall transfer all of the
issued and outstanding stock in the Borrower Corporate General Partner to the
Transferor Agent. Immediately prior to Closing, (i) the Transferor Agent shall
cause the Borrower Corporate General Partner to assign its Borrower General
Partnership Interest in the Borrower Partnership to a limited liability company
formed by the BRI Partnership, all of the membership interests in which shall be
owned by the BRI Partnership or an affiliate thereof (the "Borrower LLC General
Partner") and (ii) the Transferor Agent shall cause the Borrower Corporate
General Partner to
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withdraw as a general partner of the Borrower Partnership, such that, at
Closing, the Borrower Partnership shall validly exist as a Maryland general
partnership, having as its sole general partners the Transferor Partnership and
the Borrower LLC General Partner, each of which shall hold a 50% general
partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
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(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the Borrower Partnership Assignment has not been duly executed
and delivered by the Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
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(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and fairways endorsement and to omit from its title insurance policy
all exceptions for (i) judgments, bankruptcies or other returns against persons
or entities whose names are the same as or similar to the Transferor
Partnership's name; (ii) parties in possession other than under the rights to
possession granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
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(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been paid on the Note; and (D) the amount of
any real estate tax escrow, insurance escrow and other escrows or reserves held
by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
all transfer taxes and documentary stamps, if any, in connection with the
transfer of title to the Property to the Transferor Partnership as described in
Section 5.08 hereof, and one-half of all: (i) Title Insurance and Survey costs,
(ii) escrow and recording costs (iii) transfer taxes and documentary stamps, if
any, in connection with the assignment and transfer of the Transferor
Partnership Interests as contemplated herein, and (iv) UCC Search costs. The
Transferor Partners also shall pay their pro rata share of the fees
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and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI Partnership
and the Transferor Partnership shall be entitled to rely on the agreements
contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
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(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any amounts in
excess of 50% of the fair market value of the BRI Partnership Units received by
such Transferor Partner as of the date such indemnification obligation is
satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with
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respect to Sections 6.10 and 11.03 which shall be limited to 100% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the
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Transferor Partnership with respect to all tax years or periods ending on or
prior to the Closing Date. The Transferor Agent shall prepare and timely file
the terminating tax returns for the Transferor Partnership resulting from the
consummation of the transactions contemplated under this Agreement, provided,
however, that such tax returns shall be prepared in accordance with the terms
and provisions of this Agreement and provided further, that prior to the filing
thereof the Transferor Agent shall submit the terminating tax returns to the BRI
Partnership for its review and approval, which shall not be unreasonably
withheld or delayed. The BRI Partnership shall assist the Transferor Agent in
obtaining such data and information regarding the Transferor Agent to permit the
Transferor Partnership to prepare such returns or to respond to any audits or
assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower Corporate General
Partner in the Borrower Partnership to the Borrower LLC General Partner in such
a manner as not to result in the dissolution of the Borrower Partnership, in the
form of the Borrower Partnership Assignment attached hereto as Exhibit X, duly
executed and delivered by the Borrower Corporate General Partner, which shall
transfer such Borrower General Partnership Interest in the Borrower Partnership
to the Borrower LLC General Partner free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party (the "Borrower
Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
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(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant to which the BRI Partnership, or its designees, shall be admitted as
partners of the Transferor Partnership.
(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the
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representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, in
connection with the assignment and transfer of the Transferor Partnership
Interests as contemplated herein, and (iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the
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BRI Partnership Units received by the Transferor Partners hereunder for cash or
for shares of BRI common stock or (II) seven (7) years from the Closing Date,
neither the BRI Partnership nor BRI shall allow the sale or transfer of either
the Transferor Partnership Interests or the Property, except for (i) transfers
that are fully tax-free to partnerships in which the BRI Partnership has an
interest, (ii) exchanges that are fully tax-free pursuant to Section 1031 of the
Code and (iii) involuntary transfers which shall include, without limitation, a
foreclosure, a deed-in-lieu of foreclosure, a condemnation or a liquidation of
the BRI Partnership or BRI, provided that in the event of a condemnation, the
BRI Partnership shall use reasonable efforts to reinvest the net condemnation
proceeds in accordance with Section 1033 of the Code and hold the same until the
expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a
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taxpayer other than the BRI Partnership (any such change, a "Change in Law")
such that, in the reasonable opinion of tax counsel to the BRI Partnership,
based on such Change in Law, either (i) the foregoing method is no longer
legally permissible, (ii) or an alternative method, not previously permitted,
which results in more favorable tax consequences to each of the limited
partners, including the Transferor Partners, of the BRI Partnership is currently
permitted, the BRI Partnership, shall be entitled, without the consent of the
Transferor Agent, to adopt an alternative method, provided further that, in the
case of clause (i), the BRI Partnership shall choose the alternative method that
minimizes to the extent reasonably possible, the adverse tax consequences to the
Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
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If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transferor Allocation Schedule (the "Transferor Allocation Schedule"), which
shall be based upon the Preliminary Transferor Allocation Schedule, shall
incorporate all adjustments and prorations to be made pursuant to Section 12,
and shall set forth (i) the name of each Transferor Partner, (ii) the number of
Unrestricted Distribution BRI Partnership Units to be received by each
Transferor Partner, and (iii) the number of Restricted Distribution BRI
Partnership Units to be received by each Transferor Partner. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Preliminary Transferor Allocation Schedule or the Transferor
Allocation Schedule or the distribution of the BRI Partnership Units or the BRI
Additional Payment, if applicable, to the Transferor Partners and the Transferor
Partners hereby release the BRI Partnership from any such obligation or
liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of
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priority: (a) first to the month in which the Closing occurred; (b) then to any
month or months following the month in which the Closing occurred until all
unpaid rents have been paid in full; and (c) then to the period prior to the
month in which the Closing occurred. After Closing, the BRI Partnership shall
cause the Transferor Partnership to use reasonable efforts to collect delinquent
rents attributable to the period prior to the month in which Closing occurred,
provided such efforts shall not require the commencement of litigation against
any such tenant. If rents or any portion thereof received by the Transferor
Partners or the BRI Partnership after the Closing are payable to the other party
by reason of this allocation or otherwise, the appropriate sum shall be paid to
the other party within thirty (30) days from the receipt thereof, which
obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the
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provisions hereof, the BRI Partnership may elect by written notice given to the
Transferor Agent on or before the Closing Date either (a) to take title as
provided in Section 13.02, or (b) to terminate this Agreement as provided in
Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the
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Transferor Partners shall have the right to recover from the BRI Partnership the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the Transferor Partners in connection with the exercise of their
right of specific performance. The remedies provided in this Section 13.04 shall
be the sole and exclusive remedies at law or in equity of the Transferor
Partners in the event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Partners may have against the BRI
Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by
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prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Transferor Agent or the BRI Partnership shall
otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly
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conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower Corporate General Partner set forth in this Agreement
shall be true and correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title
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to a fifty percent (50%) general partnership interest in the Borrower General
Partnership, free and clear of all liens, pledges, and encumbrances of any kind
whatsoever and free of any rights of assignment of any third party; and the
Borrower LLC General Partner shall own a fifty percent (50%) general partnership
interest in the Borrower Partnership, free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
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In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of its interests in the Borrower Partnership to
the Borrower LLC General Partner, to the withdrawal from the Borrower
Partnership of the Borrower Corporate General Partner, and to the admission to
the Borrower Partnership of the Borrower LLC General Partner as a fifty percent
(50%) general partner, and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership, the transfer of
ownership of the Transferor Partnership to the BRI Partnership, to the
assignment by the Borrower Corporate General Partner of all of its interests in
the Borrower Partnership to the Borrower LLC General Partner, to the withdrawal
from the Borrower Partnership of the Borrower Corporate General Partner, and to
the admission to the Borrower Partnership of the Borrower LLC General Partner as
a fifty percent (50%) general partner. The BRI Partnership shall supply any and
all documentation and additional information required by Lender in order to
promptly complete the request for the consent of Lender to the transactions
contemplated hereunder. The Transferor Partnership shall request that Lender
state in writing any terms and requirements, including the amount of any Loan
Assumption Fees, to be imposed by Lender in connection with its consent to the
transactions contemplated hereby. It shall be a condition of Closing that prior
to October 15, 1997, Lender shall have granted its consent to the transactions
contemplated hereunder on terms and requirements reasonably satisfactory to the
BRI Partnership, shall have issued the Lender Estoppel Letter and shall have
agreed to release the Transferor Partners from all liability under the Loan
Documents. In the event that any of the terms or requirements required by Lender
for its consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, including
the amount of any Loan Assumption Fees in excess of 1% of the unpaid
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principal balance, and the BRI Partnership gives timely notice of termination
hereunder to the Transferor Agent, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement. In the event the Lender shall
not have agreed to release the Transferor Partners from all liability under the
Loan Documents or the Lender shall have placed terms and conditions on the
Transferor Partners that are unacceptable to them, the Transferor Agent may
terminate this Agreement by written notice given to the BRI Partnership within
fifteen (15) business days after the Transferor Agent has received in writing
notice that the Lender has refused to release the Transferor Partners from
liability under the Loan Documents or has imposed such unacceptable terms and
conditions. If the Transferor Agent gives timely notice of termination to the
BRI Partnership, this Agreement shall terminate without further action by any
party, and, thereafter this Agreement shall be void and without recourse to all
parties, except for provisions which are expressly stated to survive termination
of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the
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event that any of the Related Agreements is terminated pursuant to any
termination provision of any other Related Agreement or does not become
effective due to the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997, this
Agreement shall terminate automatically simultaneously with the termination of
any such Related Agreement or upon the failure of all of the other parties to
the Related Agreement to execute the Related Agreement on or before September
22, 1997, whereupon this Agreement shall be void and without recourse to all
parties, except for provisions which are expressly stated to survive the
termination of this Agreement. The Closing under this Agreement shall be
simultaneous with the closings under the Related Agreements. Except as provided
in the Kickout Agreement, in the event the closing under any of the Related
Agreements is cancelled or postponed, the Closing under this Agreement shall be
cancelled or postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
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18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the
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transactions contemplated hereby to the accountants, attorneys or other
authorized agents of such party or as such party deems necessary or desirable
pursuant to any court or governmental order or applicable securities regulations
or financial reporting requirements, nor shall the BRI Partnership or BRI be
precluded from describing this Agreement and the transactions herein
contemplated in any filings made pursuant to any securities laws or in
connection with the Public Offering or Private Placement, or from filing this
Agreement, the Exhibits hereto and the Schedules as exhibits to any filings by
the BRI Partnership or BRI required by any securities laws. Notwithstanding the
foregoing, no party hereunder shall have any liability by reason of the details
of the transactions contemplated hereby becoming known by means beyond the
reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be
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adjusted with cash and/or BRI Partnership Units and acting as distribution agent
with respect to the apportionments and adjustments under Section 12 hereof and
such other administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the proposes of
this Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI
shall be entitled to an aggregate administrative fee of $200,000 in connection
with the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may
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be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation and fairways affidavits and gap indemnities as are required by
the terms of this Agreement and endorsement, assignment and transfer of the
issued and outstanding stock of the Borrower Corporate General Partner currently
owned by the Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such agreements and, to the extent that any agreements or documents relating to
this Agreement (such as partnership assignments or other similar closing
documents) are executed prior to the Closing, the Transferor Agent is authorized
on behalf of each Transferor Partner and the Borrower Corporate General Partner
to hold all such agreements in escrow pending the Closing, at which time the
Transferor Agent shall be authorized to deliver such documents on behalf of the
Transferor Partners and the Borrower Corporate General Partner to the BRI
Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not
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extend to any act of gross negligence or willful malfeasance on the part of the
Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
_________________________ ____________________________________________
Name:
As Trustee of Irving Gisner u/w/o Trust
WITNESS:
_________________________ ____________________________________________
Slova Gisner
WITNESS:
_________________________ ____________________________________________
Bette Miller
WITNESS:
_________________________ ____________________________________________
Samuel G. Gorn
WITNESS:
_________________________ ____________________________________________
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Arlene Gorn
WITNESS:
_________________________ ____________________________________________
Irvin Miller
WITNESS:
_________________________ ____________________________________________
Name:
For the Estate of Harry S. Miller
WITNESS:
_________________________ ____________________________________________
Morton Gorn
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
By:
_________________________ _________________________________________
Name:
Title:
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BORROWER CORPORATE GENERAL PARTNER:
WITNESS: PLAINFIELD FUNDING, INC., a
Maryland corporation
By:
_________________________ _________________________________________
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
By:
_________________________ _________________________________________
Name:
Title:
WITNESS:
_________________________ ____________________________________________
Morton Gorn, solely for the purposes of
Section 19.06
WITNESS:
_________________________ ____________________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
WITNESS:
_________________________ ____________________________________________
John Colvin, solely for the purposes of
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Section 19.06
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
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<PAGE>
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Copy
Fourth Rolling Road/Courtleigh
(08-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between 19 West
Lexington Street Limited Partnership, John B. Colvin, Irvin Gomprecht, Morton
Gorn, Stephen M. Gorn, M. Peter Moser, James D. Nolan, Stanley Panitz, Bette
Miller and M. Richard Wyman (collectively, the "Transferor General Partners")
and the individuals and entities listed on Exhibit I attached hereto (the
"Transferor Limited Partners"), with an address c/o Questar Properties, Inc.,
124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen
M. Gorn (the Transferor General Partners and the Transferor Limited Partners are
sometimes collectively referred to as the "Transferor Partners"), and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn and BRI OP Limited Partnership, a Delaware limited
partnership (the "BRI Partnership") with an address c/o Berkshire Realty
Company, Inc., 470 Atlantic Avenue, Boston, Massachusetts 02210, Attention: Mr.
David J. Olney.
WHEREAS, the Transferor General Partners are the legal and beneficial owner
of all of the general partnership interests as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in Fourth
Rolling Road Associates Limited Partnership, a Maryland Limited Partnership (the
"Transferor Partnership") pursuant to the Amended and Restated Certificate and
Agreement of Limited Partnership dated as of October 25, 1985, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit II and is
referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
<PAGE>
b. the 280-unit apartment complex, commonly known as Courtleigh
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Partnership in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
all the estate and rights of the Transferor Partnership in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Partnership
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible
property now or hereafter, owned by the Transferor Partnership and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Partners pursuant
to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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<PAGE>
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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<PAGE>
Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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<PAGE>
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $13,536,318, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated November 18,
1985, as amended through a certain Fourth Allonge Deed of Trust Note dated as of
January 25, 1994, in the original principal amount of $12,258,600 (the "Note")
evidencing the loan (the "Loan") made to the Transferor Partnership by CPC
Mortgage Capital, LLC ("Lender") and secured by the Loan Documents which shall
be an obligation of the Transferor Partnership as of the Closing subject to any
exculpation from liability provisions therein.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted
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Distribution BRI Partnership Units are collectively referred to herein as the
"BRI Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the
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occurrence of any of the following events to reflect a stock split, dividend
(outside of the ordinary course), recapitalization or other similar event
outside of the ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
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SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
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4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
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4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or
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result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Transferor Partnership, except for
Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor
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Partnership's knowledge, threat thereof against the Transferor Partners, the
Transferor Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's
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business as such is presently conducted and neither the conduct of the
Transferor Partnership's business nor any material portion thereof is dependent
on the issuance or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan described in Schedule 5.10 and
in such audited financial statements and provide evidence thereof to the BRI
Partnership. As of the Closing Date the Transferor Partnership shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Partnership's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts and (c) liabilities under the Loan Documents. The Transferor
Partnership has conducted its business only in the ordinary course and, except
for the Loan and the matters disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, the Transferor
Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
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5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no
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representative of the Transferor Partners shall be a signatory on any other
account or safe deposit box of the Transferor Partnership or shall have the
power to borrow, discount debt obligations, cash or draw checks, or otherwise
act on behalf of the Transferor Partnership in any dealings with any banks or
other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
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(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents which are due and payable, through the Closing
Date, have been, and will be, paid in full and no default exists thereunder
which extends beyond applicable grace or cure periods. The Transferor
Partnership has not received any written notice of default under any of the Loan
Documents. The Lender is the sole holder or designated servicer of the Note. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. The Loan Documents secure no other indebtedness but the Loan. To the
best knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be
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obtained by the BRI Partnership in accordance with Section 1.04 hereof (the "BRI
Environmental Reports"), the Transferor Partnership has not received any written
notice from any governmental entity or other person that the Property, or
current or former operations on the Property, are not or have not been in
material compliance with any Environmental Laws or that the Transferor
Partnership has any material liability with respect thereto. To the Transferor
Partnership's knowledge, except as set forth in the Environmental Reports or in
the BRI Environmental Reports, there are no underground tanks for Hazardous
Materials, active or abandoned, at the Property and no Hazardous Materials are
present or have been released in a reportable quantity, where such a quantity
has been established by statute, ordinance, rule, regulation or order, at, on or
under the Property. To the Transferor Partnership's knowledge, except as
disclosed in the Environmental Reports or in the BRI Environmental Reports,
neither the Transferor Partnership nor the Property is in violation in any
material respect of any Environmental Laws and there is no asbestos, PCB's or
lead paint on the Property or any part thereof. For purposes of this Agreement,
"Environmental Laws" shall mean the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), as amended by the Hazardous and Solid Waste Amendments
of 1984; the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.), as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49
U.S.C. ss. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. ss. 2601 et
seq.; the Clean Air Act (42 U.S.C. ss. 9402 et seq.); the Clean Water Act (33
U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. ss. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.); and all other applicable federal, state and local
environmental laws (including, without limitation, obligations under the common
law), ordinances, orders, rules and regulations, as any of the foregoing may
have been amended, supplemented or supplanted prior to the Closing, relating to
regulation or control of hazardous, toxic or dangerous substances, materials or
wastes (collectively, "Hazardous Materials"), or their handling, storage or
disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would
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not have a Material Adverse Effect. To the Transferor Partnership's knowledge
the Property and the current use thereof comply in all material respects with
(a) all applicable laws and (b) all restrictive covenants and title encumbrances
affecting the Property. The Transferor Partnership holds all material licenses,
permits and authorizations required for the lawful use, operation and occupancy
of the Property. The parties agree that all matters relating to compliance with
Environmental Laws shall be covered by Section 5.21 and not by this Section
5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property
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not included in the Property relies for its operation, maintenance or legal
compliance on any facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and complete copy of all material correspondence submitted to and issued
by HUD in connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person
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not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any
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applicable Blue Sky Laws, (ii) pursuant to a no-action letter issued by the
Securities and Exchange Commission to the effect that a proposed transfer of the
BRI Partnership Units (or shares of common stock issued upon exchange of the BRI
Partnership Units) may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon the BRI Partnership or BRI, as the case may be, receiving an opinion of
counsel knowledgeable in securities law matters (and which opinion and counsel
shall be reasonably acceptable to both the BRI Partnership and BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Transferor Partner must bear the economic risk of an investment in the BRI
Partnership Units (and the shares of common stock issued upon exchange of the
BRI Partnership Units) for an indefinite period of time. Such Transferor Partner
acknowledges, represents and agrees that (i) its economic circumstances are such
that it is able to bear all risks of the investment in the BRI Partnership and
BRI for an indefinite period of time, including the risk of a complete loss of
its investment in the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units), (ii) it has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in the BRI Partnership Units and BRI, and (iii) it has consulted with
its own separate counsel and tax advisor, to the extent deemed necessary by it,
as to all legal and taxation matters covered by this Agreement and has not
relied upon the BRI Partnership or the Transferor Agent, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI
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Partnership and the transactions contemplated hereby, which questions were
answered to its satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which
opinion and which counsel shall be acceptable to Berkshire Realty
Company, Inc.) that the proposed transaction will be exempt from
registration under the Act and its applicable state securities
laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
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(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other
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material agreement to which the BRI Partnership is a party or by which the BRI
Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
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6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
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6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
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6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and
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without recourse to the parties hereto except for provisions which are expressly
stated to survive such termination; or (b) proceed with the contribution and
transfer of the Transferor Partnership Interests, and in such case, unless the
Transferor Partners shall have previously restored the Property to its condition
prior to the occurrence of any such damage or destruction, the Transferor
Partners shall pay over or assign to the BRI Partnership, on behalf of the
Transferor Partnership, all amounts received or due (plus an amount equal to any
deductible under any insurance policy covering the Property) from, and all
claims against, any insurance company or governmental entity as a result of such
destruction or taking and there shall be no adjustment to the Consideration
hereunder. If prior to the Time of Closing, any such damage or destruction shall
occur having a replacement cost of less than $750,000.00 or if any eminent
domain notice or proceeding is commenced which does not affect any material
portion of the Property, the BRI Partnership shall proceed to accept the
contribution and transfer of the Transferor Partnership Interests in accordance
with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations
of laws, ordinances, regulations or insurance requirements ("Violations of
Law"), which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur
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or any subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the Closing Date
which are attributable to (i) the fiscal tax year during which the Closing
occurs shall be apportioned between Transferor Partners and the BRI Partnership,
based upon the relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs shall be paid
to the Transferor Partners, in either case after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance
with its normal practices and procedures, shall continue to maintain and to make
all repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
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(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
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(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor
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Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V hereto duly
executed and delivered by the Transferor Partners, pursuant to which the
Transferor Partners shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
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(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
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(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, and to the transfer of the ownership of the
Transferor Partnership to the BRI Partnership and (ii) the following matters:
(A) the Note and other Loan Documents are in full force and effect; (B) to the
Lender's knowledge, no default exists; (C) the amount of the outstanding unpaid
principal balance of the Note, and the date to which interest and principal have
been paid on the Note; and (D) the amount of any real estate tax escrow,
insurance escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the
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BRI Partnership title to the Transferor Partnership Interests. The provisions of
this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs\ (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the Transferor Partnership shall
be entitled to rely on the agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
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(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor
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Partner under Section 10.05(b)(i) for any amounts in excess of 50% of the fair
market value as of the date such indemnification obligation is satisfied of the
BRI Partnership Units received by such Transferor Partner (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
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708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
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(c) Record Amended Transferor Partnership Certificate. Cause the
Amended Transferor Partnership Certificate to be filed with all appropriate
state and, if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
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11.02 Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and all loan assumption fees (not to exceed 1% of the outstanding
loan balance) and one-half of all (i) Title Insurance and Survey costs, (ii)
escrow and recording costs and (iii) transfer taxes and documentary stamps, if
any, and (iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect
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to allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
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(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor
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Partner, and (iii) the number of the Restricted Distribution BRI Partnership
Units to be received by each Transferor Partner. The BRI Partnership shall have
no obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the
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Transferor Partners to adjust for such amounts owing by the Transferor Partners
to the BRI Partnership in the form of BRI Partnership Units rather than cash. In
addition, if as a result of the prorations and apportionments set forth in
Section 12.01, the BRI Partnership owes an amount to the Transferor Partners,
such amount shall be paid in the form of BRI Partnership Units rather than cash.
The Transferor Agent shall have the right to elect to adjust for amounts owing
to the Transferor Partners or the BRI Partnership, as the case may be, in the
form of cash and/or BRI Partnership Units. The Transferor Agent shall notify the
BRI Partnership at least seven (7) business days prior to the Closing Date of
the manner in which the Transferor Partnership shall have elected to settle
adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such distribution of surplus cash
relates only to the period prior to the Closing Date, all such surplus cash
shall be distributed to the Transferor Partners prior to Closing; provided
however, if as a result of the 1997 annual HUD audit (it being agreed that the
BRI Partnership shall consult with the Transferor Agent during the HUD audit
procedure), HUD (after final adjudication by regulatory and judicial
authorities) determines that all or any portion of such distribution of surplus
cash to the Transferor Partners was improper, the Transferor Partners,
severally, agree to reimburse the Transferor Partnership immediately upon demand
for all amounts so designated by HUD as improper and to indemnify, defend and
hold the Transferor Partnership and the BRI Partnership harmless from and
against all loss, cost, damage or expense (including reasonable legal fees)
suffered or incurred as a result of such improper distribution of surplus cash.
In all other cases, there shall be no adjustment at Closing regarding surplus
cash, but at such time as HUD approves the distribution of surplus cash for
fiscal 1997, the BRI Partnership shall receive all such surplus cash and
thereafter the BRI Partnership shall promptly pay to the Transferor Agent, as
distribution agent for the Transferor Partners, the Transferor Partners pro-rata
share of such surplus cash allocable to the period prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled
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closing the Transferor Partnership Interests or the Property does not conform
with the provisions hereof, the BRI Partnership may elect by written notice
given to the Transferor Agent on or before the Closing Date either (a) to take
title as provided in Section 13.02, or (b) to terminate this Agreement as
provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to
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compel specific performance by the BRI Partnership hereunder, in which event the
Transferor Partners shall have the right to recover from the BRI Partnership the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the Transferor Partners in connection with the exercise of their
right of specific performance. The remedies provided in this Section 13.04 shall
be the sole and exclusive remedies at law or in equity of the Transferor
Partners in the event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Partners may have against the BRI
Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail,
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sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Transferor Agent or the BRI Partnership shall
otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5,12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with
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the Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate
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this Agreement by written notice given to the Transferor Agent within seven (7)
days after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the
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Transferor Partners, to the transfer of ownership of the Transferor Partnership
to the BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of
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common stock or other equity securities of BRI (the "Public Offering"), or (ii)
a private placement of common stock or other equity securities of BRI (the
"Private Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the
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Transferor Partners pursuant to the terms of this Agreement. Each Transferor
Partner and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed
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counterparts to such agreements and, to the extent that any agreements or
documents relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the Transferor
Agent is authorized on behalf of each Transferor Partner to hold all such
agreements in escrow pending the Closing, at which time the Transferor Agent
shall be authorized to deliver such documents on behalf of the Transferor
Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
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TRANSFEROR PARTNERS:
EACH TRANSFEROR GENERAL PARTNER
WITNESS
______________________________ ______________________________
M. Peter Moser
______________________________ ______________________________
John B. Colvin
______________________________ ______________________________
James D. Nolan
______________________________ ______________________________
Irvin Gomprecht
______________________________ ______________________________
Stanley Panitz
______________________________ ______________________________
Morton Gorn
______________________________ ______________________________
M. Richard Wyman
______________________________ ______________________________
Stephen M. Gorn
19 WEST LEXINGTON STREET
LIMITED PARTNERSHIP
______________________________ By: ______________________________
Name:
Its:
______________________________ ______________________________
Bette Miller
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WITNESS: EACH TRANSFEROR LIMITED PARTNER
______________________________ ______________________________
John Colvin
______________________________ ______________________________
Karen Colvin
______________________________ ______________________________
Bette Miller
______________________________ ______________________________
Franklin Wyman
______________________________ ______________________________
Jean L. Wyman
______________________________ ______________________________
M. Richard Wyman
QUESTAR BUILDERS, INC.
______________________________ By: ______________________________
Name:
Its:
19 WEST LEXINGTON STREET
ASSOCIATES
______________________________ By: ______________________________
Name:
Its:
______________________________ _______________________________
Stanley Panitz
______________________________ _______________________________
Irvin Gomprecht
______________________________ _______________________________
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Morton Gorn
______________________________ ______________________________
Stephen M. Gorn
______________________________ ______________________________
M. Peter Moser
______________________________ ______________________________
James D. Nolan
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
_________________________ By: ______________________________
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.,
Its General Partner
__________________________ By: ________________________
Name:
Title:
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<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited
Partners (with address and partnership interest of each
partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Fairway Ridge
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Purnell Funding, Inc., a Maryland corporation (the
"Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Purnell Associates, a Maryland general partnership (the "Transferor
Partnership") pursuant to a Joint Venture Agreement dated as of November 13,
1963, as amended (a copy of which, including all amendments, is attached hereto
as Exhibit II and is referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore City,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 274-unit apartment complex, commonly known as Fairway Ridge
Apartments, which contains related improvements, facilities, amenities,
<PAGE>
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Partnership in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
all the estate and rights of the Transferor Partnership in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Partnership
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible
property now or hereafter, owned by the Transferor Partnership and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Partners pursuant
to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Purnell Associates II
General Partnership, a Maryland general partnership ("Borrower Partnership")
pursuant to that certain Partnership Agreement dated as of October 29, 1996, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit IX and is referred to herein as the "Borrower Partnership Agreement"),
and the Transferor Partnership is also the legal and beneficial owner of all of
the issued and outstanding stock of the Borrower Corporate General Partner,
which owns the remaining fifty percent (50%) general
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partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
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cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
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terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $6,642,632, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing, and minus (Z) the amount required to pay the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"), but in any
event, the total amount to be deducted under this clause (Z) shall not exceed an
amount equal to the difference between the Consideration Amount minus the
outstanding principal balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of The Patrician
Financial Company ("Lender"), securing the outstanding principal balance of the
Note dated November 27, 1996, in the original principal amount of $6,137,000
(the "Note") evidencing the loan (the
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"Loan") made to the Borrower Partnership by Lender. The Loan is also secured by
the other Loan Documents (as defined in Section 5.20 hereof) which shall be an
obligation of the Borrower Partnership and the Transferor Partnership as of the
Closing subject to any exculpation from liability provisions therein. The
Transferor Partnership shall also remain as obligor of the outstanding principal
balance of the note dated November 27, 1996 in the original principal amount of
the Note (the "Borrower Partnership Note"), evidencing the loan made to the
Transferor Partnership by the Borrower Partnership (the "Borrower Partnership
Loan"). At the Closing, the BRI Partnership shall pay the amount required to
satisfy the Other Loans, provided that the amount to be paid by the BRI
Partnership shall not exceed the Other Loans BRI Cap. If the amount paid by the
BRI Partnership is not sufficient to pay the Other Loans in full, the Transferor
Partnership shall pay, from funds otherwise allocable under this Agreement to
the Transferor Partners, all additional amounts required to pay off the Other
Loans in full. At least fifteen (15) days prior to the Closing, the Transferor
Agent shall deliver a pay-off letter from each holder of an Other Loan stating
the amount required to pay-off such Other Loan in full, and at Closing, the
Transferor shall deliver the original note evidencing each such Other Loan
marked "Paid in Full," or in the event that the original of any such note is not
available, such other evidence of the satisfaction of such note and release of
liability under such Other Loan as the BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a
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fractional BRI Partnership Unit, the number of BRI Partnership Units shall be
rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit.
At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"), at Closing, the BRI Partnership
shall pay the BRI Additional Payment to the Transferor Agent in accordance with
the election made by each Transferor Partner pursuant to Section 12.04. The
Transferor Agent shall be liable to distribute the BRI Partnership Units and if
applicable, a pro-rata share of the BRI Additional Payment to each of the
Transferor Partners in accordance with the Transferor Allocation Schedule. The
BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transferor Allocation Schedule or the distribution of the BRI Partnership Units
or the BRI Additional Payment, if applicable, to the Transferor Partners and the
Transferor Partners hereby release the BRI Partnership from any such obligation
or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each
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Transferor Partner shall have such additional rights with respect to its BRI
Partnership Units as are contained in the Registration Rights Agreement, the
form of which is attached hereto as Exhibit 4; at Closing, the Transferor
Partners and BRI Apartments shall execute and deliver an Amendment to the BRI
Partnership, in the form and substance of Exhibit 3 attached hereto (the "BRI
Partnership Amendment") and the BRI Partnership shall deliver to the Transferor
Partners a certified copy of the Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted
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under Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
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4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
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SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not
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been amended or modified. Exhibit I sets forth an accurate and complete list of
the names of all of the Transferor Partners, and the Transferor Partners'
respective partnership interests in the Transferor Partnership. Except as set
forth on Exhibit I, no other person or party owns any partnership interest in
the Transferor Partnership. Except as set forth on Schedule 5.04, no Transferor
Partner is in default with respect to any capital contribution required to be
paid by him or it pursuant to the Transferor Partnership Agreement. A true,
correct and complete copy of the Transferor Partnership Agreement is attached
hereto as Exhibit II. The Transferor Partnership has no commitment to issue any
right to purchase or acquire or to issue or distribute to any of the Transferor
Partners, any evidences of indebtedness or assets; and the Transferor
Partnership has no obligation, contingent or otherwise, to purchase, redeem or
otherwise acquire any interest in the Transferor Partnership or any interest
therein or to make any distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated; or (ii) the rights
represented by the Transferor Partnership Interests or the partnership interests
in the Borrower Partnership. During the period commencing on the date hereof and
ending on the Closing Date, the Transferor Partnership will promptly inform the
BRI Partnership in writing of any material action, suit, proceeding or
investigation pending, or to the Transferor Partnership's knowledge, threat
thereof against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
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Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. Legal title to the Property is
currently held in the name of some or all of the partners of the Partnership who
are holding title on behalf of and for the benefit of the Transferor Partnerhip.
Except as disclosed on the Financial Statements, the Transferor Partnership does
not own, or otherwise hold any interest in, any material assets other than its
interest Property. On or before the Closing Date, the Transferor Partnership
shall cause legal and equitable title to the Property to be in the name of the
Transferor Partnership, and it shall be a condition to the BRI Partnership's
obligation to close that legal and equitable title to the Property be in the
name of the Transferor Partnership on or before the Closing Date. The Transferor
Partners shall pay all costs in connection with the transfer of title to the
Property to the Transferor Partnership, including, without limitation, any
transfer taxes and documentary stamps.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or
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indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except as
disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, no Transferor Partner, nor any affiliate of any
Transferor Partner nor any employee of the Transferor Partnership is presently
indebted to the Transferor Partnership for borrowed money and the Transferor
Partnership is not presently indebted for borrowed money to any of the foregoing
persons. Prior to Closing, the Transferor Partnership shall pay-off and
discharge in full all indebtedness and liabilities other than the Guaranty, the
Borrower Partnership Loan and the Other Loans described in Schedule 5.10 and in
such audited financial statements and provide evidence thereof to the BRI
Partnership. As of the Closing Date the Transferor Partnership shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Partnership's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts; and (c) liabilities under the Guaranty or the Borrower
Partnership Note and (d) a contingent liability for recordation taxes if the
Transferor Partnership or the Borrower Partnership defaults on the Loan after
Closing. The Transferor Partnership has conducted its business only in the
ordinary course and, except for the Loan and the matters disclosed on Schedule
5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
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5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no
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representative of the Transferor Partners shall be a signatory on any other
account or safe deposit box of the Transferor Partnership or shall have the
power to borrow, discount debt obligations, cash or draw checks, or otherwise
act on behalf of the Transferor Partnership in any dealings with any banks or
other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
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(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents and the Borrower Partnership Note are in full
force and effect and none of the Loan Documents or the Borrower Partnership Note
have been modified, amended or extended except as disclosed on Schedule H. All
payments of principal, interest, and, if applicable, real estate tax escrow,
insurance escrow and any other payments required under the Loan Documents or the
Borrower Partnership Note which are due and payable, through the Closing Date,
have been, and will be, paid in full and no default exists thereunder which
extends beyond applicable grace or cure periods. Neither the Transferor
Partnership nor the Borrower Partnership has received any written notice of
default under any of the Loan Documents or the Borrower Partnership Note. The
Lender is the sole holder or designated servicer of the Note. The Borrower
Partnership is the sole holder of the Borrower Partnership Note, subject to any
pledge thereof to Lender. The only security taken or held in connection with the
Note is evidenced in the Loan Documents. No security has been taken or held in
connection with the Borrower Partnership Note. The Loan Documents do not secure
any other indebtedness but the Loan or the Borrower Partnership Loan. To the
best knowledge of the Transferor Partnership, the amounts of any real estate tax
escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental
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authority, or agreements with any person or governmental authority and similar
material documents relating to environmental matters in the possession of the
Transferor Partnership, the Transferor Agent or any of the Transferor Agent's
affiliates, with respect to the Property (collectively, the "Environmental
Reports"). The Transferor Partnership has heretofore either furnished to the BRI
Partnership or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in the
Environmental Reports and the reports to be obtained by the BRI Partnership in
accordance with Section 1.04 hereof (the "BRI Environmental Reports"), the
Transferor Partnership has not received any written notice from any governmental
entity or other person that the Property, or current or former operations on the
Property, are not or have not been in material compliance with any Environmental
Laws or that the Transferor Partnership has any material liability with respect
thereto. To the Transferor Partnership's knowledge, except as set forth in the
Environmental Reports or in the BRI Environmental Reports, there are no
underground tanks for Hazardous Materials, active or abandoned, at the Property
and no Hazardous Materials are present or have been released in a reportable
quantity, where such a quantity has been established by statute, ordinance,
rule, regulation or order, at, on or under the Property. To the Transferor
Partnership's knowledge, except as disclosed in the Environmental Reports or in
the BRI Environmental Reports, neither the Transferor Partnership nor the
Property is in violation in any material respect of any Environmental Laws and
there is no asbestos, PCB's or lead paint on the Property or any part thereof.
For purposes of this Agreement, "Environmental Laws" shall mean the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended by the
Hazardous and Solid Waste Amendments of 1984; the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), as
amended by the Superfund Amendments and Reauthorization Act of 1986; the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the Toxic
Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42 U.S.C.
ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all other
applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may
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be) or have been or are about to be revoked; (ii) any fees and charges therefor
have not been fully paid; (iii) the Property, including the current use and
occupancy thereof, is in violation in any material respect of any laws or (iv)
any governmental authority has a current plan, including without limitation, a
condemnation, a widening change of grade or limitation on use of streets, a
special assessment or a change in zoning classification, that would adversely
affect the continued use and operation of the Property as currently used and
operated except, in the case of clauses (i), (ii), (iii) and (iv) as would not
have a Material Adverse Effect. To the Transferor Partnership's knowledge the
Property and the current use thereof comply in all material respects with (a)
all applicable laws and (b) all restrictive covenants and title encumbrances
affecting the Property. The Transferor Partnership holds all material licenses,
permits and authorizations required for the lawful use, operation and occupancy
of the Property. The parties agree that all matters relating to compliance with
Environmental Laws shall be covered by Section 5.21 and not by this Section
5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
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5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the
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Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and
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Exchange Commission to the effect that a proposed transfer of the BRI
Partnership Units (or shares of common stock issued upon exchange of the BRI
Partnership Units) may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon the BRI Partnership or BRI, as the case may be, receiving an opinion of
counsel knowledgeable in securities law matters (and which opinion and counsel
shall be reasonably acceptable to both the BRI Partnership and BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Transferor Partner must bear the economic risk of an investment in the BRI
Partnership Units (and the shares of common stock issued upon exchange of the
BRI Partnership Units) for an indefinite period of time. Such Transferor Partner
acknowledges, represents and agrees that (i) its economic circumstances are such
that it is able to bear all risks of the investment in the BRI Partnership and
BRI for an indefinite period of time, including the risk of a complete loss of
its investment in the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units), (ii) it has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in the BRI Partnership Units and BRI, and (iii) it has consulted with
its own separate counsel and tax advisor, to the extent deemed necessary by it,
as to all legal and taxation matters covered by this Agreement and has not
relied upon the BRI Partnership or the Transferor Agent, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
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(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which
opinion and which counsel shall be acceptable to Berkshire Realty
Company, Inc.) that the proposed transaction will be exempt from
registration under the Act and its applicable state securities
laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to
effect any transfers thereof, in the absence of satisfying the
conditions contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
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(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's knowledge the Borrower Partnership is not in violation of any
order, statute, rule or regulation applicable to it, except for such violations
which would not have a Material Adverse Effect. Neither the execution, delivery
and performance of this Agreement by the Transferor Partnership, nor the
contribution of the Transferor Partnership Interests by the Transferor Partners
hereunder, nor the assignment and transfer of the Borrower General Partnership
Interest by the Borrower Corporate General Partner to the Borrower LLC General
Partner will result in any Material Adverse Effect or be in conflict with or
constitute a default under the Borrower Partnership Agreement or result in the
creation of any mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is
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124 Slade Avenue, Suite 200, Baltimore, Maryland 21208. Each of the Transferor
Partnership and the Borrower Corporate General Partner owns a 50% general
partnership interest in the Borrower Partnership. No partner of the Borrower
Partnership is in default with respect to any capital contribution required to
be paid by it pursuant to the Borrower Partnership Agreement. A true, correct
and complete copy of the Borrower Partnership Agreement is attached hereto as
Exhibit IX. The Borrower Partnership has no commitment to issue any right to
purchase or acquire or to issue or distribute to the partners thereof any
evidences of indebtedness or assets; and the Borrower Partnership has no
obligation, contingent or otherwise, to purchase, redeem or otherwise acquire
any interest in the Borrower Partnership or any interest therein or to make any
distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower
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Partnership defaults on the Loan after Closing. The Borrower Partnership has
conducted its business only in the ordinary course and, except for the Loan and
the Borrower Partnership Loan and the matters disclosed on Schedule 5.10, the
Borrower Partnership has not created, permitted or allowed any mortgage, pledge,
lien, security interest, encumbrance, restriction or charge of any kind with
respect to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
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5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and hold, the
Borrower General Partnership Interest free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party. Upon Closing, the Transfer Partnership shall own and hold its
interest in the Borrower Partnership free and clear of any liens, pledges and
encumbrances of any kind whatsoever, and free of any rights of assignment of any
third party. Prior to Closing, the Transferor Partnership shall assign and
transfer to the Transferor Agent all of the issued and outstanding stock of the
Borrower Corporate General Partner. Subsequent to such assignment and transfer
to the Transferor Agent but prior to Closing, the Transferor Agent shall cause
the Borrower Corporate General Partner to assign and transfer the Borrower
General Partnership Interest to the Borrower LLC General Partner (as defined in
Section 9.12 hereof) free and clear of any liens, pledges and encumbrances of
any kind whatsoever and free of any rights of assignment of any third party,
such that upon Closing the Transferor Partnership and the Borrower LLC General
Partner will each own and hold a fifty percent (50%) general partnership
interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT
TO THE BORROWER CORPORATE GENERAL PARTNER
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The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the acquisition of the Borrower General
Partnership Interest in the Borrower Partnership or any part thereof, except for
the rights of the Borrower LLC General Partner and the BRI Partnership under
this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
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5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other
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material agreement to which the BRI Partnership is a party or by which the BRI
Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
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(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
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6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
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6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00 are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the
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Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such damage or
destruction shall occur having a replacement cost of less than $750,000.00 or if
any eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Partnership Interests in
accordance with the provisions of clause (b) above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur
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or any subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the Closing Date
which are attributable to (i) the fiscal tax year during which the Closing
occurs shall be apportioned between Transferor Partners and the BRI Partnership,
based upon the relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs shall be paid
to the Transferor Partners, in either case after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder except as permitted and set forth on
Schedule 9.06 attached hereto and (d) not make (or permit the Borrower
Partnership to make) any prepayment of principal under the Note. Without
limitation of the foregoing, the Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow, and other amounts required under the Borrower Partnership Note coming
due thereunder prior to the Closing in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Borrower
Partnership Note up to the Closing, (c) not alter or amend the Borrower
Partnership Note, or seek or accept any waivers or extensions of time for
payment or performance thereunder except as permitted and set forth on Schedule
9.06 attached hereto and (d) not make any prepayment of principal under the
Borrower Partnership Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
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9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least
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equal quality or make or permit to be made any material alterations to or upon
the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
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refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent, on behalf of the Transferor Partnership and pursuant to the
power of attorney granted to it under Section 19.04, shall transfer all of the
issued and outstanding stock in the Borrower Corporate General Partner to the
Transferor Agent. Immediately prior to Closing, (i) the Transferor Agent shall
cause the Borrower Corporate General Partner to assign its Borrower General
Partnership Interest in the Borrower Partnership to a limited liability company
formed by the BRI Partnership, all of the membership interests in which shall be
owned by the BRI Partnership or an affiliate thereof (the "Borrower LLC General
Partner") and (ii) the Transferor Agent shall cause the Borrower Corporate
General Partner to withdraw as a general partner of the Borrower Partnership,
such that, at Closing, the Borrower Partnership shall validly exist as a
Maryland general partnership, having as its sole general partners the Transferor
Partnership and the Borrower LLC General Partner, each of which shall hold a 50%
general partnership interest in the Borrower Partnership.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
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10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the
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Borrower Partnership Assignment has not been duly executed and delivered by the
Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted
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under Section 19.04 in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and fairways endorsement and to omit from its title insurance policy all
exceptions for (i) judgments, bankruptcies or other returns against persons or
entities whose names are the same as or similar to the Transferor Partnership's
name; (ii) parties in possession other than under the rights to possession
granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are in full force and effect; (B) to the Lender's knowledge, no
default exists under the Note, the Guaranty or any other Loan Document; (C) the
amount of the outstanding unpaid principal balance of the Note, and the date to
which interest and principal have been
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paid on the Note; and (D) the amount of any real estate tax escrow, insurance
escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
all transfer taxes and documentary stamps, if any, in connection with the
transfer of title to the Property to the Transferor Partnership described in
Section 5.08 hereof, and one-half of all: (i) Title Insurance and Survey costs,
(ii) escrow and recording costs (iii) transfer taxes and documentary stamps, if
any, in connection with the assignment and transfer of the Transferor
Partnership Interests as contemplated herein, and (iv) UCC Search costs. The
Transferor Partners also shall pay their pro rata share of the fees and expenses
attributable to the transactions contemplated by this Agreement in accordance
with the provisions of Section 19.03 and all of the fees and expenses of their
own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Partnership and the BRI
Partnership, the representations and warranties of such Transferor Partner or
the Borrower Corporate General Partner, as the case may be, shall be deemed to
be true and correct on and as of the Closing Date and that the BRI
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Partnership and the Transferor Partnership shall be entitled to rely on the
agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due after the Closing) incurred by the
Transferor Partnership, the Borrower Partnership, the Borrower Corporate General
Partner or the Property prior to the Closing; provided that no Transferor
Partner shall be required to indemnify the BRI Partnership for any
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amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
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(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower Corporate General
Partner in the Borrower Partnership to the Borrower LLC General Partner in such
a manner as not to result in the dissolution of the Borrower Partnership, in the
form of the Borrower Partnership Assignment attached hereto as Exhibit X, duly
executed and delivered by the Borrower Corporate General Partner, which shall
transfer such Borrower General Partnership Interest in the Borrower Partnership
to the Borrower LLC General Partner free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party (the "Borrower
Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant to which the BRI Partnership, or its designees, shall be admitted as
partners of the Transferor Partnership.
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(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
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consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, in
connection with the assignment and transfer of the Transferor Partnership
Interests as contemplated herein, and (iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the
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Loan Documents, or change the terms in a manner that would change the Loan from
nonrecourse to recourse within the meaning of Section 752 of the Code and the
regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
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SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and
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prorations to be made pursuant to this Section 12. Transferor Agent and the BRI
Partnership shall cooperate in the furnishing of all information and
documentation necessary to prepare such calculations. Prior to Closing, the
Transferor Agent shall deliver to the BRI Partnership the final Transferor
Allocation Schedule (the "Transferor Allocation Schedule"), which shall be based
upon the Preliminary Transferor Allocation Schedule, shall incorporate all
adjustments and prorations to be made pursuant to Section 12, and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transferor Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued
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thereon at the rate of 4% as required by applicable state law or at such higher
rate, if any, as required by the terms of the leases, for each tenant as shown
on the Rent Roll and the BRI Partnership, or its designee, shall assume all
liability with respect to the tenant security deposits under applicable state
law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or
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similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or
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to such address as the Transferor Agent or the BRI Partnership shall otherwise
have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly
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conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower Corporate General Partner set forth in this Agreement
shall be true and correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title
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to a fifty percent (50%) general partnership interest in the Borrower General
Partnership, free and clear of all liens, pledges, and encumbrances of any kind
whatsoever and free of any rights of assignment of any third party; and the
Borrower LLC General Partner shall own a fifty percent (50%) general partnership
interest in the Borrower Partnership, free and clear of any liens, pledges and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
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In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of its interests in the Borrower Partnership to
the Borrower LLC General Partner, to the withdrawal from the Borrower
Partnership of the Borrower Corporate General Partner, and to the admission to
the Borrower Partnership of the Borrower LLC General Partner as a fifty percent
(50%) general partner, and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership, the transfer of
ownership of the Transferor Partnership to the BRI Partnership, to the
assignment by the Borrower Corporate General Partner of all of its interests in
the Borrower Partnership to the Borrower LLC General Partner, to the withdrawal
from the Borrower Partnership of the Borrower Corporate General Partner, and to
the admission to the Borrower Partnership of the Borrower LLC General Partner as
a fifty percent (50%) general partner. The BRI Partnership shall supply any and
all documentation and additional information required by Lender in order to
promptly complete the request for the consent of Lender to the transactions
contemplated hereunder. The Transferor Partnership shall request that Lender
state in writing any terms and requirements, including the amount of any Loan
Assumption Fees, to be imposed by Lender in connection with its consent to the
transactions contemplated hereby. It shall be a condition of Closing that prior
to October 15, 1997, Lender shall have granted its consent to the transactions
contemplated hereunder on terms and requirements reasonably satisfactory to the
BRI Partnership, shall have issued the Lender Estoppel Letter and shall have
agreed to release the Transferor Partners from all liability under the Loan
Documents. In the event that any of the terms or requirements required by Lender
for its consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, including
the amount of any Loan Assumption Fees in excess of 1% of the unpaid
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principal balance, and the BRI Partnership gives timely notice of termination
hereunder to the Transferor Agent, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement. In the event the Lender shall
not have agreed to release the Transferor Partners from all liability under the
Loan Documents or the Lender shall have placed terms and conditions on the
Transferor Partners that are unacceptable to them, the Transferor Agent may
terminate this Agreement by written notice given to the BRI Partnership within
fifteen (15) business days after the Transferor Agent has received in writing
notice that the Lender has refused to release the Transferor Partners from
liability under the Loan Documents or has imposed such unacceptable terms and
conditions. If the Transferor Agent gives timely notice of termination to the
BRI Partnership, this Agreement shall terminate without further action by any
party, and, thereafter this Agreement shall be void and without recourse to all
parties, except for provisions which are expressly stated to survive termination
of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the
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event that any of the Related Agreements is terminated pursuant to any
termination provision of any other Related Agreement or does not become
effective due to the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997, this
Agreement shall terminate automatically simultaneously with the termination of
any such Related Agreement or upon the failure of all of the other parties to
the Related Agreement to execute the Related Agreement on or before September
22, 1997, whereupon this Agreement shall be void and without recourse to all
parties, except for provisions which are expressly stated to survive the
termination of this Agreement. The Closing under this Agreement shall be
simultaneous with the closings under the Related Agreements. Except as provided
in the Kickout Agreement, in the event the closing under any of the Related
Agreements is cancelled or postponed, the Closing under this Agreement shall be
cancelled or postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
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18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized
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agents of such party or as such party deems necessary or desirable pursuant to
any court or governmental order or applicable securities regulations or
financial reporting requirements, nor shall the BRI Partnership or BRI be
precluded from describing this Agreement and the transactions herein
contemplated in any filings made pursuant to any securities laws or in
connection with the Public Offering or Private Placement, or from filing this
Agreement, the Exhibits hereto and the Schedules as exhibits to any filings by
the BRI Partnership or BRI required by any securities laws. Notwithstanding the
foregoing, no party hereunder shall have any liability by reason of the details
of the transactions contemplated hereby becoming known by means beyond the
reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with
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respect to the apportionments and adjustments under Section 12 hereof and such
other administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the proposes of
this Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI
shall be entitled to an aggregate administrative fee of $200,000 in connection
with the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM, by the other Transferor
Partnerships and related entities (collectively, the "Related Entities"), which
shall be Indirect Costs; (ii) to the extent it is determined that APC is due any
fee as described in Section 14.01 hereof, up to $1,000,000 of such fee (which
may be paid at Closing or held back in an escrow account by the Transferor Agent
until such time as the amount of such fee, if any, is determined) shall be
included as Indirect Costs, with any such fee in excess of $1,000,000 to APC
being the sole responsibility of QPI; and (iii) all legal and accounting fees of
counsel and advisors to the Transferor Agent and the Related Entities shall also
be Indirect Costs. Each of the Transferor Partners acknowledges and agrees that
(i) any and all Direct Costs shall be allocated based on the pro rata number of
BRI Partnership Units allocated to each of them with respect to their interest
in the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out
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the provisions of this Agreement and the transactions contemplated hereby
including, without limitation, execution of such title affidavits,
non-imputation and fairways affidavits and gap indemnities as are required by
the terms of this Agreement and endorsement, assignment and transfer of the
issued and outstanding stock of the Borrower Corporate General Partner currently
owned by the Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such agreements and, to the extent that any agreements or documents relating to
this Agreement (such as partnership assignments or other similar closing
documents) are executed prior to the Closing, the Transferor Agent is authorized
on behalf of each Transferor Partner and the Borrower Corporate General Partner
to hold all such agreements in escrow pending the Closing, at which time the
Transferor Agent shall be authorized to deliver such documents on behalf of the
Transferor Partners and the Borrower Corporate General Partner to the BRI
Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing,, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the
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Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
____________________________ _____________________________________________
Karen G. Colvin
WITNESS:
____________________________ _____________________________________________
As Trustee for the benefit
of Nicholas J. Colvin
WITNESS:
____________________________ _____________________________________________
As Trustee for the benefit
of Tracey J. Colvin
WITNESS:
____________________________ _____________________________________________
A Trustee of Irving Gisner
u/w/o Trust
WITNESS:
____________________________ _____________________________________________
Slova Gisner
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WITNESS:
____________________________ _____________________________________________
Morton Gorn
WITNESS:
____________________________ _____________________________________________
Stephen M. Gorn
WITNESS:
____________________________ _____________________________________________
Arlene Gorn
WITNESS:
____________________________ _____________________________________________
As Trustee for the benefit
of Heather D. Gorn
WITNESS:
____________________________ _____________________________________________
Samuel G. Gorn
WITNESS:
____________________________ _____________________________________________
Marilyn Kerman
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WITNESS:
____________________________ _____________________________________________
Bruce Winston
WITNESS:
____________________________ _____________________________________________
Dorothy Winston
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
By:
____________________________ _________________________________________
Name:
Title:
BORROWER CORPORATE GENERAL PARTNER:
WITNESS: PURNELL FUNDING, INC.,
a Maryland corporation
By:
____________________________ _________________________________________
Name:
Title:
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BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
By:
____________________________ _________________________________________
Name:
Title:
WITNESS:
____________________________ _____________________________________________
Morton Gorn, solely for the purposes of
Section 19.06
WITNESS:
____________________________ _____________________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
WITNESS:
____________________________ _____________________________________________
John Colvin, solely for the purposes of
Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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Execution Copy
Fairbrook/Stratton Meadows
(8-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Stratton
Associates Limited Partnership, a Maryland limited partnership (the "Transferor
General Partner") and the individuals and entities listed on Exhibit I attached
hereto (the "Transferor Limited Partners"), with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (the Transferor General Partner and the
Transferor Limited Partners are sometimes collectively referred to as the
"Transferor Partners"), and Questar Investment Corporation, a Maryland
corporation (the "Transferor Agent"), with an address of 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in
Fairbrook Associates Limited Partnership, a Maryland Limited Partnership (the
"Transferor Partnership") pursuant to the Fourth Amended and Restated
Certificate and Agreement of Limited Partnership dated as of January 1, 1993, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
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b. the 268-unit apartment complex, commonly known as Stratton Meadows
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Partnership in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
all the estate and rights of the Transferor Partnership in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Partnership
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible
property now or hereafter, owned by the Transferor Partnership and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Partners pursuant
to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before September 5, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before September 5, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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1.03 Survey. On or before September 5, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of
the Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before September 5, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $14,407,465, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing and, minus (Z) the amount required to pay the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"), but in any
event, the total amount to be deducted under this clause (Z) shall not exceed an
amount equal to the difference between the Consideration Amount minus the
outstanding principal balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated June 16, 1987, in
the original principal amount of $12,750,000 (the "Note") evidencing the loan
(the "Loan") made to the Transferor Partnership by Reilly Mortgage Group, Inc.
("Lender") and secured by the Loan Documents which shall be an obligation of the
Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein.
At the Closing, the BRI Partnership shall pay the amount required to
satisfy the Other Loans, provided that the amount to be paid by the BRI
Partnership shall not exceed the Other Loans BRI Cap. If the amount paid by the
BRI Partnership is not sufficient to pay the Other Loans in full, the Transferor
Partnership shall pay, from funds otherwise allocable under this Agreement to
the Transferor Partners, all
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additional amounts required to pay off the Other Loans in full. At least fifteen
(15) days prior to the Closing, the Transferor Agent shall deliver a pay-off
letter from each holder of an Other Loan stating the amount required to pay-off
such Other Loan in full, and at Closing, the Transferor shall deliver the
original note evidencing each such Other Loan marked "Paid in Full," or in the
event that the original of any such note is not available, such other evidence
of the satisfaction of such note and release of liability under such Other Loan
as the BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
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liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership
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Units. Notwithstanding these fluctuations, once the value and number of BRI
Partnership Units have been established as provided in Section 2.01(a), the BRI
Partnership will not be required to increase or permitted to decrease the number
of BRI Partnership Units to be issued to the Transferor Partners in the event of
a decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
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SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
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4.07 Current Rent Roll. The Rent Roll (as that term is defined in
Section 5.18 hereof) containing a list of the current rents now being collected
on each of the apartment units in the Improvements which includes: apartment
number, unit status, tenant name, commencement and termination dates, lease
rent, deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
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5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
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Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31,
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1996 and on or before August 31, 1997 the Transferor Partnership shall provide
unaudited financial statements for the six-month period ending June 30, 1997
(collectively, the "Financial Statements"). The Financial Statements fairly
present the financial condition of the Transferor Partnership as of the
respective statement dates in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto), and reflect all liabilities, fixed, contingent or otherwise, required
to be disclosed in such Financial Statements in accordance with generally
accepted accounting principles (subject, in the case of any unaudited interim
financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan and the Other Loans described
in Schedule 5.10 and in such audited financial statements and provide evidence
thereof to the BRI Partnership. As of the Closing Date the Transferor
Partnership shall have no liabilities or obligations (absolute or contingent) of
any kind, other than (a) liabilities and obligations incurred in the ordinary
course of the Transferor Partnership's business which are either (i) in the
aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts and (c) liabilities under the
Loan Documents. The Transferor Partnership has
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conducted its business only in the ordinary course and, except for the Loan and
the matters disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal
1996 audited financial statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
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(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
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(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow,
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insurance escrow and any other payments required under the Loan Documents which
are due and payable, through the Closing Date, have been, and will be, paid in
full and no default exists thereunder which extends beyond applicable grace or
cure periods. The Transferor Partnership has not received any written notice of
default under any of the Loan Documents. The Lender is the sole holder or
designated servicer of the Note. The only security taken or held in connection
with the Note is evidenced in the Loan Documents. The Loan Documents secure no
other indebtedness but the Loan. To the best knowledge of the Transferor
Partnership, the amounts of any real estate tax escrow, insurance escrow and any
other escrows and reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the
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Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide
and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. ss. 651 et seq.); and all other applicable federal, state
and local environmental laws (including, without limitation, obligations under
the common law), ordinances, orders, rules and regulations, as any of the
foregoing may have been amended, supplemented or supplanted prior to the
Closing, relating to regulation or control of hazardous, toxic or dangerous
substances, materials or wastes (collectively, "Hazardous Materials"), or their
handling, storage or disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
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5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and
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complete copy of all material correspondence submitted to and issued by HUD in
connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
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(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its
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affiliates or its other legal counsel and advisors for any explanation of the
application of the various United States or state securities laws or tax laws
with regard to its acquisition of the BRI Partnership Units. Such Transferor
Partner further acknowledges and represents that it has made its own independent
investigation of the BRI Partnership and the business conducted or proposed to
be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws,
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receipt of a no-action letter issued by the Securities and
Exchange Commission (together with either registration or an,
exemption under applicable state securities laws) or an opinion
of counsel (which opinion and which counsel shall be acceptable
to Berkshire Realty Company, Inc.) that the proposed transaction
will be exempt from registration under the Act and its applicable
state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
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6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
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governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
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9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any
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portion of the Property, or subject any portion of the Property to any option
contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
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9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V
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hereto duly executed and delivered by the Transferor Partners, pursuant to which
the Transferor Partners shall withdraw as partners from the Transferor
Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, that no state transfer taxes, sales tax,
excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys,
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soil and substrata studies, architectural drawings, plans and specifications,
engineering plans and studies, floor plans, landscape plans and other plans or
studies of any kind that relate to all or any part of the Property. The
Transferor Partnership shall also deliver, to the extent in the possession of
the Transferor Partnership: original copies of all certificates, licenses,
permits, authorizations and approvals issued for or with respect to the Property
by governmental and quasi-governmental authorities having jurisdiction, except
that photocopies may be substituted if the originals are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel
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Letter shall be mutually agreed upon by the parties during the Financing
Assumption Period (as defined in Section 17.03). However, the BRI Partnership
will require, at a minimum, that the Lender Estoppel Letter set forth (i) Lender
consent to the contribution of the Transferor Partnership Interests, as
contemplated herein, and to the transfer of the ownership of the Transferor
Partnership to the BRI Partnership and (ii) the following matters: (A) the Note
and other Loan Documents are in full force and effect; (B) to the Lender's
knowledge, no default exists; (C) the amount of the outstanding unpaid principal
balance of the Note, and the date to which interest and principal have been paid
on the Note; and (D) the amount of any real estate tax escrow, insurance escrow
and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and
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the Transferor Partnership shall be entitled to rely on the agreements contained
in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each
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of the Transferor Partners in Section 5.34, which shall be limited to 100% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner)
(collectively, the "Cap"); and provided further that to the extent any of the
Transferor Partners have any indemnification obligation to the BRI Partnership,
the Transferor Partners may elect to satisfy such indemnification obligation by
directing the BRI Partnership to cancel such amount of BRI Partnership Units
acquired by such Transferor Partner pursuant to this Agreement having a fair
market value (measured at the time such BRI Partnership Units are returned or
cancelled) equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
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SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
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qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
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(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected
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Transferor Partners is obtained), provided however that in the event of a change
in the Code, the Treasury Regulations, or published Internal Revenue Service
("IRS") rulings, notices or other administrative guidance, or in any private
letter ruling issued to a taxpayer other than the BRI Partnership (any such
change, a "Change in Law") such that, in the reasonable opinion of tax counsel
to the BRI Partnership, based on such Change in Law, either (i) the foregoing
method is no longer legally permissible, (ii) or an alternative method, not
previously permitted, which results in more favorable tax consequences to each
of the limited partners, including the Transferor Partners, of the BRI
Partnership is currently permitted, the BRI Partnership, shall be entitled,
without the consent of the Transferor Agent, to adopt an alternative method,
provided further that, in the case of clause (i), the BRI Partnership shall
choose the alternative method that minimizes to the extent reasonably possible,
the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
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(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of the Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
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12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such
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distribution of surplus cash relates only to the period prior to the Closing
Date, all such surplus cash shall be distributed to the Transferor Partners
prior to Closing; provided however, if as a result of the 1997 annual HUD audit
(it being agreed that the BRI Partnership shall consult with the Transferor
Agent during the HUD audit procedure), HUD (after final adjudication by
regulatory and judicial authorities) determines that all or any portion of such
distribution of surplus cash to the Transferor Partners was improper, the
Transferor Partners, severally, agree to reimburse the Transferor Partnership
immediately upon demand for all amounts so designated by HUD as improper and to
indemnify, defend and hold the Transferor Partnership and the BRI Partnership
harmless from and against all loss, cost, damage or expense (including
reasonable legal fees) suffered or incurred as a result of such improper
distribution of surplus cash. In all other cases, there shall be no adjustment
at Closing regarding surplus cash, but at such time as HUD approves the
distribution of surplus cash for fiscal 1997, the BRI Partnership shall receive
all such surplus cash and thereafter the BRI Partnership shall promptly pay to
the Transferor Agent, as distribution agent for the Transferor Partners, the
Transferor Partners pro-rata share of such surplus cash allocable to the period
prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
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If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly
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conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days
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after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the
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BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private
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placement of common stock or other equity securities of BRI (the "Private
Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the
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Transferor Partners pursuant to the terms of this Agreement. Each Transferor
Partner and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed
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counterparts to such agreements and, to the extent that any agreements or
documents relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the Transferor
Agent is authorized on behalf of each Transferor Partner to hold all such
agreements in escrow pending the Closing, at which time the Transferor Agent
shall be authorized to deliver such documents on behalf of the Transferor
Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNER
STRATTON ASSOCIATES LIMITED
PARTNERSHIP
_______________________________ By: ______________________________
Name:
Its:
WITNESS: EACH TRANSFEROR LIMITED PARTNER
_______________________________ ____________________________________
Lionel Goodman
_______________________________ ____________________________________
John J. Bagliani, Jr.
_______________________________ ____________________________________
Noah Lightman
_______________________________ ____________________________________
H. F. Criste
CHARLES J. FRANK, INC.
_______________________________ By: ______________________________
Name:
Title:
_______________________________ ____________________________________
James P. McDonagh
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_______________________________ ____________________________________
Bette Miller
_______________________________ ____________________________________
Israel Freedman
_______________________________ ____________________________________
Irvin Miller
_______________________________ ____________________________________
Martin Gerberg
_______________________________ ____________________________________
Mildred Miller
_______________________________ ____________________________________
Bernice Gerberg
_______________________________ ____________________________________
Marcel A. Reischer
_______________________________ ____________________________________
Daniel E. Wallach, M.D.
REVLUZ REALTY CO.
_______________________________ By: ______________________________
Name:
Title:
_______________________________ ____________________________________
M. Richard Wyman
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
_______________________________ By: ______________________________
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<PAGE>
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.,
Its General Partner
_______________________________ By: ________________________
Name:
Title:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited
Partners (with address and partnership interest of each
partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Version of 8/27//97
Diamond Ridge
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between John B.
Colvin, Morton Gorn and Stephen M. Gorn (the "Transferor General Partners") and
the individuals and entities listed on Exhibit I attached hereto (the
"Transferor Limited Partners"), with an address c/o Questar Properties, Inc.,
124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen
M. Gorn (the Transferor General Partners and the Transferor Limited Partners are
sometimes collectively referred to as the "Transferor Partners"), and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn and BRI OP Limited Partnership, a Delaware limited
partnership (the "BRI Partnership") with an address c/o Berkshire Realty
Company, Inc., 470 Atlantic Avenue, Boston, Massachusetts 02210, Attention: Mr.
David J. Olney.
WHEREAS, the Transferor General Partners are the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in Diamond
Ridge Associates Limited Partnership, a Maryland Limited Partnership (the
"Transferor Partnership") pursuant to the First Amended and Restated Agreement
of Limited Partnership dated as of May 1, 1989, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit II and is referred to as
the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
<PAGE>
b. the 92-unit apartment complex, commonly known as Diamond Ridge
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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WHEREAS, in exchange for such contribution, the Transferor Partners
desire to receive BRI Partnership Units in accordance with the terms of this
Agreement and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Transferor
Partners and the BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as
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<PAGE>
defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than liens for real estate taxes and current water and sewer charges for
fiscal 1997 which taxes and current water and sewer charges will be adjusted as
provided in Section 12 hereof) (collectively the "Monetary Liens") shall
automatically be deemed to be unacceptable exceptions to title and shall be paid
and removed by the Transferor Partners at Closing. The Transferor Partnership
shall be deemed to have refused to cure any unacceptable exceptions unless the
Transferor Partnership, within ten (10) days after receipt of notice from the
BRI Partnership, shall notify the BRI Partnership in writing that the Transferor
Partnership will attempt to cure such unacceptable exceptions. If the Transferor
Partnership fails or refuses to cure said unacceptable exceptions within the
time period above provided, on or before the earlier to occur of (A) ten (10)
days after the Transferor Partnership notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
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<PAGE>
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of
the Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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<PAGE>
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and tenant files pertaining to the operation of the Property
prior to the Closing. The BRI
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<PAGE>
Partnership's agents and representatives shall be permitted access to such
records and files during regular business hours. To the extent that any of the
Transferor Partnership's financial records relating to the Property have been
audited, the Transferor Partnership agrees to deliver any reports relating to
such audits to the BRI Partnership. The Transferor Partnership shall provide the
BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal
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Revenue Code of 1986, as amended (the "Code") (and any analogous state income
tax provisions). The BRI Partnership and the Transferor Partners agree to report
such transaction for federal and applicable state income tax purposes
consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be $4,650,000, which shall consist of BRI Partnership Units, to
be issued by the BRI Partnership to the Transferor Partners as of the Closing,
equal in value (as such value is determined at the time and in the manner
provided hereinbelow) to the excess of (X) $4,650,000, subject to the prorations
and adjustments as provided in this Agreement, (the "Consideration Amount")
minus (Y) the amount required to pay the Loan in full, and minus (Z) the amount
required to pay the various outstanding loans owed by the Transferor Partnership
to the Transferor Partners or their affiliates or to other third-party lenders
(the "Other Loans"), but in any event, the total amount to be deducted under
this clause (Z) shall not exceed an amount equal to the difference between the
Consideration Amount minus the outstanding principal balance of the Note (the
"Other Loans BRI Cap").
At the Closing, the BRI Partnership shall pay in full the outstanding
principal balance of the Note dated August __, 1997, in the original principal
amount of $3,450,000 (the "Note") evidencing the loan (the "Loan") made to the
Transferor Partnership by First Union National Bank ("Lender") and secured by
the Loan Documents.
At the Closing, the BRI Partnership shall pay the amount required to
satisfy the Other Loans, provided that the amount to be paid by the BRI
Partnership shall not exceed the Other Loans BRI Cap. If the amount paid by the
BRI Partnership is not sufficient to pay the Other Loans in full, the Transferor
Partnership shall pay, from funds otherwise allocable under this Agreement to
the Transferor Partners, all additional amounts required to pay off the Other
Loans in full. At least fifteen (15) days prior to the Closing, the Transferor
Agent shall deliver a pay-off letter from each holder
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of an Other Loan stating the amount required to pay-off such Other Loan in full,
and at Closing, the Transferor shall deliver the original note evidencing each
such Other Loan marked "Paid in Full," or in the event that the original of any
such note is not available, such other evidence of the satisfaction of such note
and release of liability under such Other Loan as the BRI Partnership may
require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI
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Partnership Units or the BRI Additional Payment, if applicable, to the
Transferor Partners and the Transferor Partners hereby release the BRI
Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to
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be issued to the Transferor Partners in the event of a decrease or increase in
the market value of the common stock of BRI subsequent to the closing of the
Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Retention of Escrow. At the Closing, the Transferor Partnership shall
disburse the escrow deposits set forth on Schedule C attached hereto as provided
in Section 12.01.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other
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documents of record relating thereto. In addition, the Transferor Partnership
shall provide the BRI Partnership with access on-site to the originals of all
leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
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4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
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5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
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5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with
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generally accepted accounting principles (subject, in the case of any unaudited
interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan and the Other Loans described
in Schedule 5.10 and in such audited financial statements and provide evidence
thereof to the BRI Partnership. As of the Closing Date the Transferor
Partnership shall have no liabilities or obligations (absolute or contingent) of
any kind, other than (a) liabilities and obligations incurred in the ordinary
course of the Transferor Partnership's business which are either (i) in the
aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts and (c) liabilities under the
Loan Documents. The Transferor Partnership has conducted its business only in
the ordinary course and, except for the Loan and the matters disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
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(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
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5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but
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do not move in until after the Closing Date, which commissions shall be paid by
the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents which are due and payable, through the Closing
Date, have been, and will be, paid in full and no default exists thereunder
which extends beyond applicable grace or cure periods. The Transferor
Partnership has not received any written notice of default under any of the Loan
Documents. The Lender is the sole holder or designated servicer of the Note. The
only security taken or held in connection with the Note is evidenced in the Loan
Documents. The Loan Documents secure no other indebtedness but the Loan. To the
best knowledge of the Transferor Partnership, the amounts of any real estate tax
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escrow, insurance escrow and any other escrows and reserves held by Lender are
as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules an
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
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5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the
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Transferor Partnership, nor are any of such proceedings, against or by the
Transferor Partnership, anticipated or contemplated by the Transferor
Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Deleted.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the
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Closing Date the Transferor Partners Closing Documents will constitute valid and
binding obligations, enforceable against such Transferor Partner in accordance
with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33, no
approval of any person not a party to this Agreement is necessary for the
contribution by such Transferor Partner of the Transferor Partnership Interests
held by such Transferor Partner and the performance of such Transferor Partner's
obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
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(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its affiliates or its other legal counsel and advisors for any
explanation of the application of the various United States or state securities
laws or tax laws with regard to its acquisition of the BRI Partnership Units.
Such Transferor Partner further acknowledges and represents that it has made its
own independent investigation of the BRI Partnership and the business conducted
or proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and
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has had the opportunity to review all documents and information relevant to its
decision to enter into this Agreement and to invest in the BRI Partnership and
BRI, including, without limitation, the Private Placement Memorandum of BRI,
dated as of August 25, 1997 (the "PPM") and (iii) had the opportunity to ask
questions of the BRI Partnership and BRI and its management concerning its
investment in the BRI Partnership and the transactions contemplated hereby,
which questions were answered to its satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement under the Act and
under any applicable state securities laws, receipt of a
no-action letter issued by the Securities and Exchange Commission
(together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which
opinion and which counsel shall be acceptable to Berkshire Realty
Company, Inc.) that the proposed transaction will be exempt from
registration under the Act and its applicable state securities
laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
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(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the
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BRI Partnership at Closing, upon execution and delivery will have been duly and
validly authorized and executed by the BRI Partnership and will constitute the
valid and binding obligations of the BRI Partnership, enforceable in accordance
with their respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI
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Partnership Units shall be vested in the Transferor Partners free and clear of
any lien, claim, charge, pledge encumbrance, limitation, agreement or instrument
whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a
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"real estate investment trust" and its method of operation has enabled and to
BRI's knowledge should enable it to meet the requirements for qualification and
taxation as a "real estate investment trust" under the Internal Code of 1986, as
amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
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6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding
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which affects any units, parking spaces or material amenities), then the BRI
Partnership shall have the option, exercisable by written notice given to the
Transferor Partners at or prior to the Time of Closing, either to (a) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease, and
this Agreement shall be void and without recourse to the parties hereto except
for provisions which are expressly stated to survive such termination; or (b)
proceed with the contribution and transfer of the Transferor Partnership
Interests, and in such case, unless the Transferor Partners shall have
previously restored the Property to its condition prior to the occurrence of any
such damage or destruction, the Transferor Partners shall pay over or assign to
the BRI Partnership, on behalf of the Transferor Partnership, all amounts
received or due (plus an amount equal to any deductible under any insurance
policy covering the Property) from, and all claims against, any insurance
company or governmental entity as a result of such destruction or taking and
there shall be no adjustment to the Consideration hereunder. If prior to the
Time of Closing, any such damage or destruction shall occur having a replacement
cost of less than $750,000.00 or if any eminent domain notice or proceeding is
commenced which does not affect any material portion of the Property, the BRI
Partnership shall proceed to accept the contribution and transfer of the
Transferor Partnership Interests in accordance with the provisions of clause (b)
above.
SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
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SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur
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or any subsequent fiscal period without the prior written consent of BRI
Partnership. Real estate tax refunds and credits received after the Closing Date
which are attributable to (i) the fiscal tax year during which the Closing
occurs shall be apportioned between Transferor Partners and the BRI Partnership,
based upon the relative time periods before and after the Closing, or (ii) any
fiscal year prior to the fiscal year in which the Closing occurs shall be paid
to the Transferor Partners, in either case after deducting the expenses of
collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
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(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
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(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
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SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V hereto duly
executed and delivered by the Transferor Partners, pursuant to which the
Transferor Partners shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and
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delivered by the Transferor Partners and a BRI Questionnaire, in the form of
Exhibit 5 attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997 and
for any prior period (including, without limitation, all amounts whether or not
currently due and payable, under that certain Resolution adopted by the County
Council of Baltimore County, Maryland as Resolution No. 65-94 on July 5, 1994
(the "Tax Agreement")).
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor
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Partnership's name; (ii) parties in possession other than under the rights to
possession granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Intentionally Deleted.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
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10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the Transferor Partnership shall
be entitled to rely on the agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
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(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Transferor Partners in Section 5.34, which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Partner) (collectively, the "Cap"); and provided further that to the extent any
of the Transferor Partners have any indemnification obligation to the BRI
Partnership, the Transferor Partners may elect to satisfy such indemnification
obligation by directing the BRI Partnership to cancel such amount of BRI
Partnership Units acquired by such Transferor Partner pursuant to this Agreement
having a fair market value (measured at the time such BRI Partnership Units are
returned or cancelled) equal to the indemnification obligation of such
Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value
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as of the date such indemnification obligation is satisfied of the BRI
Partnership Units received by such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the
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Closing Date. The Transferor Agent shall prepare and timely file the terminating
tax returns for the Transferor Partnership resulting from the consummation of
the transactions contemplated under this Agreement, provided, however, that such
tax returns shall be prepared in accordance with the terms and provisions of
this Agreement and provided further, that prior to the filing thereof the
Transferor Agent shall submit the terminating tax returns to the BRI Partnership
for its review and approval, which shall not be unreasonably withheld or
delayed. The BRI Partnership shall assist the Transferor Agent in obtaining such
data and information regarding the Transferor Agent to permit the Transferor
Partnership to prepare such returns or to respond to any audits or assessments
for the periods covered by such returns.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
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(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and one-half of all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
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11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Intentionally Deleted.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section
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704(c) "minimum gain." The foregoing method shall not be modified by the BRI
Partnership until the expiration of the No Transfer Period without the consent
of the Transferor Agent (which consent may only be granted if none of the
Transferor Partners is materially adversely affected unless the consent of such
materially adversely affected Transferor Partners is obtained), provided however
that in the event of a change in the Code, the Treasury Regulations, or
published Internal Revenue Service ("IRS") rulings, notices or other
administrative guidance, or in any private letter ruling issued to a taxpayer
other than the BRI Partnership (any such change, a "Change in Law") such that,
in the reasonable opinion of tax counsel to the BRI Partnership, based on such
Change in Law, either (i) the foregoing method is no longer legally permissible,
(ii) or an alternative method, not previously permitted, which results in more
favorable tax consequences to each of the limited partners, including the
Transferor Partners, of the BRI Partnership is currently permitted, the BRI
Partnership, shall be entitled, without the consent of the Transferor Agent, to
adopt an alternative method, provided further that, in the case of clause (i),
the BRI Partnership shall choose the alternative method that minimizes to the
extent reasonably possible, the adverse tax consequences to the Transferor
Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes (including, without limitation,
all amounts payable under the Tax Agreement whether or not currently due and
payable), water charges, sewer rents and vault charges, if any, on the basis of
the fiscal period for which assessed, except that if there is a water meter on
the Property, apportionment on the Closing Date shall be based on the last
available reading, subject to adjustment after the Closing on a per diem basis,
when the next reading is available;
(c) intentionally deleted;
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(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of the Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing the BRI Partnership shall hold such cash
as agent for the Transferor Partners, and refund such cash to the Transferor
Partners subsequent to Closing.
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12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
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SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the BRI Partnership desires to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the terms of
this Agreement and the Transferor Partners willfully refuse to perform the
Transferor Partners' obligations hereunder, the BRI Partnership, at its option,
shall have the right to compel specific performance by the Transferor Partners
hereunder, in which event the BRI Partnership shall have the right to recover
from the Transferor Partners the amount of all reasonable legal fees, court
costs and other litigation expenses incurred by the BRI Partnership in
connection with the exercise of its right of specific performance. The remedies
provided in this Section 13.03 shall be the sole and exclusive remedies at law
or in equity of the BRI Partnership in the event of a default by the Transferor
Partners in lieu of all other rights and remedies which the BRI Partnership may
have against the Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the
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Transferor Agent shall be entitled to terminate this Agreement by written notice
given to the BRI Partnership within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if all of the
Transferor Partners desire to accept the transfer of the BRI Partnership Units
in accordance with the terms of this Agreement and the BRI Partnership willfully
refuses to perform the BRI Partnership's obligations hereunder, the Transferor
Partners, jointly, but not severally, at their option, shall have the right to
compel specific performance by the BRI Partnership hereunder, in which event the
Transferor Partners shall have the right to recover from the BRI Partnership the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the Transferor Partners in connection with the exercise of their
right of specific performance. The remedies provided in this Section 13.04 shall
be the sole and exclusive remedies at law or in equity of the Transferor
Partners in the event of a default by the BRI Partnership in lieu of all other
rights and remedies which the Transferor Partners may have against the BRI
Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN PREPAYMENT
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Prepayment. The Transferor Partnership shall pay any prepayment
or other penalty and all other amounts required to repay the Loan in full at
Closing.
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SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
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With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and
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the delivery of the BRI Confirmations and the acceptance thereof by the
Transferor Partners, shall be deemed the full performance and discharge of every
obligation to be performed by the parties hereunder and the satisfaction of all
conditions to Closing set forth herein, except as provided in Section 16.01 and
except for such other obligations which are expressly provided herein to survive
the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
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(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(f) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after
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such date, and, thereafter this Agreement shall be void and without recourse to
all parties hereunder except for provisions which are expressly stated to
survive termination of this Agreement.
17.03 Intentionally Deleted.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as
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provided in the Kickout Agreement, in the event the closing under any of the
Related Agreements is cancelled or postponed, the Closing under this Agreement
shall be cancelled or postponed.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the
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Transferor Partners have the right to assign or transfer its right to receive
BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the
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transactions contemplated hereby becoming known by means beyond the reasonable
control of such party. The provisions of this Section 18.09 shall survive the
Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be
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specifically allocated to the Transferor Partnership due to said fees solely
benefiting it ("Direct Costs") and (ii) those fees which cannot be so allocated
("Indirect Costs"). Notwithstanding anything to the contrary contained herein,
for the proposes of this Section 19.03, each of the Transferor Partners hereby
agrees that: (i) QPI shall be entitled to an aggregate administrative fee of
$200,000 in connection with the concurrent contribution of up to eighteen (18)
properties and the management companies, as described in the PPM, by the other
Transferor Partnerships and related entities (collectively, the "Related
Entities"), which shall be Indirect Costs; (ii) to the extent it is determined
that APC is due any fee as described in Section 14.01 hereof, up to $1,000,000
of such fee (which may be paid at Closing or held back in an escrow account by
the Transferor Agent until such time as the amount of such fee, if any, is
determined) shall be included as Indirect Costs, with any such fee in excess of
$1,000,000 to APC being the sole responsibility of QPI; and (iii) all legal and
accounting fees of counsel and advisors to the Transferor Agent and the Related
Entities shall also be Indirect Costs. Each of the Transferor Partners
acknowledges and agrees that (i) any and all Direct Costs shall be allocated
based on the pro rata number of BRI Partnership Units allocated to each of them
with respect to their interest in the Transferor Partnership and (ii) any and
all Indirect Costs shall be allocated among the Transferor Partners and the
Related Entities at Closing based on the pro rata number of BRI Partnership
Units allocated at Closing to each of them. Each of the Transferor Partners
further acknowledges and agrees that the Transferor Agent shall be authorized to
determine the allocations of the transaction costs and expenses to be allocated
in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed counterparts to such agreements and, to the extent that any
agreements or documents relating to this Agreement (such as partnership
assignments or other similar closing documents) are executed prior to the
Closing, the Transferor Agent is authorized on
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behalf of each Transferor Partner to hold all such agreements in escrow pending
the Closing, at which time the Transferor Agent shall be authorized to deliver
such documents on behalf of the Transferor Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNERS
_________________________ __________________________________________
John B. Colvin
_________________________ __________________________________________
Morton Gorn
_________________________ __________________________________________
Stephen M. Gorn
WITNESS: EACH TRANSFEROR LIMITED PARTNER
WHITECLIFF ASSOCIATES LIMITED
PARTNERSHIP
_________________________ By:_______________________________________
Name:
Title:
_________________________ __________________________________________
Howard Castleman
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QUESTAR BUILDERS, INC.
_________________________ By:_______________________________________
Name:
Title:
_________________________ __________________________________________
John Kelbel
_________________________ __________________________________________
Ruth Kelbel
_________________________ __________________________________________
Name:
As Trustee of Helen B. Kleiman Trust
_________________________ __________________________________________
Name:
As Trustee of Bernard S. Kleiman Trust
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
_________________________ By:_______________________________________
Name:
Title:
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BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
__________________________ By:______________________________________
Name:
Title:
WITNESS:
_________________________ __________________________________________
Morton Gorn, solely for the purposes of
Section 19.06
_________________________ __________________________________________
Stephen Gorn, solely for the purposes of
Section 19.06
_________________________ __________________________________________
John Colvin, solely for the purposes of
Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited
Partners (with address and partnership interest of each
partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Calvert's Walk
(08-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Citadel
Associates Limited Partnership (the "Transferor General Partner") and the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Limited Partners"), with an address c/o Questar Properties, Inc., 124 Slade
Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn
(the Transferor General Partner and the Transferor Limited Partners are
sometimes collectively referred to as the "Transferor Partners"), and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn and BRI OP Limited Partnership, a Delaware limited
partnership (the "BRI Partnership") with an address c/o Berkshire Realty
Company, Inc., 470 Atlantic Avenue, Boston, Massachusetts 02210, Attention: Mr.
David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in
Calvert's Walk Associates Limited Partnership, a Maryland Limited Partnership
(the "Transferor Partnership") pursuant to the Second Amended and Restated
Certificate and Agreement of Limited Partnership dated as of July 15, 1988, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Harford County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 276-unit apartment complex, commonly known as Calvert's Walk
Apartments, which contains related improvements, facilities, amenities,
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structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before September 5, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before September 5, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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1.03 Survey. On or before September 5, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of
the Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before September 5, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $15,046,868, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing and, minus (Z) the amount required to pay the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"), but in any
event, the total amount to be deducted under this clause (Z) shall not exceed an
amount equal to the difference between the Consideration Amount minus the
outstanding principal balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated March 8, 1994, in
the original principal amount of $14,620,000 (the "Note") evidencing the loan
(the "Loan") made to the Transferor Partnership by Washington Capital ("Lender")
and secured by the Loan Documents which shall be an obligation of the Transferor
Partnership as of the Closing subject to any exculpation from liability
provisions therein.
At the Closing, the BRI Partnership shall pay the amount required to
satisfy the Other Loans, provided that the amount to be paid by the BRI
Partnership shall not exceed the Other Loans BRI Cap. If the amount paid by the
BRI Partnership is not sufficient to pay the Other Loans in full, the Transferor
Partnership shall pay, from funds otherwise allocable under this Agreement to
the Transferor Partners, all
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additional amounts required to pay off the Other Loans in full. At least fifteen
(15) days prior to the Closing, the Transferor Agent shall deliver a pay-off
letter from each holder of an Other Loan stating the amount required to pay-off
such Other Loan in full, and at Closing, the Transferor shall deliver the
original note evidencing each such Other Loan marked "Paid in Full," or in the
event that the original of any such note is not available, such other evidence
of the satisfaction of such note and release of liability under such Other Loan
as the BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
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liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
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Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
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4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
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4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be
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so qualified would have a material adverse effect on the Transferor
Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or
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otherwise acquire any interest in the Transferor Partnership or any interest
therein or to make any distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except
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as may be indicated in the notes thereto), and reflect all liabilities, fixed,
contingent or otherwise, required to be disclosed in such Financial Statements
in accordance with generally accepted accounting principles (subject, in the
case of any unaudited interim financial statements, to normal year end
adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan and the Other Loans described
in Schedule 5.10 and in such audited financial statements and provide evidence
thereof to the BRI Partnership. As of the Closing Date the Transferor
Partnership shall have no liabilities or obligations (absolute or contingent) of
any kind, other than (a) liabilities and obligations incurred in the ordinary
course of the Transferor Partnership's business which are either (i) in the
aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts and (c) liabilities under the
Loan Documents. The Transferor Partnership has conducted its business only in
the ordinary course and, except for the Loan and the matters disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
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(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
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5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
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(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents which are due and payable, through the Closing
Date, have been, and will be, paid in full and no default exists thereunder
which extends beyond applicable grace or cure periods.
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The Transferor Partnership has not received any written notice of default under
any of the Loan Documents. The Lender is the sole holder or designated servicer
of the Note. The only security taken or held in connection with the Note is
evidenced in the Loan Documents. The Loan Documents secure no other indebtedness
but the Loan. To the best knowledge of the Transferor Partnership, the amounts
of any real estate tax escrow, insurance escrow and any other escrows and
reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental
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laws (including, without limitation, obligations under the common law),
ordinances, orders, rules and regulations, as any of the foregoing may have been
amended, supplemented or supplanted prior to the Closing, relating to regulation
or control of hazardous, toxic or dangerous substances, materials or wastes
(collectively, "Hazardous Materials"), or their handling, storage or disposal or
to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
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5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and complete copy of all material correspondence submitted to and issued
by HUD in connection with the HUD Audit.
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B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the
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sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its affiliates or its other legal counsel and advisors for any
explanation of the application of the various United States or state securities
laws or tax laws with regard to its
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acquisition of the BRI Partnership Units. Such Transferor Partner further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or
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an, exemption under applicable state securities laws) or an opinion of
counsel (which opinion and which counsel shall be acceptable to
Berkshire Realty Company, Inc.) that the proposed transaction will be
exempt from registration under the Act and its applicable state
securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of
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Delaware with full power and authority to carry on its business; (ii) the BRI
Partnership has the right, power and authority to issue the BRI Partnership
Units and to operate its properties and to carry on its business as is presently
being conducted and to enter into and perform all of the agreements and
covenants contained in this Agreement and contemplated hereby and any other
documents and instruments relating hereto or thereto; (iii) this Agreement and
the documents to be executed and delivered by the BRI Partnership at Closing,
upon execution and delivery will have been duly and validly authorized and
executed by the BRI Partnership and will constitute the valid and binding
obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this
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Agreement by the BRI Partnership and the performance of the BRI Partnership's
obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
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6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this
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Agreement and the transactions contemplated hereby or the right of the BRI
Partnership to enter into it, or which would likely have, either individually or
in the aggregate, a material adverse effect on the business of the BRI
Partnership as such is presently conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
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9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any
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portion of the Property, or subject any portion of the Property to any option
contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
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9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V
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hereto duly executed and delivered by the Transferor Partners, pursuant to which
the Transferor Partners shall withdraw as partners from the Transferor
Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys,
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soil and substrata studies, architectural drawings, plans and specifications,
engineering plans and studies, floor plans, landscape plans and other plans or
studies of any kind that relate to all or any part of the Property. The
Transferor Partnership shall also deliver, to the extent in the possession of
the Transferor Partnership: original copies of all certificates, licenses,
permits, authorizations and approvals issued for or with respect to the Property
by governmental and quasi-governmental authorities having jurisdiction, except
that photocopies may be substituted if the originals are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel
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Letter shall be mutually agreed upon by the parties during the Financing
Assumption Period (as defined in Section 17.03). However, the BRI Partnership
will require, at a minimum, that the Lender Estoppel Letter set forth (i) Lender
consent to the contribution of the Transferor Partnership Interests, as
contemplated herein, and to the transfer of the ownership of the Transferor
Partnership to the BRI Partnership and (ii) the following matters: (A) the Note
and other Loan Documents are in full force and effect; (B) to the Lender's
knowledge, no default exists; (C) the amount of the outstanding unpaid principal
balance of the Note, and the date to which interest and principal have been paid
on the Note; and (D) the amount of any real estate tax escrow, insurance escrow
and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the
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Transferor Partnership shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each
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of the Transferor Partners in Section 5.34, which shall be limited to 100% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner)
(collectively, the "Cap"); and provided further that to the extent any of the
Transferor Partners have any indemnification obligation to the BRI Partnership,
the Transferor Partners may elect to satisfy such indemnification obligation by
directing the BRI Partnership to cancel such amount of BRI Partnership Units
acquired by such Transferor Partner pursuant to this Agreement having a fair
market value (measured at the time such BRI Partnership Units are returned or
cancelled) equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
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SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
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qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
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(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the
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Code, the Treasury Regulations, or published Internal Revenue Service ("IRS")
rulings, notices or other administrative guidance, or in any private letter
ruling issued to a taxpayer other than the BRI Partnership (any such change, a
"Change in Law") such that, in the reasonable opinion of tax counsel to the BRI
Partnership, based on such Change in Law, either (i) the foregoing method is no
longer legally permissible, (ii) or an alternative method, not previously
permitted, which results in more favorable tax consequences to each of the
limited partners, including the Transferor Partners, of the BRI Partnership is
currently permitted, the BRI Partnership, shall be entitled, without the consent
of the Transferor Agent, to adopt an alternative method, provided further that,
in the case of clause (i), the BRI Partnership shall choose the alternative
method that minimizes to the extent reasonably possible, the adverse tax
consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
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(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of the Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
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12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such
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distribution of surplus cash relates only to the period prior to the Closing
Date, all such surplus cash shall be distributed to the Transferor Partners
prior to Closing; provided however, if as a result of the 1997 annual HUD audit
(it being agreed that the BRI Partnership shall consult with the Transferor
Agent during the HUD audit procedure), HUD (after final adjudication by
regulatory and judicial authorities) determines that all or any portion of such
distribution of surplus cash to the Transferor Partners was improper, the
Transferor Partners, severally, agree to reimburse the Transferor Partnership
immediately upon demand for all amounts so designated by HUD as improper and to
indemnify, defend and hold the Transferor Partnership and the BRI Partnership
harmless from and against all loss, cost, damage or expense (including
reasonable legal fees) suffered or incurred as a result of such improper
distribution of surplus cash. In all other cases, there shall be no adjustment
at Closing regarding surplus cash, but at such time as HUD approves the
distribution of surplus cash for fiscal 1997, the BRI Partnership shall receive
all such surplus cash and thereafter the BRI Partnership shall promptly pay to
the Transferor Agent, as distribution agent for the Transferor Partners, the
Transferor Partners pro-rata share of such surplus cash allocable to the period
prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
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If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly
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conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days
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after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the
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BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private
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placement of common stock or other equity securities of BRI (the "Private
Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner
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and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed counterparts to such agreements and, to the extent that any
agreements or documents
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relating to this Agreement (such as partnership assignments or other similar
closing documents) are executed prior to the Closing, the Transferor Agent is
authorized on behalf of each Transferor Partner to hold all such agreements in
escrow pending the Closing, at which time the Transferor Agent shall be
authorized to deliver such documents on behalf of the Transferor Partners to the
BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
TRANSFEROR GENERAL PARTNER
WITNESS: CITADEL ASSOCIATES LIMITED
PARTNERSHIP
By:
- ------------------------ --------------------------------
Name:
Its:
WITNESS: EACH TRANSFEROR LIMITED PARTNER
- ------------------------- ------------------------------------
John B. Colvin
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Morton Gorn
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Stephen M. Gorn
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:
- ------------------------- ---------------------------------
Name:
Title:
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BRI PARTNERSHIP:
BRI OP LIMITED PARTNERSHIP
WITNESS: By: Berkshire Apartments, Inc.,
Its General Partner
By:
- ------------------------- ---------------------------------
Name:
Title:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
(with address and partnership interest of each partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Arborview
(08-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Caliber
Associates Limited Partnership, a Maryland limited partnership (the "Transferor
General Partner") and the individuals and entities listed on Exhibit I attached
hereto (the "Transferor Limited Partners"), with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (the Transferor General Partner and the
Transferor Limited Partners are sometimes collectively referred to as the
"Transferor Partners"), and Questar Investment Corporation, a Maryland
corporation (the "Transferor Agent"), with an address of 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in
Arborview Associates Limited Partnership, a Maryland Limited Partnership (the
"Transferor Partnership") pursuant to the First Amended and Restated Certificate
and Agreement of Limited Partnership dated as of November 2, 1990, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit II and is
referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in the Village of Church
Creek, Harford County, Maryland, more particularly described in Schedule A
attached hereto (the "Land");
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b. the 288-unit apartment complex, commonly known as Arborview Apartments,
which contains related improvements, facilities, amenities, structures,
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before September 5, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before September 5, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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1.03 Survey. On or before September 5, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of
the Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before September 5, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $18,262,099, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing and, minus (Z) the amount required to pay the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"), but in any
event, the total amount to be deducted under this clause (Z) shall not exceed an
amount equal to the difference between the Consideration Amount minus the
outstanding principal balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated January 10, 1991,
in the original principal amount of $17,938,000 (the "Note") evidencing the loan
(the "Loan") made to the Transferor Partnership by Greystone Servicing
Corporation ("Lender") and secured by the Loan Documents which shall be an
obligation of the Transferor Partnership as of the Closing subject to any
exculpation from liability provisions therein.
At the Closing, the BRI Partnership shall pay the amount required to satisfy the
Other Loans, provided that the amount to be paid by the BRI Partnership shall
not exceed the Other Loans BRI Cap. If the amount paid by the BRI Partnership is
not sufficient to pay the Other Loans in full, the Transferor Partnership shall
pay, from funds otherwise allocable under this Agreement to the Transferor
Partners, all additional amounts
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required to pay off the Other Loans in full. At least fifteen (15) days prior to
the Closing, the Transferor Agent shall deliver a pay-off letter from each
holder of an Other Loan stating the amount required to pay-off such Other Loan
in full, and at Closing, the Transferor shall deliver the original note
evidencing each such Other Loan marked "Paid in Full," or in the event that the
original of any such note is not available, such other evidence of the
satisfaction of such note and release of liability under such Other Loan as the
BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
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liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
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Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
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SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has
made available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
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4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
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5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
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Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31,
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1996 and on or before August 31, 1997 the Transferor Partnership shall provide
unaudited financial statements for the six-month period ending June 30, 1997
(collectively, the "Financial Statements"). The Financial Statements fairly
present the financial condition of the Transferor Partnership as of the
respective statement dates in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto), and reflect all liabilities, fixed, contingent or otherwise, required
to be disclosed in such Financial Statements in accordance with generally
accepted accounting principles (subject, in the case of any unaudited interim
financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan and the Other Loans described
in Schedule 5.10 and in such audited financial statements and provide evidence
thereof to the BRI Partnership. As of the Closing Date the Transferor
Partnership shall have no liabilities or obligations (absolute or contingent) of
any kind, other than (a) liabilities and obligations incurred in the ordinary
course of the Transferor Partnership's business which are either (i) in the
aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts and (c) liabilities under the
Loan Documents. The Transferor Partnership has
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conducted its business only in the ordinary course and, except for the Loan and
the matters disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal
1996 audited financial statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
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(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
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(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow,
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insurance escrow and any other payments required under the Loan Documents which
are due and payable, through the Closing Date, have been, and will be, paid in
full and no default exists thereunder which extends beyond applicable grace or
cure periods. The Transferor Partnership has not received any written notice of
default under any of the Loan Documents. The Lender is the sole holder or
designated servicer of the Note. The only security taken or held in connection
with the Note is evidenced in the Loan Documents. The Loan Documents secure no
other indebtedness but the Loan. To the best knowledge of the Transferor
Partnership, the amounts of any real estate tax escrow, insurance escrow and any
other escrows and reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the
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Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide
and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. ss. 651 et seq.); and all other applicable federal, state
and local environmental laws (including, without limitation, obligations under
the common law), ordinances, orders, rules and regulations, as any of the
foregoing may have been amended, supplemented or supplanted prior to the
Closing, relating to regulation or control of hazardous, toxic or dangerous
substances, materials or wastes (collectively, "Hazardous Materials"), or their
handling, storage or disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
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5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and
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complete copy of all material correspondence submitted to and issued by HUD in
connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
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5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business
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matters sufficient to evaluate the risks of investment in the BRI Partnership
Units and BRI, and (iii) it has consulted with its own separate counsel and tax
advisor, to the extent deemed necessary by it, as to all legal and taxation
matters covered by this Agreement and has not relied upon the BRI Partnership or
the Transferor Agent, its affiliates or its other legal counsel and advisors for
any explanation of the application of the various United States or state
securities laws or tax laws with regard to its acquisition of the BRI
Partnership Units. Such Transferor Partner further acknowledges and represents
that it has made its own independent investigation of the BRI Partnership and
the business conducted or proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
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"Act"), or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so
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delivered or made available, has not been modified and is in full force and
effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
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6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
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9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any
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portion of the Property, or subject any portion of the Property to any option
contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
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9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V
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hereto duly executed and delivered by the Transferor Partners, pursuant to which
the Transferor Partners shall withdraw as partners from the Transferor
Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys,
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soil and substrata studies, architectural drawings, plans and specifications,
engineering plans and studies, floor plans, landscape plans and other plans or
studies of any kind that relate to all or any part of the Property. The
Transferor Partnership shall also deliver, to the extent in the possession of
the Transferor Partnership: original copies of all certificates, licenses,
permits, authorizations and approvals issued for or with respect to the Property
by governmental and quasi-governmental authorities having jurisdiction, except
that photocopies may be substituted if the originals are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel
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Letter shall be mutually agreed upon by the parties during the Financing
Assumption Period (as defined in Section 17.03). However, the BRI Partnership
will require, at a minimum, that the Lender Estoppel Letter set forth (i) Lender
consent to the contribution of the Transferor Partnership Interests, as
contemplated herein, and to the transfer of the ownership of the Transferor
Partnership to the BRI Partnership and (ii) the following matters: (A) the Note
and other Loan Documents are in full force and effect; (B) to the Lender's
knowledge, no default exists; (C) the amount of the outstanding unpaid principal
balance of the Note, and the date to which interest and principal have been paid
on the Note; and (D) the amount of any real estate tax escrow, insurance escrow
and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the
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Transferor Partnership shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each
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of the Transferor Partners in Section 5.34, which shall be limited to 100% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner)
(collectively, the "Cap"); and provided further that to the extent any of the
Transferor Partners have any indemnification obligation to the BRI Partnership,
the Transferor Partners may elect to satisfy such indemnification obligation by
directing the BRI Partnership to cancel such amount of BRI Partnership Units
acquired by such Transferor Partner pursuant to this Agreement having a fair
market value (measured at the time such BRI Partnership Units are returned or
cancelled) equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
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SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
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qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
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(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected
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Transferor Partners is obtained), provided however that in the event of a change
in the Code, the Treasury Regulations, or published Internal Revenue Service
("IRS") rulings, notices or other administrative guidance, or in any private
letter ruling issued to a taxpayer other than the BRI Partnership (any such
change, a "Change in Law") such that, in the reasonable opinion of tax counsel
to the BRI Partnership, based on such Change in Law, either (i) the foregoing
method is no longer legally permissible, (ii) or an alternative method, not
previously permitted, which results in more favorable tax consequences to each
of the limited partners, including the Transferor Partners, of the BRI
Partnership is currently permitted, the BRI Partnership, shall be entitled,
without the consent of the Transferor Agent, to adopt an alternative method,
provided further that, in the case of clause (i), the BRI Partnership shall
choose the alternative method that minimizes to the extent reasonably possible,
the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
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(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of the Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
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12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such
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distribution of surplus cash relates only to the period prior to the Closing
Date, all such surplus cash shall be distributed to the Transferor Partners
prior to Closing; provided however, if as a result of the 1997 annual HUD audit
(it being agreed that the BRI Partnership shall consult with the Transferor
Agent during the HUD audit procedure), HUD (after final adjudication by
regulatory and judicial authorities) determines that all or any portion of such
distribution of surplus cash to the Transferor Partners was improper, the
Transferor Partners, severally, agree to reimburse the Transferor Partnership
immediately upon demand for all amounts so designated by HUD as improper and to
indemnify, defend and hold the Transferor Partnership and the BRI Partnership
harmless from and against all loss, cost, damage or expense (including
reasonable legal fees) suffered or incurred as a result of such improper
distribution of surplus cash. In all other cases, there shall be no adjustment
at Closing regarding surplus cash, but at such time as HUD approves the
distribution of surplus cash for fiscal 1997, the BRI Partnership shall receive
all such surplus cash and thereafter the BRI Partnership shall promptly pay to
the Transferor Agent, as distribution agent for the Transferor Partners, the
Transferor Partners pro-rata share of such surplus cash allocable to the period
prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or
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to such address as the Transferor Agent or the BRI Partnership shall otherwise
have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly
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conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days
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after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the
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BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private
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placement of common stock or other equity securities of BRI (the "Private
Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the
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Transferor Partners pursuant to the terms of this Agreement. Each Transferor
Partner and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed
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counterparts to such agreements and, to the extent that any agreements or
documents relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the Transferor
Agent is authorized on behalf of each Transferor Partner to hold all such
agreements in escrow pending the Closing, at which time the Transferor Agent
shall be authorized to deliver such documents on behalf of the Transferor
Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNER
CALIBER ASSOCIATES LIMITED
PARTNERSHIP
By:
- ------------------------------- --------------------------------
Name:
Its:
WITNESS: EACH TRANSFEROR LIMITED PARTNER
HELEN B. KLEIMAN TRUST
By:
- ------------------------------- --------------------------------
Name:
As Trustee of Helen B.
Kleiman Trust
BERNARD S. KLEIMAN TRUST
By:
- ------------------------------- --------------------------------
Name:
As Trustee of Bernard S.
Kleiman Trust
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:
- ------------------------------- --------------------------------
Name:
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Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.,
Its General Partner
By:
- ------------------------------- --------------------------------
Name:
Title:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - KickoutAgreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners (with
address and partnership interest of each partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
The Estates
(08-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Estates II
Funding Corporation, a Maryland corporation (the "Transferor General Partner")
and the entity listed on Exhibit I attached hereto (the "Transferor Limited
Partner"), with an address c/o Questar Properties, Inc., 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn (the Transferor
General Partner and the Transferor Limited Partner are sometimes collectively
referred to as the "Transferor Partners"), and Questar Investment Corporation, a
Maryland corporation (the "Transferor Agent"), with an address of 124 Slade
Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and
BRI OP Limited Partnership, a Delaware limited partnership (the "BRI
Partnership") with an address c/o Berkshire Realty Company, Inc., 470 Atlantic
Avenue, Boston, Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partner is the legal and beneficial owner of all of the
limited partnership interest as set forth in Exhibit I in The Estates Limited
Partnership, a Maryland Limited Partnership (the "Transferor Partnership")
pursuant to the Second Amended and Restated Certificate and Agreement of Limited
Partnership dated as of March 30, 1990, as amended (a copy of which, including
all amendments, is attached hereto as Exhibit II and is referred to as the
"Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 208-unit apartment complex, commonly known as The Estates
Apartments, which contains related improvements, facilities, amenities,
structures,
<PAGE>
driveways, walkways, plumbing and heating pipes, culverts, and mains, all
of which have been constructed on the Land (collectively, the
"Improvements");
c. all right, title and interest of the Transferor Partnership in and
to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway,
street, road, right-of-way or avenue, open or proposed, in, on, under,
across, in front of, abutting or adjoining the Land, and all right, title
and interest of the Transferor Partnership in and to any awards for damage
thereto by reason of a change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and
all the estate and rights of the Transferor Partnership in and to the Land
and the Improvements, as applicable, or otherwise appertaining to any of
the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed in
Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Partnership
and located on or in or used solely in connection with the Land and
Improvements (collectively, the "Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible
property now or hereafter, owned by the Transferor Partnership and used
solely in connection with the Land, Improvements and Personal Property,
including without limitation the right to use any trade style or name now
used in connection with the same, any contract rights, escrow or security
deposits, utility agreements or other rights related to the ownership of or
use and operation of the Property, as hereinafter defined excepting (i) any
cash and escrow deposits (including escrow deposits and reserves set forth
on Schedule C) and other current assets relating to periods prior to
Closing and (ii) amounts, if any, due to the Transferor Partners pursuant
to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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<PAGE>
Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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<PAGE>
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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<PAGE>
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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<PAGE>
tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $13,224,828, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined), as
of the Closing and minus (Z) the amount required to pay both (i) the
Subordinated Promissory Note dated May 14, 1993 (the "Subordinated Note") from
the Transferor Partnership to Krupp Government Income Trust (the "Subordinated
Lender") evidencing a loan made to the Transferor Partnership (the "Subordinated
Loan"), secured by the relevant Loan Documents, and (ii) the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"; such term shall
include, without limitation, the Subordinated Loan), but in any event, the total
amount to be deducted under this clause (Z) shall not exceed an amount equal to
the difference between the Consideration Amount minus the outstanding principal
balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated May 14, 1993, in
the original principal amount of $12,000,000 (the "Note") evidencing the loan
(the "Loan") made to the Transferor Partnership by CPC Mortgage Capital, LLC
("Lender") and secured by the relevant Loan Documents which shall be an
obligation of the Transferor Partnership as of the Closing subject to any
exculpation from liability provisions therein.
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<PAGE>
At the Closing, the BRI Partnership shall pay the amount required to
satisfy the Other Loans, including the Subordinated Loan, provided that the
amount to be paid by the BRI Partnership shall not exceed the Other Loans BRI
Cap. If the amount paid by the BRI Partnership is not sufficient to pay the
Other Loans, including the Subordinated Loan, in full, the Transferor
Partnership shall pay, from funds otherwise allocable under this Agreement to
the Transferor Partners, all additional amounts required to pay off the Other
Loans, including the Subordinated Loan, in full. At least fifteen (15) days
prior to the Closing, the Transferor Agent shall deliver a pay-off letter from
each holder of an Other Loan stating the amount required to pay-off such Other
Loan in full, and at Closing, the Transferor shall deliver the original note
evidencing each such Other Loan marked "Paid in Full," or in the event that the
original of any such note is not available, such other evidence of the
satisfaction of such note and release of liability under such Other Loan as the
BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments
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(the "BRI Additional Payment"), at Closing, the BRI Partnership shall pay the
BRI Additional Payment to the Transferor Agent in accordance with the election
made by each Transferor Partner pursuant to Section 12.04. The Transferor Agent
shall be liable to distribute the BRI Partnership Units and if applicable, a
pro-rata share of the BRI Additional Payment to each of the Transferor Partners
in accordance with the Transferor Allocation Schedule. The BRI Partnership shall
have no obligation or liability with respect to the preparation or accuracy of
the Preliminary Transfer Allocation Schedule or the Transferor Allocation
Schedule or the distribution of the BRI Partnership Units or the BRI Additional
Payment, if applicable, to the Transferor Partners and the Transferor Partners
hereby release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
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(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
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SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
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4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Subordinated Loan, together with any and all
modifications and amendments thereto as set forth on Schedule H attached hereto
(collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
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5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
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Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31,
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1996 and on or before August 31, 1997 the Transferor Partnership shall provide
unaudited financial statements for the six-month period ending June 30, 1997
(collectively, the "Financial Statements"). The Financial Statements fairly
present the financial condition of the Transferor Partnership as of the
respective statement dates in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto), and reflect all liabilities, fixed, contingent or otherwise, required
to be disclosed in such Financial Statements in accordance with generally
accepted accounting principles (subject, in the case of any unaudited interim
financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan, the Subordinated Loan and the
indebtedness for borrowed money described on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, the Transferor
Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Loan and the the Other Loans, including Subordinated Loan,
described in Schedule 5.10 and in such audited financial statements and provide
evidence thereof to the BRI Partnership. As of the Closing Date the Transferor
Partnership shall have no liabilities or obligations (absolute or contingent) of
any kind, other than (a) liabilities and obligations incurred in the ordinary
course of the Transferor Partnership's business which are either (i) in the
aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts and (c) liabilities under the
Loan
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Documents. The Transferor Partnership has conducted its business only in the
ordinary course and, except for the Loan, the Subordinated Loan and the matters
disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
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(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender and the Subordinated Lender,
as provided in the Loan Documents, no person holds a power of attorney from or
agency agreement with the Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
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(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender, the Subordinated Lender or any other lender with respect
to the Property other than as listed on Schedule H. The Loan Documents are in
full force and effect and none of the Loan Documents have been modified, amended
or extended except as disclosed on Schedule H. All payments of principal,
interest, and, if applicable, real estate tax
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escrow, insurance escrow and any other payments required under the Loan
Documents which are due and payable, through the Closing Date, have been, and
will be, paid in full and no default exists thereunder which extends beyond
applicable grace or cure periods. The Transferor Partnership has not received
any written notice of default under any of the Loan Documents. The Lender is the
sole holder or designated servicer of the Note and the Subordinated Lender is
the sole holder or designated servicer of the Subordinated Note. The only
security taken or held in connection with the Note and the Subordinated Note is
evidenced in the Loan Documents. The Loan Documents secure no other indebtedness
but the Loan and the Subordinated Loan. To the best knowledge of the Transferor
Partnership, the amounts of any real estate tax escrow, insurance escrow and any
other escrows and reserves held by Lender and the Subordinated Lender are as set
forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the
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Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the Toxic
Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42 U.S.C.
ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all other
applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against
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the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit").
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The Transferor Partnership has delivered to the BRI Partnership a true, correct
and complete copy of all material correspondence submitted to and issued by HUD
in connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33, and
except for the Lender Estoppel Letters and TPA Approval, no approval of any
person not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
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(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this
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Agreement and has not relied upon the BRI Partnership or the Transferor Agent,
its affiliates or its other legal counsel and advisors for any explanation of
the application of the various United States or state securities laws or tax
laws with regard to its acquisition of the BRI Partnership Units. Such
Transferor Partner further acknowledges and represents that it has made its own
independent investigation of the BRI Partnership and the business conducted or
proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The securities may
not be offered, sold, transferred, pledged or otherwise disposed
of without an effective registration statement
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under the Act and under any applicable state securities laws,
receipt of a no-action letter issued by the Securities and
Exchange Commission (together with either registration or an,
exemption under applicable state securities laws) or an opinion
of counsel (which opinion and which counsel shall be acceptable
to Berkshire Realty Company, Inc.) that the proposed transaction
will be exempt from registration under the Act and its applicable
state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
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6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
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governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note, the Subordinated Note and
other Loan Documents coming due thereunder prior to the Closing, in accordance
with the terms thereof, (b) otherwise comply with all of the material terms and
provisions of the Loan Documents up to the Closing, (c) not alter or amend the
Loan Documents, or seek or accept any waivers or extensions of time for payment
or performance thereunder except as permitted and set forth on Schedule 9.06
attached hereto and except as provided in Section 17.03 hereof and (d) not make
any prepayment of principal under the Note.
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9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any
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portion of the Property, or subject any portion of the Property to any option
contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
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9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V
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hereto duly executed and delivered by the Transferor Partners, pursuant to which
the Transferor Partners shall withdraw as partners from the Transferor
Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys,
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soil and substrata studies, architectural drawings, plans and specifications,
engineering plans and studies, floor plans, landscape plans and other plans or
studies of any kind that relate to all or any part of the Property. The
Transferor Partnership shall also deliver, to the extent in the possession of
the Transferor Partnership: original copies of all certificates, licenses,
permits, authorizations and approvals issued for or with respect to the Property
by governmental and quasi-governmental authorities having jurisdiction, except
that photocopies may be substituted if the originals are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel
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Letter shall be mutually agreed upon by the parties during the Financing
Assumption Period (as defined in Section 17.03). However, the BRI Partnership
will require, at a minimum, that the Lender Estoppel Letter from the Lender set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, and to the transfer of the ownership of the
Transferor Partnership to the BRI Partnership and (ii) the following matters:
(A) the Note and other applicable Loan Documents are in full force and effect;
(B) to the Lender's knowledge, no default exists; (C) the amount of the
outstanding unpaid principal balance of the Note, and the date to which interest
and principal have been paid on the Note; and (D) the amount of any real estate
tax escrow, insurance escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and
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the Transferor Partnership shall be entitled to rely on the agreements contained
in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each
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of the Transferor Partners in Section 5.34, which shall be limited to 100% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner)
(collectively, the "Cap"); and provided further that to the extent any of the
Transferor Partners have any indemnification obligation to the BRI Partnership,
the Transferor Partners may elect to satisfy such indemnification obligation by
directing the BRI Partnership to cancel such amount of BRI Partnership Units
acquired by such Transferor Partner pursuant to this Agreement having a fair
market value (measured at the time such BRI Partnership Units are returned or
cancelled) equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
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SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
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qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
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(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected
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unless the consent of such materially adversely affected Transferor Partners is
obtained), provided however that in the event of a change in the Code, the
Treasury Regulations, or published Internal Revenue Service ("IRS") rulings,
notices or other administrative guidance, or in any private letter ruling issued
to a taxpayer other than the BRI Partnership (any such change, a "Change in
Law") such that, in the reasonable opinion of tax counsel to the BRI
Partnership, based on such Change in Law, either (i) the foregoing method is no
longer legally permissible, (ii) or an alternative method, not previously
permitted, which results in more favorable tax consequences to each of the
limited partners, including the Transferor Partners, of the BRI Partnership is
currently permitted, the BRI Partnership, shall be entitled, without the consent
of the Transferor Agent, to adopt an alternative method, provided further that,
in the case of clause (i), the BRI Partnership shall choose the alternative
method that minimizes to the extent reasonably possible, the adverse tax
consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
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(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of the Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to
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receive such rent to the Transferor Partners immediately prior to Closing. The
BRI Partnership shall act as agent for the Transferor Partners in collecting
such rent. Rents received from such tenant after the Closing shall be applied in
the following order of priority: (a) first to the month in which the Closing
occurred; (b) then to any month or months following the month in which the
Closing occurred until all unpaid rents have been paid in full; and (c) then to
the period prior to the month in which the Closing occurred. After Closing, the
BRI Partnership shall cause the Transferor Partnership to use reasonable efforts
to collect delinquent rents attributable to the period prior to the month in
which Closing occurred, provided such efforts shall not require the commencement
of litigation against any such tenant. If rents or any portion thereof received
by the Transferor Partners or the BRI Partnership after the Closing are payable
to the other party by reason of this allocation or otherwise, the appropriate
sum shall be paid to the other party within thirty (30) days from the receipt
thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such distribution of surplus cash
relates only to the period prior to the Closing Date, all such surplus cash
shall be distributed to the Transferor Partners prior to Closing; provided
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however, if as a result of the 1997 annual HUD audit (it being agreed that the
BRI Partnership shall consult with the Transferor Agent during the HUD audit
procedure), HUD (after final adjudication by regulatory and judicial
authorities) determines that all or any portion of such distribution of surplus
cash to the Transferor Partners was improper, the Transferor Partners,
severally, agree to reimburse the Transferor Partnership immediately upon demand
for all amounts so designated by HUD as improper and to indemnify, defend and
hold the Transferor Partnership and the BRI Partnership harmless from and
against all loss, cost, damage or expense (including reasonable legal fees)
suffered or incurred as a result of such improper distribution of surplus cash.
In all other cases, there shall be no adjustment at Closing regarding surplus
cash, but at such time as HUD approves the distribution of surplus cash for
fiscal 1997, the BRI Partnership shall receive all such surplus cash and
thereafter the BRI Partnership shall promptly pay to the Transferor Agent, as
distribution agent for the Transferor Partners, the Transferor Partners pro-rata
share of such surplus cash allocable to the period prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice given to the Transferor Agent within
seven (7) days after the Closing Date and thereafter this Agreement shall be
void and without recourse to any party hereunder
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except for provisions which are expressly stated to survive termination of this
Agreement. In addition to the foregoing, if the BRI Partnership desires to
accept the contribution and transfer of the Transferor Partnership Interests in
accordance with the terms of this Agreement and the Transferor Partners
willfully refuse to perform the Transferor Partners' obligations hereunder, the
BRI Partnership, at its option, shall have the right to compel specific
performance by the Transferor Partners hereunder, in which event the BRI
Partnership shall have the right to recover from the Transferor Partners the
amount of all reasonable legal fees, court costs and other litigation expenses
incurred by the BRI Partnership in connection with the exercise of its right of
specific performance. The remedies provided in this Section 13.03 shall be the
sole and exclusive remedies at law or in equity of the BRI Partnership in the
event of a default by the Transferor Partners in lieu of all other rights and
remedies which the BRI Partnership may have against the Transferor Partners at
law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in
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connection with this transaction. The Transferor Partnership understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of the Transferor Partners and
QPI in accordance with the provisions of Section 19 hereof. In no event shall
any commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall the BRI
Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Note and other Loan Documents as contemplated
hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
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If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14
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shall survive until twelve (12) months after the Closing Date and thereafter
during the pendency of any claim based upon a breach thereof, and no action
based thereon shall be commenced more than twelve (12) months after the Closing
Date. Except as otherwise specifically provided in this Agreement, no other
representations, warranties, covenants or other obligations of the Transferor
Partners or the BRI Partnership set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
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(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letters and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties
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set forth in this Agreement shall be true and correct, in all material respects,
as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership and to obtain the Lender Estoppel
Letter. The Transferor Partnership, with the BRI Partnership's cooperation,
shall immediately commence to obtain the consent of Lender necessary to permit
the contribution of the Transferor Partnership Interests to the BRI Partnership
and the transfer of ownership of the Transferor Partnership to the BRI
Partnership. The BRI Partnership shall supply any and all documentation and
additional information required by Lender in order to promptly complete the
request for the consent of Lender to the transactions contemplated hereunder.
The Transferor Partnership shall request that Lender state in writing any terms
and requirements, including the amount of any Loan Assumption Fees, to be
imposed by Lender in connection with its consent to the transactions
contemplated hereby.
It shall be a condition of Closing that prior to October 15, 1997, Lender
shall have granted its consent to the transactions contemplated hereunder on
terms and requirements reasonably satisfactory to the BRI Partnership, shall
have issued the Lender Estoppel Letter and shall have agreed to release the
Transferor Partners from all
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liability under the Loan Documents. It shall also be a condition of Closing that
prior to October 15, 1997 the Subordinated Lender shall have agreed to accept a
full pay-off of the Subordinated Note, including without limitation, the Minimum
Additional Interest, Shared Income Interest, and Shared Appreciation Features of
the Subordinated Note, as such terms are defined in the Subordinated Note, on
terms and conditions satisfactory to the Transferor Partnership and the BRI
Partnership. In the event that any of the terms or requirements required by
Lender or the Subordinated Lender for their respective consents or agreements
are not approved by the BRI Partnership, the BRI Partnership may terminate this
Agreement by written notice given to the Transferor Partners within fifteen (15)
business days after the BRI Partnership have received in writing the terms and
requirements of Lender and the Subordinated Lender for their respective consents
or agreements. In the event either (a) the consent of Lender and agreement of
Subordinated Lender are not obtained prior to the Closing or (b) the BRI
Partnership does not approve the terms and conditions of Lender and the
Subordinated Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender or the Subordinated Lender shall not have agreed to release the
Transferor Partners from all liability under the applicable Loan Documents or
the Lender or the Subordinated Lender shall have placed terms and conditions on
the Transferor Partners that are unacceptable to them or the Subordinated Lender
shall not have agreed to the pay-off of the Subordinated Note on terms
acceptable to the Transferor Partnership, the Transferor Agent may terminate
this Agreement by written notice given to the BRI Partnership within fifteen
(15) business days after the Transferor Agent has received in writing notice
that the Lender or the Subordinated Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions or that the Subordinated Lender has not agreed
to the pay-off of the Subordinated Note described above on such acceptable
terms. If the Transferor Agent gives timely notice of termination to the BRI
Partnership, this Agreement shall terminate without further action by any party,
and, thereafter this Agreement shall be void and without recourse to all
parties, except for provisions which are expressly stated to survive termination
of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information
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required by BRI in order to complete the offering materials in connection with
the Public Offering or the Private Placement. The obligation of the BRI
Partnership to proceed with the Closing of the transactions contemplated by this
Agreement is expressly conditioned upon the successful completion of the Public
Offering and the Private Placement raising a minimum of $75,000,000.00. If the
Public Placement and the Private Placement do not in the aggregate complete
offerings which raise a minimum of $75,000,000 as aforesaid prior to the Closing
Date hereunder, the BRI Partnership shall have the right to terminate this
Agreement effective as of the Closing Date, and, thereafter this Agreement shall
be void and without recourse to all parties except for provisions which are
expressly stated to survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI Partnership will not take possession of the Transferor Partnership or
the Property nor assume the burdens and benefits of project ownership prior to
such approval by HUD.
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The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives timely notice of termination hereunder to
the Transferor Partners, this Agreement shall terminate without further action
by any party, and, thereafter this Agreement shall
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be void and without recourse to all parties, except for provisions which are
expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the
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Transferor Partners have the right to assign or transfer its right to receive
BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the
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transactions contemplated hereby becoming known by means beyond the reasonable
control of such party. The provisions of this Section 18.09 shall survive the
Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner
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and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed counterparts to such agreements and, to the extent that any
agreements or documents
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relating to this Agreement (such as partnership assignments or other similar
closing documents) are executed prior to the Closing, the Transferor Agent is
authorized on behalf of each Transferor Partner to hold all such agreements in
escrow pending the Closing, at which time the Transferor Agent shall be
authorized to deliver such documents on behalf of the Transferor Partners to the
BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNER
ESTATES II FUNDING CORPORATION
_________________________ By: ____________________________________
Name:
Title:
WITNESS: TRANSFEROR LIMITED PARTNER
CAHILL ASSOCIATES LIMITED PARTNERSHIP
_________________________ By: ____________________________________
Name:
Title:
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
_________________________ By: ____________________________________
Name:
Title:
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BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
__________________________ By: ____________________________
Name:
Title:
WITNESS:
__________________________ ________________________________
Morton Gorn, solely for the
purposes of Section 19.06
__________________________ ________________________________
Stephen Gorn, solely for the
purposes of Section 19.06
__________________________ ________________________________
John Colvin, solely for the
purposes of Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow,
insurance escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letters
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor
Limited Partners (with address and partnership
interest of each partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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Execution Copy
Warren Park
(08/27/97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between the
individuals and entities listed on Exhibit I attached hereto (the "Transferor
Partners"), with an address c/o Questar Properties, Inc., 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and Questar
Investment Corporation, a Maryland corporation (the "Transferor Agent"), with an
address of 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention:
Mr. Stephen M. Gorn, Warren Park Funding, Inc., a Maryland corporation (the
"Borrower Corporate General Partner"), with an address of 124 Slade Avenue,
Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn, and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor Partners are the legal and beneficial owners,
respectively, of all of the general partnership interests as set forth in
Exhibit I in Warren Park Associates, a Maryland general partnership (the
"Transferor Partnership") pursuant to a Joint Venture Agreement dated as of
August 1, 1963, as amended (a copy of which, including all amendments, is
attached hereto as Exhibit II and is referred to as the "Transferor Partnership
Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in Baltimore County,
Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 200-unit apartment complex, commonly known as Warren Park
Apartments, which contains related improvements, facilities, amenities,
structures,
<PAGE>
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partnership is the legal and beneficial owner of a
fifty percent (50%) general partnership interest in Warren Park II General
Partnership, a Maryland general partnership ("Borrower Partnership") pursuant to
that certain Partnership Agreement dated as of October 18, 1989, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit IX and is
referred to herein as the "Borrower Partnership Agreement"), and the Transferor
Partnership is also the legal and beneficial owner of all of the issued and
outstanding stock of the Borrower Corporate General Partner, which owns the
remaining fifty percent (50%) general
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partnership interest in the Borrower Partnership (the "Borrower General
Partnership Interest");
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of their
respective general partnership interests in the Transferor Partnership
(collectively referred to as the "Transferor Partnership Interests") to the BRI
Partnership, and the BRI Partnership desires to admit the Transferor Partners as
limited partners in the BRI Partnership and to accept such contribution from the
Transferor Partners; and
WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Partnership in the form of Exhibit IV attached hereto (the "Amended Transferor
Partnership Agreement") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Partners shall withdraw, as the partners of
the Transferor Partnership and be released of all liability thereunder, and the
terms of the Transferor Partnership shall be amended in accordance with the
Amended Transferor Partnership Agreement.
1.02 Property Title. On or before August 31, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance
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Policy (the "Commitment") from Lawyers Title Insurance Corporation (the "Title
Insurer") and copies of all instruments and plans mentioned therein as
exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the Transferor Partnership and
shall be in the amount of the Consideration Amount (as defined in Section
2.01(a) hereof). The Commitment shall provide for a title insurance policy which
shall contain coverage against all mechanics' liens, shall have full survey
coverage, shall have deleted therefrom all "printed standard exceptions", shall
have a 3.1 zoning endorsement, a comprehensive endorsement, a non-imputation
endorsement, a fairways endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before August 31, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of
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(A) ten (10) days after the Transferor Partnership notifies the BRI Partnership
that it refuses to cure such unacceptable exceptions, and (B) Closing Date, the
BRI Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Partnership
or (ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Consideration Amount (as defined in Section
2.01(a)) in an amount necessary to enable the BRI Partnership to remove all
Monetary Liens.
1.03 Survey. On or before August 31, 1997, the BRI Partnership, at the BRI
Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the
Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before August 31, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to
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cure such unacceptable survey matters. If the Transferor Partnership fails or
refuses to cure said unacceptable survey matters within the time period
provided, on or before the earlier to occur of (A) ten (10) days after the
Transferor Partnership notifies the BRI Partnership that it refuses to cure such
unacceptable survey matters, and (B) Closing Date, the BRI Partnership may, in
accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Partnership or (ii) waive
such survey matters and accept title subject thereto, in which event there shall
be no reduction in the Consideration Amount.
1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to
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terminate this Agreement pursuant to this Section 1.04(b). The BRI Partnership
shall pay when due all fees and expenses incurred in the performance of the
Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's and the Borrower Partnership's books,
financial records, Service Contracts, Leases and tenant files pertaining to the
operation of the Property prior to the Closing. The BRI Partnership's agents and
representatives shall be permitted access to such records and files during
regular business hours. To the extent that any of the Transferor Partnership's
or the Borrower Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for
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damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Partners by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Partners hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income tax purposes as a tax-free contribution to
capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended
(the "Code") (and any analogous state income tax provisions). The BRI
Partnership and the Transferor Partners agree to report such transaction for
federal and applicable state income tax purposes consistently with the intent
set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $7,030,019, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing.
In addition, as of Closing, the Transferor Partnership shall remain as
Guarantor under a certain Guaranty (the "Guaranty") in favor of The Patrician
Financial Company ("Lender"), securing the outstanding principal balance of the
Note dated October 29, 1996, in the original principal amount of $5,100,000 (the
"Note") evidencing the loan (the "Loan") made to the Borrower Partnership by
Lender. The Loan is also secured by the other Loan Documents (as defined in
Section 5.20 hereof) which shall be an obligation of the Borrower Partnership
and the Transferor Partnership as of the Closing subject to any exculpation from
liability provisions therein. The Transferor Partnership shall also remain as
obligor of the outstanding principal balance of the note dated October 29,
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1996 in the original principal amount of the Note (the "Borrower Partnership
Note"), evidencing the loan made to the Transferor Partnership by the Borrower
Partnership (the "Borrower Partnership Loan").
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule shall be prepared by the
Transferor Agent based upon the Preliminary Transferor Allocation Schedule and
shall be delivered to the BRI Partnership prior to Closing in accordance with
the provisions of Section 12.01 hereof, together with an investor questionnaire
in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each
Transferor Partner. In the event that any Transferor Partner would be entitled
to a fractional BRI Partnership Unit, the number of BRI Partnership Units shall
be rounded up or down, as the case may be, to the nearest whole BRI Partnership
Unit. At Closing, the BRI Partnership shall deliver to the Transferor Agent all
of the BRI Partnership Confirmations evidencing the issuance of the BRI
Partnership Units to the Transferor Partners in accordance with the Transferor
Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership
owes any amounts to the Transferor Partners as a result of prorations and
apportionments (the "BRI Additional Payment"), at Closing, the BRI Partnership
shall pay the BRI Additional Payment to the Transferor Agent in accordance with
the election made by each Transferor Partner pursuant to Section 12.04. The
Transferor Agent shall be liable to distribute the BRI Partnership Units and if
applicable, a pro-rata share of the BRI Additional Payment to each of the
Transferor Partners in accordance with the Transferor Allocation Schedule. The
BRI Partnership shall have no obligation or liability with respect to the
preparation or accuracy of the Preliminary Transferor Allocation Schedule or the
Transferor Allocation Schedule or the distribution of the BRI Partnership Units
or the BRI Additional Payment, if applicable, to the Transferor Partners and the
Transferor Partners hereby release the BRI Partnership from any such obligation
or liability.
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The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
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2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has made
available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
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4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
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4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan and the Borrower Partnership Loan, together with any
and all modifications and amendments thereto as set forth on Schedule H attached
hereto (collectively, the "Loan Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a general partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the
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Transferor Partnership is not in violation of any order, statute, rule or
regulation applicable to it, except for such violations which would not have a
Material Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Transferor Partners, nor the contribution of the Transferor
Partnership Interests by the Transferor Partners hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Partnership Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Partnership, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for the requirement for the receipt
of the Lender approval in accordance with the provisions of Section 17.03, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Partners, the Transferor Partnership or the
Borrower Partnership in connection with the valid execution and delivery of this
Agreement by the Transferor Partners and the performance of the Transferor
Partners' obligations hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners, and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership, the
Borrower Partnership or the Property or any part thereof which questions the
validity of this Agreement or the right of the Transferor Partners to enter into
it, or which might result in or have, either individually or in the aggregate, a
material adverse effect on (i) the business of the Transferor Partnership or the
Borrower Partnership, as such is presently contemplated;
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or (ii) the rights represented by the Transferor Partnership Interests or the
partnership interests in the Borrower Partnership. During the period commencing
on the date hereof and ending on the Closing Date, the Transferor Partnership
will promptly inform the BRI Partnership in writing of any material action,
suit, proceeding or investigation pending, or to the Transferor Partnership's
knowledge, threat thereof against the Transferor Partners, the Transferor
Partnership, the Borrower Partnership or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31, 1996 and on or before August 31, 1997 the Transferor
Partnership shall provide unaudited financial statements for the six-month
period ending June 30, 1997 (collectively, the "Financial Statements"). The
Financial Statements fairly present the financial condition of the Transferor
Partnership as of the respective statement dates in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto), and reflect all liabilities, fixed, contingent or
otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. Legal title to the Property is
currently held in the name of some or all of the partners of the Partnership who
are holding title on behalf of and for the benefit of the Transferor Partnerhip.
Except as disclosed on the Financial Statements, the Transferor Partnership does
not own, or otherwise hold any
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interest in, any material assets other than its interest Property. On or before
the Closing Date, the Transferor Partnership shall cause legal and equitable
title to the Property to be in the name of the Transferor Partnership, and it
shall be a condition to the BRI Partnership's obligation to close that legal and
equitable title to the Property be in the name of the Transferor Partnership on
or before the Closing Date. The Transferor Partners shall pay all costs in
connection with the transfer of title to the Property to the Transferor
Partnership, including, without limitation, any transfer taxes and documentary
stamps.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Guaranty, the Borrower Partnership Loan
and the indebtedness for borrowed money described on Schedule 5.10 or in the
Transferor Partnership's fiscal 1996 audited financial statements, the
Transferor Partnership has no indebtedness for borrowed money and the Transferor
Partnership has not, directly or indirectly, created, incurred, assumed or
guaranteed or otherwise become directly or indirectly liable for the payment of
any borrowed money. Except as disclosed on Schedule 5.10 or in the Transferor
Partnership's fiscal 1996 audited financial statements, no Transferor Partner,
nor any affiliate of any Transferor Partner nor any employee of the Transferor
Partnership is presently indebted to the Transferor Partnership for borrowed
money and the Transferor Partnership is not presently indebted for borrowed
money to any of the foregoing persons. Prior to Closing, the Transferor
Partnership shall pay-off and discharge in full all indebtedness and liabilities
other than the Guaranty and the Borrower Partnership Loan described in Schedule
5.10 and in such audited financial statements and provide evidence thereof to
the BRI Partnership. As of the Closing Date the Transferor Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Transferor Partnership's business which are either (i) in the aggregate, not in
excess of $50,000, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Service Contracts; and (c) liabilities under the Guaranty or
the Borrower Partnership Note and (d) a contingent liability for recordation
taxes if the Transferor Partnership or the Borrower Partnership defaults on the
Loan after Closing. The Transferor Partnership has conducted its business only
in the ordinary course and, except for the Loan and the matters disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, the Transferor Partnership has not:
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(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
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5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
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(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the loan documents,
including, without limitation, the Guaranty, evidencing or securing the Loan
(the "Loan Documents"). True and complete copies of the Loan Documents and the
Borrower Partnership Note, including each modification and amendment thereof,
have been furnished heretofore to the BRI Partnership. There are no notes,
instruments, agreements, mortgages, deeds of trust or other documents evidencing
any material agreement or obligation of the Transferor Partnership or the
Borrower Partnership to Lender or any other lender with respect to the Property
other than the Borrower Partnership Note and the Loan Documents listed on
Schedule H. The Loan Documents and the Borrower Partnership Note are in full
force and effect and none of the Loan Documents or the Borrower Partnership Note
have been modified, amended or extended except as disclosed on Schedule H. All
payments of principal, interest, and, if
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applicable, real estate tax escrow, insurance escrow and any other payments
required under the Loan Documents or the Borrower Partnership Note which are due
and payable, through the Closing Date, have been, and will be, paid in full and
no default exists thereunder which extends beyond applicable grace or cure
periods. Neither the Transferor Partnership nor the Borrower Partnership has
received any written notice of default under any of the Loan Documents or the
Borrower Partnership Note. The Lender is the sole holder or designated servicer
of the Note. The Borrower Partnership is the sole holder of the Borrower
Partnership Note, subject to any pledge thereof to Lender. The only security
taken or held in connection with the Note is evidenced in the Loan Documents. No
security has been taken or held in connection with the Borrower Partnership
Note. The Loan Documents do not secure any other indebtedness but the Loan or
the Borrower Partnership Loan. To the best knowledge of the Transferor
Partnership, the amounts of any real estate tax escrow, insurance escrow and any
other escrows and reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
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Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the Clean Water Act (33 U.S.C. ss. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.); and all
other applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
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Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 Intentionally Omitted.
B. REPRESENTATIONS AND WARRANTIES OF THE
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TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter, no approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Partner of
the Transferor Partnership Interests held by such Transferor Partner and the
performance of such Transferor Partner's obligations under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption
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provisions of any applicable securities laws and in accordance with the terms of
the BRI Partnership Agreement and the Registration Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership or the
Transferor Agent, its affiliates or its other legal counsel and advisors for any
explanation of the application of the various United States or state securities
laws or tax laws with regard to its acquisition of the BRI Partnership Units.
Such Transferor Partner further acknowledges and represents that it has made its
own independent investigation of the BRI
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Partnership and the business conducted or proposed to be conducted by the BRI
Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall
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be acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
C. ADDITIONAL REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
BORROWER PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
5.37 Organization and Standing of the Borrower Partnership. The Borrower
Partnership is a general partnership duly organized, validly existing and in
good standing under the laws of the State of Maryland. The Borrower Partnership
has all requisite power to maintain the Loan from Lender and to maintain the
Borrower Partnership Loan to the Transferor Partnership and to carry on its
business as presently being conducted and as proposed to be conducted. The
Borrower Partnership is duly qualified to do business in all jurisdictions in
which the failure to be so qualified would have a Material Adverse Effect on the
Borrower Partnership's business.
5.38 Compliance with Other Instruments, etc. The Borrower Partnership is
not in violation of any term contained in the Borrower Partnership Agreement, or
to the Transferor Partnership's knowledge in any other material instrument or
contract to which the Borrower Partnership is a party, and to the Transferor
Partnership's
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knowledge the Borrower Partnership is not in violation of any order, statute,
rule or regulation applicable to it, except for such violations which would not
have a Material Adverse Effect. Neither the execution, delivery and performance
of this Agreement by the Transferor Partnership, nor the contribution of the
Transferor Partnership Interests by the Transferor Partners hereunder, nor the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner will
result in any Material Adverse Effect or be in conflict with or constitute a
default under the Borrower Partnership Agreement or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Borrower Partnership.
5.39 Partnership Capitalization. The Borrower Partnership Agreement (i) is
the only agreement among the partners thereto relating to the organization,
operation, or management of the Borrower Partnership, (ii) is in full force and
effect and (iii) has not been amended or modified. The Transferor Partnership
and the Borrower Corporate General Partner are the sole partners of the Borrower
Partnership. The address of the Transferor Partnership and the Borrower
Corporate General Partner is 124 Slade Avenue, Suite 200, Baltimore, Maryland
21208. Each of the Transferor Partnership and the Borrower Corporate General
Partner owns a 50% general partnership interest in the Borrower Partnership. No
partner of the Borrower Partnership is in default with respect to any capital
contribution required to be paid by it pursuant to the Borrower Partnership
Agreement. A true, correct and complete copy of the Borrower Partnership
Agreement is attached hereto as Exhibit IX. The Borrower Partnership has no
commitment to issue any right to purchase or acquire or to issue or distribute
to the partners thereof any evidences of indebtedness or assets; and the
Borrower Partnership has no obligation, contingent or otherwise, to purchase,
redeem or otherwise acquire any interest in the Borrower Partnership or any
interest therein or to make any distribution in respect thereof.
5.40 Agreements; Affiliated and Extraordinary Transactions. Other than the
Loan Documents and the Borrower Partnership Note, there are no agreements, oral
or written to which the Borrower Partnership is a party or to which any agent of
the Borrower Partnership is a party on behalf of the Borrower Partnership or has
entered into on behalf of the Borrower Partnership.
5.41 Intentionally Omitted.
5.42 Title to Properties and Assets. The Borrower Partnership does not own,
or otherwise hold any interest in, any assets other than the Borrower
Partnership Loan to the Transferor Partnership.
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5.43 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Borrower Partnership, no other material license,
permit or authorization is necessary to own and operate the Borrower
Partnership's business as such is presently conducted and neither the conduct of
the Borrower Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.44 Liabilities. Except for the Loan, the Borrower Partnership has no
indebtedness for borrowed money and the Borrower Partnership has not, directly
or indirectly, created, incurred, assumed or guaranteed or otherwise become
directly or indirectly liable for the payment of any borrowed money. Except for
the Borrower Partnership Loan, no partner, nor any affiliate of any partner nor
any employee of the Transferor Partnership or the Borrower Corporate General
Partner is presently indebted to the Borrower Partnership for borrowed money and
the Borrower Partnership is not presently indebted for borrowed money to any of
the foregoing persons. As of the Closing Date the Borrower Partnership shall
have no liabilities or obligations (absolute or contingent) of any kind, other
than liabilities under the Loan Documents and a contingent liability for
recordation taxes if the Transferor Partnership or the Borrower Partnership
defaults on the Loan after Closing. The Borrower Partnership has conducted its
business only in the ordinary course and, except for the Loan and the Borrower
Partnership Loan and the matters disclosed on Schedule 5.10, the Borrower
Partnership has not created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets.
5.45 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Borrower Partnership or
for which the Borrower Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Borrower Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Borrower Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
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(c) The Borrower Partnership does not know of (A) any audit or
investigation of the Borrower Partnership with respect to any liability for
taxes relating to the Borrower Partnership for which any partner thereof may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Borrower Partnership.
5.46 Employees. The Borrower Partnership has no employees, has not entered
into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.47 Retirement Obligations. The Borrower Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.48 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Borrower Partnership.
5.49 Bank Accounts. On or before Closing, the Borrower Partnership shall
have closed every bank account and safe deposit box of the Borrower Partnership
for which any partners thereof or its representatives are signatories, and no
representative of any such partner shall be a signatory on any other account or
safe deposit box of the Borrower Partnership or shall have the power to borrow,
discount debt obligations, cash or draw checks, or otherwise act on behalf of
the Borrower Partnership in any dealings with any banks or other financial
institutions.
5.50 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Borrower Partnership, nor are any of such proceedings,
against or by the Borrower Partnership, anticipated or contemplated by the
Borrower Partnership.
5.51 Partnership Interest. Except as provided in the Borrower Partnership
Agreement, no right (contingent or otherwise) to purchase or acquire the
partnership interests in the Borrower Partnership held by the Transferor
Partnership or the Borrower Corporate General Partner is authorized or
outstanding. The Transferor Partnership owns and holds its interest in the
Borrower Partnership and the stock of the Borrower Corporate General Partner
free and clear of any liens, pledges and encumbrances of any kind whatsoever and
free of any rights of assignment of any third party. The Borrower Corporate
General Partner currently owns and holds, and, subject to the provisions of
Section 9.12 hereof, until immediately prior to Closing will own and
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hold, the Borrower General Partnership Interest free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Upon Closing, the Transfer Partnership shall own
and hold its interest in the Borrower Partnership free and clear of any liens,
pledges and encumbrances of any kind whatsoever, and free of any rights of
assignment of any third party. Prior to Closing, the Transferor Partnership
shall assign and transfer to the Transferor Agent all of the issued and
outstanding stock of the Borrower Corporate General Partner. Subsequent to such
assignment and transfer to the Transferor Agent but prior to Closing, the
Transferor Agent shall cause the Borrower Corporate General Partner to assign
and transfer the Borrower General Partnership Interest to the Borrower LLC
General Partner (as defined in Section 9.12 hereof) free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party, such that upon Closing the Transferor Partnership
and the Borrower LLC General Partner will each own and hold a fifty percent
(50%) general partnership interest in the Borrower Partnership.
D. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE BORROWER
CORPORATE GENERAL PARTNER
The Borrower Corporate General Partner represents, warrants and covenants
to the BRI Partnership as of the date hereof as follows:
5.52 Organization and Standing of the Borrower Corporate General Partner.
The Borrower Corporate General Partner is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Borrower Corporate General Partner has all requisite power to own its general
partnership interest in the Borrower Partnership and to carry on its business as
presently being conducted and as proposed to be conducted. The Borrower
Corporate General Partner is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a Material Adverse Effect.
5.53 Authorization. The Borrower Corporate General Partner has full power
and authority to enter into and deliver this Agreement and on the Closing Date
will have full power and authority to enter into each of the Borrower Corporate
General Partner Closing Documents (as defined in Section 10.07 hereof) required
to be executed and delivered by the Borrower Corporate General Partner under
this Agreement, each in accordance with their respective terms, and on the
Closing Date the Borrower Corporate General Partner Closing Documents will
constitute valid and binding obligations, enforceable against the Borrower
Corporate General Partner in accordance with their respective terms.
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5.54 Additional Authorization. Except as provided in Section 17.03, no
approval of any person not a party to this Agreement is necessary for the
assignment by the Borrower Corporate General Partner of the Borrower General
Partnership Interest in the Borrower Partnership to the Borrower LLC General
Partner and the performance of the Borrower Corporate General Partnership's
obligations under this Agreement.
5.55 Ownership. The Borrower Corporate General Partner has not received any
written notice challenging the validity of the Borrower Corporate General
Partner's title to the Borrower General Partnership Interest in the Borrower
Partnership. The Borrower Corporate General Partner has not granted any rights,
options, rights of first refusal or entered into other agreements of any kind
which are currently in effect for the acquisition of the Borrower General
Partnership Interest in the Borrower Partnership or any part thereof, except for
the rights of the Borrower LLC General Partner and the BRI Partnership under
this Agreement.
5.56 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Borrower Corporate General Partner to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits are true, accurate and complete in
all material respects.
5.57 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Borrower Corporate General Partner's
knowledge, threatened against the Borrower Corporate General Partner, nor are
any of such proceedings, against or by the Borrower Corporate General Partner,
anticipated or contemplated by the Borrower Corporate General Partner.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so delivered or made available, has not been modified and is in
full force and effect in accordance with its terms as of the date hereof.
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6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
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governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership and the Borrower Partnership, all amounts received or due (plus an
amount equal to any deductible under any insurance policy covering the Property)
from, and all claims against, any insurance company or governmental entity as a
result of such destruction or taking and there shall be no adjustment to the
Consideration hereunder. If prior to the Time of Closing, any such damage or
destruction shall occur having a replacement cost of less than $750,000.00 or if
any eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Partnership Interests in
accordance with the provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make (or cause
the Borrower Partnership to make) all payments of interest and principal and, if
applicable, tax escrow, insurance escrow and other amounts required under the
Note and other Loan Documents coming due thereunder prior to the Closing, in
accordance with the terms thereof, (b) otherwise comply (and cause the Borrower
Partnership to comply) with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend (or permit the Borrower
Partnership to alter or amend) the Loan Documents, or seek or accept (or permit
the Borrower Partnership to seek or accept) any waivers or extensions of time
for payment or performance thereunder except as permitted and set forth on
Schedule 9.06 attached hereto and (d) not make (or permit the Borrower
Partnership to make) any prepayment of principal under the Note.
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Without limitation of the foregoing, the Transferor Partnership shall (a) make
all payments of interest and principal and, if applicable, tax escrow, insurance
escrow, and other amounts required under the Borrower Partnership Note coming
due thereunder prior to the Closing in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Borrower
Partnership Note up to the Closing, (c) not alter or amend the Borrower
Partnership Note, or seek or accept any waivers or extensions of time for
payment or performance thereunder except as permitted and set forth on Schedule
9.06 attached hereto and (d) not make any prepayment of principal under the
Borrower Partnership Note.
9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
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(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any portion of the Property, or subject any portion of the Property to any
option contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
(j) Any act or omission of Borrower Partnership which would be inconsistent
with the foregoing provisions of this Section 9.08.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
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(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
(g) Cause the Borrower Partnership to conduct its business in the ordinary
course as heretofore conducted and to take such actions as are consistent (and
refrain from taking any actions which are inconsistent) with the foregoing
requirements of this Section 9.09.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's and the Borrower Partnership's personnel and all
properties, documents, contracts, books, and records of the Transferor
Partnership, relating to the consummation of the transactions contemplated
hereunder and will furnish the BRI Partnership with copies of such documents
(certified by the Transferor Partnership if so requested) and with such
information with respect to the affairs of the Transferor Partnership and the
Borrower Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
9.12 Transfer of Stock of Borrower Corporate General Partner and Assignment
of Partnership Interest in Borrower Partnership. Prior to Closing, the
Transferor Agent, on behalf of the Transferor Partnership and pursuant to the
power of attorney granted to it under Section 19.04, shall transfer all of the
issued and outstanding stock in the Borrower Corporate General Partner to the
Transferor Agent. Immediately prior to Closing, (i) the Transferor Agent shall
cause the Borrower Corporate General Partner to
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assign its Borrower General Partnership Interest in the Borrower Partnership to
a limited liability company formed by the BRI Partnership, all of the membership
interests in which shall be owned by the BRI Partnership or an affiliate thereof
(the "Borrower LLC General Partner") and (ii) the Transferor Agent shall cause
the Borrower Corporate General Partner to withdraw as a general partner of the
Borrower Partnership, such that, at Closing, the Borrower Partnership shall
validly exist as a Maryland general partnership, having as its sole general
partners the Transferor Partnership and the Borrower LLC General Partner, each
of which shall hold a 50% general partnership interest in the Borrower
Partnership.
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SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, indicating that the partnership interest of each
Transferor Partner in the Transferor Partnership and of the Transferor
Partnership and of the Borrower Corporate General Partner in the Borrower
Partnership is unencumbered by any security interest therein, and the cost of
which shall be paid one-half by the Transferor Partners.
(c) Amended Transferor Partnership Agreement. The Amended Transferor
Partnership Agreement in the form of Exhibit IV hereto duly executed and
delivered by the Transferor Partners, pursuant to which the Transferor Partners
shall withdraw as partners from the Transferor Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that each of the Transferor Partnership, the Borrower Partnership and
the Borrower Corporate General Partner has been duly formed in accordance with
Maryland law and is validly existing and in good standing under such laws, that
to the best of such counsel's knowledge the Transferor Partners are all of the
partners of the Transferor Partnership, and that immediately prior to the
assignment and transfer of the Borrower General Partnership Interest by the
Borrower Corporate General Partner to the Borrower LLC General Partner as
described in Section 9.12 hereof, the Transferor Partnership and the Borrower
Corporate General Partner were all of the partners of the Borrower Partnership,
that no state transfer taxes, sales tax, excise tax or transfer stamps are
required to consummate the transactions contemplated by this Agreement and as to
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such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Parties and that the Borrower Partnership Assignment has not been duly executed
and delivered by the Borrower Corporate General Partner.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Partnership shall also deliver, to the extent in the
possession of the Transferor Partnership: original copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by governmental and quasi-governmental authorities having
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jurisdiction, except that photocopies may be substituted if the originals are
posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and fairways endorsement and to omit from its title insurance policy
all exceptions for (i) judgments, bankruptcies or other returns against persons
or entities whose names are the same as or similar to the Transferor
Partnership's name; (ii) parties in possession other than under the rights to
possession granted under the Leases; and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Intentionally Omitted.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel Letter shall be mutually agreed upon by the parties during the
Financing Assumption Period (as defined in Section 17.03). However, the BRI
Partnership will require, at a minimum, that the Lender Estoppel Letter set
forth (i) Lender consent to the contribution of the Transferor Partnership
Interests, as contemplated herein, the transfer of the ownership of the
Transferor Partnership to the BRI Partnership, the assignment by the Borrower
Corporate General Partner to the Borrower LLC General Partner of the Borrower
General Partnership Interest in the Borrower Partnership, and the withdrawal of
the Borrower Corporate General Partner and the admission of the Borrower LLC
General Partner as a fifty percent (50%) general partner of the Borrower
Partnership, and (ii) the following matters: (A) the Note and other Loan
Documents are
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in full force and effect; (B) to the Lender's knowledge, no default exists under
the Note, the Guaranty or any other Loan Document; (C) the amount of the
outstanding unpaid principal balance of the Note, and the date to which interest
and principal have been paid on the Note; and (D) the amount of any real estate
tax escrow, insurance escrow and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against (i) the Transferor Partnership with respect
to the Property, (ii) the Borrower Partnership with respect to any of its
assets, or (iii) the Borrower Corporate General Partner with respect to its
interest in the Borrower Partnership, which searches shall be dated not earlier
than thirty (30) days prior to the Closing and the cost of which shall be paid
one-half by the Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
all transfer taxes and documentary steps, if any, in connection with the
transfer of title to the Property to the Transferor Partnership as described in
Section 5.08 hereof, and one-half of all: (i) Title Insurance and Survey costs,
(ii) escrow and recording costs (iii) transfer taxes and documentary stamps, if
any, in connection with the assignment and transfer of Transferor Partnership
Interests as contemplated herein, and (iv) UCC Search costs. The Transferor
Partners also shall pay their pro rata share of the fees and expenses
attributable to the transactions contemplated by this Agreement in accordance
with the provisions of Section 19.03 and all of the fees and expenses of their
own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
and the Borrower Corporate General Partner agrees that such Transferor Partner
or the Borrower Corporate General Partner, as the case may be, will notify the
Transferor Partnership and the BRI Partnership in writing on or prior to the
Closing Date if any of the representations and warranties of such Transferor
Partner or the Borrower Corporate General Partner, as the case may be, cease to
be true and correct on and as of the Closing Date. Each Transferor Partner and
the Borrower Corporate General Partner further agrees that, subject to Section
10.05(g), if no such notice is given to the
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Transferor Partnership and the BRI Partnership, the representations and
warranties of such Transferor Partner or the Borrower Corporate General Partner,
as the case may be, shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the Transferor Partnership shall
be entitled to rely on the agreements contained in this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or Section 5C, or of such Transferor Partner set forth in Section 5B
or of the Borrower Corporate General Partner set forth in Section 5D, or (B)
resulting from any breach or default by the Transferor Partnership, such
Transferor Partner or the Borrower Corporate General Partner of any obligation
of the Transferor Partnership, such Transferor Partner or the Borrower Corporate
General Partner under this Agreement or (ii) from liabilities for borrowed money
(other than the payments under the Loan due
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after the Closing) incurred by the Transferor Partnership, the Borrower
Partnership, the Borrower Corporate General Partner or the Property prior to the
Closing; provided that no Transferor Partner shall be required to indemnify the
BRI Partnership for any amounts in excess of 50% of the fair market value of the
BRI Partnership Units received by such Transferor Partner as of the date such
indemnification obligation is satisfied (except for indemnification obligations
with respect to representations of each of the Transferor Partners in Section
5.34, which shall be limited to 100% of the fair market value as of the date
such indemnification obligation is satisfied of the BRI Partnership Units
received by such Transferor Partner) (collectively, the "Cap"); and provided
further that to the extent any of the Transferor Partners have any
indemnification obligation to the BRI Partnership, the Transferor Partners may
elect to satisfy such indemnification obligation by directing the BRI
Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Partner pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or cancelled)
equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
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(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
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10.07 Pre-Closing Obligations of Borrower Corporate General Partner. Prior
to the Closing, the Borrower Corporate General Partner shall deliver the
following to the BRI Partnership (the "Borrower Partnership Closing Documents"):
(a) Assignment of Borrower General Partnership Interests. An assignment of
the Borrower General Partnership Interest held by the Borrower Corporate General
Partner in the Borrower Partnership to the Borrower LLC General Partner in such
a manner as not to result in the dissolution of the Borrower Partnership, in the
form of the Borrower Partnership Assignment attached hereto as Exhibit X, duly
executed and delivered by the Borrower Corporate General Partner, which shall
transfer such Borrower General Partnership Interest in the Borrower Partnership
to the Borrower LLC General Partner free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party (the "Borrower
Partnership Assignment").
(b) Amended Borrower Partnership Agreement. An Amended Borrower Partnership
Agreement in the form and substance satisfactory to the BRI Partnership duly
executed and delivered by the Borrower Corporate General Partner, pursuant to
which the Borrower Corporate General Partner shall withdraw as a partner from
the Borrower Partnership.
SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments and Amended Transferor
Partnership Agreement. Deliver to the Transferor Partners (i) the Transferor
Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor
Partnership Agreement duly executed by the BRI Partnership or its designees,
pursuant
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to which the BRI Partnership, or its designees, shall be admitted as partners of
the Transferor Partnership.
(c) Execution and Delivery of Borrower Partnership Assignment and Amended
Borrower Partnership Agreement. Cause the Borrower LLC General Partner to
deliver to the Borrower Partnership and the Borrower Corporate General Partner
(i) the Borrower Partnership Assignment duly executed by the Borrower LLC
General Partner and (ii) the Amended Borrower Partnership Agreement, duly
executed by the Borrower LLC General Partner, pursuant to which the Borrower LLC
General Partner shall be admitted as a fifty percent (50%) general partner of
the Borrower Partnership.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
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(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, in
connection with the assignment and transfer of the Transferor Partnership
Interests as contemplated herein, and (iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
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(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected Transferor Partners is obtained), provided however that in the event of
a change in the Code, the Treasury Regulations, or published Internal Revenue
Service ("IRS") rulings, notices or other administrative guidance, or in any
private letter ruling issued to a taxpayer other than the BRI Partnership (any
such change, a "Change in Law") such that, in the reasonable opinion of tax
counsel to the BRI Partnership, based on such Change in Law, either (i) the
foregoing method is no longer legally permissible, (ii) or an alternative
method, not previously permitted, which results in more favorable tax
consequences to each of the limited partners, including the Transferor Partners,
of the BRI Partnership is currently permitted, the BRI Partnership, shall be
entitled, without the consent of the Transferor Agent, to adopt an alternative
method, provided further that, in the case of clause (i), the BRI Partnership
shall choose the alternative method that minimizes to the extent reasonably
possible, the adverse tax consequences to the Transferor Partners.
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(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with the provisions of Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
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At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transferor Allocation Schedule (the "Transferor Allocation Schedule"), which
shall be based upon the Preliminary Transferor Allocation Schedule, shall
incorporate all adjustments and prorations to be made pursuant to Section 12,
and shall set forth (i) the name of each Transferor Partner, (ii) the number of
Unrestricted Distribution BRI Partnership Units to be received by each
Transferor Partner, and (iii) the number of Restricted Distribution BRI
Partnership Units to be received by each Transferor Partner. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Preliminary Transferor Allocation Schedule or the Transferor
Allocation Schedule or the distribution of the BRI Partnership Units or the BRI
Additional Payment, if applicable, to the Transferor Partners and the Transferor
Partners hereby release the BRI Partnership from any such obligation or
liability.
All cash, including the escrow deposits set forth in Schedule C, shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to the Closing,
and if any of such cash applicable to pre-closing periods is not removed from
the Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
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12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If, as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners
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under this Agreement, the Transferor Partners shall be in default under this
Agreement and the BRI Partnership shall be entitled to terminate this Agreement
by written notice given to the Transferor Agent within seven (7) days after the
Closing Date and thereafter this Agreement shall be void and without recourse to
any party hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Agent or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
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With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 5.38, 5.51, 10.01(q),
10.04, 10.05 (subject to the provisions of Section 10.05(c)), 19.06 and the
representations, warranties, covenants and agreements of the BRI Partnership
contained in Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of
Section 10.05(c)) and 11.03 shall survive the Closing indefinitely and an action
based thereon may be brought at any time after the Closing Date. Representations
and warranties in Sections 5.12, 5.45, 6.06 and 6.09 shall survive until 30 days
after the expiration of the applicable statute of limitations. The
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representations, warranties, covenants and other obligations of the Transferor
Partners set forth in Sections 4, 5.01 through and including 5.57 (except for
5.02, 5.12, 5.34, 5.35, 5.38, 5.45 and 5.51), 9, 10 (except for 10.01(q), 10.04
and 10.05), 12 and 14 and the representations and warranties, covenants and
other obligations of the BRI Partnership contained in Sections 1.04(d), 6
(except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except 10.05), 11 (except
11.03), 12 and 14 shall survive until twelve (12) months after the Closing Date
and thereafter during the pendency of any claim based upon a breach thereof, and
no action based thereon shall be commenced more than twelve (12) months after
the Closing Date. Except as otherwise specifically provided in this Agreement,
no other representations, warranties, covenants or other obligations of the
Transferor Partners or the BRI Partnership set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after
Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners, the Transferor Partnership and the Borrower
Corporate General Partner shall have performed or complied with, in all material
respects, all of their respective covenants, agreements and obligations under
this Agreement, (ii) the Transferor Partners shall have delivered the Transferor
Partners Closing Documents, (iii) the Borrower Corporate General Partner shall
have delivered all of the Borrower Partnership Closing Documents and (iv) all of
the representations and warranties of the Transferor Partnership, the Transferor
Partners and the Borrower
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Corporate General Partner set forth in this Agreement shall be true and correct,
in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership or the Borrower
Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) Borrower Partnership. Prior to Closing, the Transferor Partnership
shall have assigned and transferred all of the issued and outstanding stock in
the Borrower Corporate General Partner to the Transferor Agent and caused the
Borrower Corporate General Partner to withdraw from the Borrower Partnership and
to assign and transfer to the Borrower LLC General Partner its Borrower General
Partnership Interest. In addition, the Transferor Partnership shall, as of the
Closing Date, have title to a fifty percent (50%) general partnership interest
in the Borrower General Partnership, free and clear of all liens, pledges, and
encumbrances of any kind whatsoever and free of any rights of assignment of any
third party; and the Borrower LLC General Partner shall own a fifty percent
(50%) general partnership interest in the Borrower Partnership, free and clear
of any liens, pledges and encumbrances of any kind whatsoever and free of any
rights of assignment of any third party.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all
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parties hereunder except for provisions which are expressly stated to survive
termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the BRI Partnership, to the assignment by the Borrower
Corporate General Partner of all of
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its interests in the Borrower Partnership to the Borrower LLC General Partner,
to the withdrawal from the Borrower Partnership of the Borrower Corporate
General Partner, and to the admission to the Borrower Partnership of the
Borrower LLC General Partner as a fifty percent (50%) general partner, and to
obtain the Lender Estoppel Letter. The Transferor Partnership, with the BRI
Partnership's cooperation, shall immediately commence to obtain the consent of
Lender necessary to permit the contribution of the Transferor Partnership
Interests to the BRI Partnership, the transfer of ownership of the Transferor
Partnership to the BRI Partnership, to the assignment by the Borrower Corporate
General Partner of all of its interests in the Borrower Partnership to the
Borrower LLC General Partner, to the withdrawal from the Borrower Partnership of
the Borrower Corporate General Partner, and to the admission to the Borrower
Partnership of the Borrower LLC General Partner as a fifty percent (50%) general
partner. The BRI Partnership shall supply any and all documentation and
additional information required by Lender in order to promptly complete the
request for the consent of Lender to the transactions contemplated hereunder.
The Transferor Partnership shall request that Lender state in writing any terms
and requirements, including the amount of any Loan Assumption Fees, to be
imposed by Lender in connection with its consent to the transactions
contemplated hereby. It shall be a condition of Closing that prior to October
15, 1997, Lender shall have granted its consent to the transactions contemplated
hereunder on terms and requirements reasonably satisfactory to the BRI
Partnership, shall have issued the Lender Estoppel Letter and shall have agreed
to release the Transferor Partners from all liability under the Loan Documents.
In the event that any of the terms or requirements required by Lender for its
consent are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership have received in
writing the terms and requirements of Lender for its consent. In the event
either (a) the consent of Lender is not obtained prior to the Closing or (b) the
BRI Partnership does not approve the terms and conditions of Lender, including
the amount of any Loan Assumption Fees in excess of 1% of the unpaid principal
balance, and the BRI Partnership gives timely notice of termination hereunder to
the Transferor Agent, this Agreement shall terminate without further action by
any party, and, thereafter this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly stated to survive
termination of this Agreement. In the event the Lender shall not have agreed to
release the Transferor Partners from all liability under the Loan Documents or
the Lender shall have placed terms and conditions on the Transferor Partners
that are unacceptable to them, the Transferor Agent may terminate this Agreement
by written notice given to the BRI Partnership within fifteen (15) business days
after the Transferor Agent has received in writing notice that the Lender has
refused to release the Transferor Partners from liability under the Loan
Documents or has imposed such unacceptable terms and conditions. If the
Transferor Agent gives timely notice of termination to the BRI Partnership, this
Agreement shall terminate without further action by any party, and,
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thereafter this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive termination of this
Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private placement of common stock or other equity
securities of BRI (the "Private Placement"). The Transferor Partners shall
supply any documentation and additional information required by BRI in order to
complete the offering materials in connection with the Public Offering or the
Private Placement. The obligation of the BRI Partnership to proceed with the
Closing of the transactions contemplated by this Agreement is expressly
conditioned upon the successful completion of the Public Offering and the
Private Placement raising a minimum of $75,000,000.00. If the Public Placement
and the Private Placement do not in the aggregate complete offerings which raise
a minimum of $75,000,000 as aforesaid prior to the Closing Date hereunder, the
BRI Partnership shall have the right to terminate this Agreement effective as of
the Closing Date, and, thereafter this Agreement shall be void and without
recourse to all parties except for provisions which are expressly stated to
survive termination of this Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
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SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors and permitted
assigns. In no event shall the Transferor Partners have the right to assign or
transfer its right to receive BRI Partnership Units.
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18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
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18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner and Borrower Corporate
General Partner hereby appoints the Transferor Agent as its agent for the
purpose of performing the administrative activities to be performed under this
Agreement, including, without limitation, delivering and receiving notices on
behalf of the Transferor Partners, the Borrower Corporate General Partner and
the Transferor Partnership, preparing the Transferor Allocation Schedule,
waiving conditions to closing (provided that delivery of the consideration as
provided herein to the Transferor Partners may not be waived by the Transferor
Agent) and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the Transferor Partners pursuant to the terms of this
Agreement. Each Transferor Partner and the Transferor Partnership hereby agrees
that the fees and expenses attributable to this transaction will be divided into
two categories: (i) those fees which can be specifically allocated to the
Transferor Partnership due to said fees solely benefiting it ("Direct Costs")
and (ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the proposes of
this
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Section 19.03, each of the Transferor Partners hereby agrees that: (i) QPI shall
be entitled to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and the management
companies, as described in the PPM, by the other Transferor Partnerships and
related entities (collectively, the "Related Entities"), which shall be Indirect
Costs; (ii) to the extent it is determined that APC is due any fee as described
in Section 14.01 hereof, up to $1,000,000 of such fee (which may be paid at
Closing or held back in an escrow account by the Transferor Agent until such
time as the amount of such fee, if any, is determined) shall be included as
Indirect Costs, with any such fee in excess of $1,000,000 to APC being the sole
responsibility of QPI; and (iii) all legal and accounting fees of counsel and
advisors to the Transferor Agent and the Related Entities shall also be Indirect
Costs. Each of the Transferor Partners acknowledges and agrees that (i) any and
all Direct Costs shall be allocated based on the pro rata number of BRI
Partnership Units allocated to each of them with respect to their interest in
the Transferor Partnership and (ii) any and all Indirect Costs shall be
allocated among the Transferor Partners and the Related Entities at Closing
based on the pro rata number of BRI Partnership Units allocated at Closing to
each of them. Each of the Transferor Partners further acknowledges and agrees
that the Transferor Agent shall be authorized to determine the allocations of
the transaction costs and expenses to be allocated in accordance with the
provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners and the Borrower Corporate General Partner hereby irrevocably
constitutes and appoints the Transferor Agent with unrestricted power of
substitution and resubstitution, as the attorney-in-fact for the undersigned,
coupled with an interest, with power and authority to act in its name and on its
behalf to execute, acknowledge, deliver, swear to, file, or record in the
appropriate public offices such documents and instruments as may be necessary or
appropriate in the sole judgment of the Transferor Agent to carry out the
provisions of this Agreement and the transactions contemplated hereby including,
without limitation, execution of such title affidavits, non-imputation and
fairways affidavits and gap indemnities as are required by the terms of this
Agreement and endorsement, assignment and transfer of the issued and outstanding
stock of the Borrower Corporate General Partner currently owned by the
Transferor Partnership to the Transferor Agent.
19.05 Time of Effectiveness. The Transferor Partners and the Borrower
Corporate General Partner acknowledge and agree that this Agreement and the
agreements attached as Exhibits hereto will not be binding and effective unless
and until all of the parties hereto and thereto have executed counterparts to
such agreements and, to the extent that any agreements or documents relating to
this Agreement (such as partnership assignments or other similar closing
documents) are
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executed prior to the Closing, the Transferor Agent is authorized on behalf of
each Transferor Partner and the Borrower Corporate General Partner to hold all
such agreements in escrow pending the Closing, at which time the Transferor
Agent shall be authorized to deliver such documents on behalf of the Transferor
Partners and the Borrower Corporate General Partner to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and Morton Gorn, Stephen Gorn and John Colvin and
their affiliated entities and spouses (collectively, the "GGC Parties") from any
and all liability arising out of the transactions contemplated hereby and the
operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS:
- ------------------------------- -------------------------------------------
Name:
As Trustee of Irving Gisner u/w/o Trust
WITNESS:
- ------------------------------- -------------------------------------------
Slova Gisner
WITNESS:
- ------------------------------- -------------------------------------------
Arlene Gorn
WITNESS:
- ------------------------------- -------------------------------------------
Samuel G. Gorn
WITNESS:
- ------------------------------- -------------------------------------------
Morton Gorn
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WITNESS:
- ------------------------------- -------------------------------------------
Name:
For the Estate of Harry S. Miller
WITNESS:
- ------------------------------- -------------------------------------------
Name:
As Trustee of Harold Miller u/w/o Trust
WITNESS:
- ------------------------------- -------------------------------------------
Irvin Miller
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION, a
Maryland corporation
By:
- ------------------------------- ----------------------------------------
Name:
Title:
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BORROWER CORPORATE GENERAL PARTNER:
WITNESS: WARREN PARK FUNDING, INC.,
a Maryland corporation
By:
- ------------------------------- ----------------------------------------
Name:
Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
Its General Partner
By:
- ------------------------------- ----------------------------------------
Name:
Title:
WITNESS:
- ------------------------------- -------------------------------------------
Morton Gorn, solely for the purposes of
Section 19.06
WITNESS:
- ------------------------------- -------------------------------------------
Stephen Gorn, solely for the purposes of
Section 19.06
WITNESS:
- ------------------------------- -------------------------------------------
John Colvin, solely for the purposes of
Section 19.06
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners
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Exhibit II - Transferor Partnership Agreement
Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Intentionally Omitted
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Borrower Partnership Agreement
Exhibit X - Assignment of Borrower General Partnership Interests
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AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE QUESTAR PROPERTY MANAGEMENT CORPORATION
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Questar Property
Management Corporation, a Maryland corporation (the "Management Company"), and
the stockholders set forth on Schedule 2.2 attached hereto (collectively the
"Stockholders"). BRI, the Management Company and the Stockholders are referred
to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI in
exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions
of this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company file
the certificate of merger or other appropriate documents prepared and executed
in accordance with the relevant provisions of the Delaware General Corporation
Law (the "Certificate of Merger") with the Secretary of State of the State of
Delaware and the Maryland General Corporation Law with the Department of
Assessments and Taxation of the State of Maryland. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date ("Closing
Date") mutually agreed to in writing by the Parties, but not later than October
31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and documents
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referred to in Section 8.10, (b) BRI shall deliver to the Company the various
certificates, instruments and documents referred to in Section 9.9, (c) the
Management Company and BRI shall file with the Secretary of State of the State
of Delaware the Certificate of Merger, (d) the Management Company and BRI shall
file with the Department of Assessments and Taxation of the State of Maryland
the Articles of Merger, (e) BRI shall deliver certificates for the BRI Shares
(as defined below) to the Stockholders, and (f) the Stockholders shall deliver
certificates for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of the Management Company, in order to
consummate the transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of any Party, each share of common stock,
$1.00 par value per share, of the Management Company ("Company Shares") issued
and outstanding immediately prior to the Effective Time shall be converted into
and represent the right to receive such number of shares of common stock, $.01
par value per share, of BRI ("BRI Common Stock") as is equal to one share of BRI
Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio" shall be
determined by dividing (i) the number of shares of BRI Common Stock equal in
value (as such value is determined at the time and in the manner provided herein
below) to $255,680 (the "Consideration Amount"), by (ii) the number of Company
Shares issued and outstanding immediately prior to the Effective Time; provided,
however, with respect to each property set forth on Exhibit 1 attached hereto,
as to which the transactions described in the applicable Related Agreement (as
defined in Section 11.6) have not been closed on or prior to the Closing Date
hereunder (a "Non-Acquired Property"), there shall be a reduction in the
Consideration Amount equal to the Reduction Amount for such property. The
Reduction Amount for each such property shall be equal to (A) .6 multiplied by
the amount of the Management Fees for such property as set forth on Exhibit 1
multiplied by (B) five (5). The shares of BRI Common Stock to be issued to the
holders of the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this
Agreement, the value of each share of BRI Common Stock ("BRI Share Value") shall
be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the period from, and including, August 1, 1997
through and including, the date of
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pricing of the Public Offering contemplated under Section 11.5 hereof, provided
that in any event the BRI Share Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Share Value (including the Fixed Floor and
Fixed Ceiling) will be adjusted as appropriate and customary upon the occurrence
of any of the following events to reflect a stock split, dividend (outside of
the ordinary course), recapitalization or other similar event outside of the
ordinary course.
(c) The Management Company and the Stockholders
acknowledge and agree that after the execution hereof, the price of the BRI
Common Stock may increase or decrease in value as the result of market
fluctuations prior and subsequent to the Public Offering. Notwithstanding these
fluctuations, once the value and number of BRI Shares have been established as
provided in this Section 1.5, BRI will not be required to increase or be
permitted to decrease the number of BRI Shares to be issued to the Stockholders
in the event of a decrease or increase in the market value of the BRI Common
Stock subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder
would be entitled to a fractional share of BRI Common Stock, the number of
shares of BRI Common Stock shall be rounded up or down, as the case may be, to
the nearest whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the Certificate
of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall
be the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after the
Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to do
business and is in good standing in all other jurisdictions in which the failure
to be so qualified and in good standing would have a material adverse effect on
the Management Company's business (a "Material Adverse Effect"). Such
jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2 attached
hereto, including the number of Company Shares outstanding. Such Company Shares
are held of record and beneficially owned by the Stockholders as set forth on
Schedule 2.2 attached hereto. All of such Company Shares have been duly and
validly issued, are fully paid and nonassessable and free of all preemptive
rights and were issued in compliance with applicable federal and state
securities laws. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Management Company is a party or
which are binding upon the Management Company providing for the issuance,
disposition or acquisition of any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Management Company. There are no agreements, voting trusts, proxies, or
understandings with respect to the voting, or registration under the Securities
Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this
Agreement and the agreements provided for herein by the Management Company, and
the consummation by the Management Company of all transactions contemplated
hereby and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management Company,
enforceable against the Management Company in accordance with their respective
terms, subject
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only to applicable bankruptcy, insolvency, reorganization, moratorium and other
laws for the relief of debtors theretofore or hereafter enacted to the extent
that the same may be constitutionally applied. The execution, delivery and
performance by the Management Company of this Agreement and the agreements
provided for herein, and the consummation by the Management Company of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Management Company; (b) violate
the provisions of the Certificate of Incorporation or By-laws of the Management
Company; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator which would have a Material Adverse Effect; or
(d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Management Company pursuant to, any indenture, mortgage, deed of
trust or other instrument or agreement to which the Management Company is a
party or by which the Management Company or any of its properties is or may be
bound which would have a Material Adverse Effect. Schedule 2.3 attached hereto
sets forth a true, correct and complete list of all material consents and
approvals of third parties that are required in connection with the consummation
by the Management Company of the transactions contemplated by this Agreement and
the agreements provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the Closing)
other than (i) the Contracts and (ii) the assets set forth on Schedule 2.4
hereto. The Management Company shall distribute the Excluded Assets prior to
Closing to the Shareholders. Upon the Closing, the Management Company will own
all tangible assets set forth on Schedule 2.4 attached hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements") and
on or before August 31, 1997 the Management Company shall provide unaudited
financial statements (the "Current Financial Statements") for the six-month
period ending June 30, 1997 (the "Balance Sheet Date"). The December 31
Financial Statements, the Current Financial Statements and the Closing Financial
Statement to be delivered pursuant to Section 6.8 are collectively referred to
as the "Financial Statements". The Financial Statements fairly present the
financial condition of the Management Company as of the respective statement
dates in accordance with generally accepted accounting principles consistently
applied (except as may be indicated in the notes thereto), and reflect all
liabilities, fixed, contingent or otherwise, required to be
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disclosed in such Financial Statements in accordance with generally accepted
accounting principles (subject, in the case of any unaudited interim financial
statements, to normal year end adjustments). The Financial Statements shall be
certified by the Management Company's chief financial officer.
2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course of
business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of the
date of Closing, the Management Company shall have no liabilities or obligations
(absolute or contingent) for borrowed money and shall have no other liabilities
or obligations (absolute or contingent) of any kind, other than (a) liabilities
and obligations incurred in the ordinary course of the Management Company's
business which are either (i) in the aggregate, not material, or (ii) approved
by the BRI Partnership in writing; and (b) liabilities resulting from or
incurred in the ordinary course of business arising under the Contracts. For
purposes of this Subsection 2.6, "material" means any amount in excess of
$50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the Management
Company or the Stockholders, proceeding or investigation pending or threat
thereof, against the Management Company or the Stockholders which questions the
validity of this Agreement or the right of the Management Company or the
Stockholders to enter into it, or which might result in or have, either
individually or in the aggregate, a Material Adverse Effect on the Management
Company. The Management Company is not in violation of or in default with
respect to any judgment, order, writ, injunction, decree or rule of any court,
administrative agency or governmental authority or any regulation of any
administrative agency or governmental authority except for such violations or
defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims thereunder.
The Management Company has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Management Company's knowledge, there
are no material disputes with underwriters of any such Insurance Policies and
there are no pending or threatened terminations with respect to any of such
policies.
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2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development which would have a Material Adverse Effect on
the business, properties, assets, condition or prospects of the Management
Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns
and information statements required to be filed by or on behalf of the
Management Company, or for which the Management Company may have any liability,
have been accurately prepared in all material respects and duly and timely filed
(or requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation or
matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The Management Company has not executed an
extension or waiver that is currently in effect of any statute of limitations on
the assessment or collection of any tax.
(c) Neither the Management Company, nor the
Stockholders, know of (A) any audit or investigation of the Management Company
with respect to any liability for taxes relating to the Management Company, or
(B) any threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and
complete copy of the Federal Income Tax Return for 1996 for the Management
Company, as filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of
account of the Management Company, all federal, state and local income,
franchise, property and other tax returns filed by the Management Company, and
all other books and records of the Management Company are in all material
respects complete and correct and have been maintained in accordance with good
business practice and in accordance with all applicable procedures required by
laws and regulations.
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2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true,
complete and correct list of the following contracts and agreements, whether
written or oral (collectively, the "Contracts"):
(i) all management contracts to which the
Management Company is a party;
(ii) all loan agreements, indentures,
mortgages and guaranties to which any Management Company is a party or by which
the Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title
retention agreements, security agreements, personal property leases and lease
purchase agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other
understandings or arrangements between the Management Company and any
stockholder or affiliate of the Management Company except those described in the
Financial Statements or in writing to BRI; and
(v) any other material agreement or contract
entered into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached
hereto:
(i) each Contract is a valid and binding
agreement of the Management Company, enforceable against the Management Company
in accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management
Company and the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
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(iii) To the knowledge of the Management
Company and the Stockholders, the Management Company is not in breach of or
default under any Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute such a default, result in a
loss of rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto except for such defaults, losses, liens, changes
or encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management
Company and the Stockholders, there is no existing breach or default by any
other party to any Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute a default by such other party,
result in a loss of rights or result in the creation of any lien, charge or
encumbrance thereunder or pursuant thereto except, in each case, as would not
have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.12, the
continuation, validity and effectiveness of each Contract will not be affected
by the Merger
(d) True, correct and complete copies of all
Contracts have previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management
Company has all requisite licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local
authorities necessary to conduct its business and own and operate its assets
(collectively, the "Permits") except as would not have a Material Adverse
Effect. The Management Company is not in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, disposal of hazardous substances,
land use or similar matters) relating to its properties, the violation of which
would have a Material Adverse Effect on the Management Company or its
properties. The business of the Management Company does not violate, in any
material respect, any federal, state, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment discrimination, occupational safety, environmental protection,
hazardous waste (as defined in the Resource Conservation and Recovery Act, as
amended, and the regulations adopted pursuant thereto), conservation, or corrupt
practices, the enforcement of which would have a Material Adverse Effect on the
Management Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have a
Material Adverse Effect.
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2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached hereto,
since the Balance Sheet Date, the Management Company has not entered into any
transaction which is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, the Management Company has
not:
(a) Incurred any material obligation or liability
for borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge
or other encumbrance any assets of the Management Company;
(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Management Company and which are
necessary for the execution and delivery by the Management Company of this
Agreement and the documents to be executed and delivered by the Management
Company in connection herewith are set forth on Schedule 2.16 attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees
of the Management Company, along with the position and the annual rate of
compensation of each such person.
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(b) Schedule 2.17 contains a complete and accurate
list of all Employee Benefit Plans (as defined below) maintained, or contributed
to, by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes the Management Company.
Complete and accurate copies of (i) all Employee Benefits Plans, (ii) all
related trust agreements, insurance contracts and summary plan descriptions, and
(iii) all annual reports filed on IRS Form 5500, 5500C or 5500R for the last
three plan years for each Employee Benefit Plan, have been delivered to the BRI.
Each Employee Benefit Plan has been administered in all material respects in
accordance with its terms and each of the Management Company and the ERISA
Affiliates has in all material respects met its obligations with respect to such
Employee Benefit Plan and has made all required contributions thereto. The
Management Company and all Employee Benefit Plans are in compliance in all
material respects with the currently applicable provisions of ERISA and the Code
and the regulations thereunder.
(c) There are no investigations by an governmental
entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders), suits or proceedings
against or involving any Employee Benefit Plan or asserting any rights or claims
to benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and revocation has
not been threatened, no such Employee Benefit Plan has been amended since the
date of its most recent
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determination letter or application therefor in any respect, and no act or
omission has occurred, that would likely result in a revocation of such
determination.
(e) Neither the Management Company nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(f) At no time has the Management Company or any
ERISA Affiliate been obligated to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any
Employee Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code and insurance conversion privileges under state law.
3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and
authority to enter into and deliver this Agreement and the other agreements
provided for herein and to consummate the transactions contemplated hereby and
thereby. This Agreement and all such other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby
constitute the valid and legally binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (c) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the Company Shares of
such Stockholder pursuant to, any indenture, mortgage, deed of trust or other
instrument or agreement to which such Stockholder is a party or by
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which such Stockholder is or may be bound. Schedule 3.1 attached hereto sets
forth a true, correct and complete list of all consents and approvals of third
parties that are required in connection with the consummation by such
Stockholder of the transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the Registration Rights Agreement (as defined
below).
(b) Such Stockholder understands that the BRI Shares
to be issued to Stockholder will not be registered under the Act, or the
securities laws of any state ("Blue Sky Laws") by reason of a specific exemption
or exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that,
for the reasons set forth in paragraphs (a) and (b) above, the BRI Shares may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under the
Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter issued
by the Securities and Exchange Commission to the effect that a proposed transfer
of the BRI Shares may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon BRI receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Stockholder must bear the economic risk of an investment in the BRI Shares for
an indefinite period of time. Such Stockholder acknowledges, represents and
agrees that (i) his or her economic circumstances are such that he or she is
able to bear all risks of the investment in BRI and the BRI Shares for an
indefinite period of time, including the risk of a complete loss of his or her
investment in the BRI Shares, (ii) he or she has knowledge and experience in
financial and business matters sufficient to evaluate the risks of investment in
BRI, and (iii) he or she has consulted with his or her own separate counsel and
tax advisor, to the extent necessary, as to all legal and taxation matters
covered by this
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Agreement and has not relied upon BRI, its affiliates or its legal counsel and
advisors for any explanation of the application of the various United States or
state securities laws or tax laws with regard to his or her acquisition of the
BRI Shares. Such Stockholder further acknowledges and represents that he or she
has made his or her own independent investigation of BRI and the business
conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment
in BRI involves substantial risks; such Stockholder acknowledges that he or she
has (i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and information
relevant to its decision to enter into this Agreement and to invest in BRI,
including, without limitation, BRI's SEC Filings (as defined below) and the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of BRI and its management concerning
his or her investment in BRI and the transactions contemplated hereby, which
questions were answered to his or her satisfaction.
(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her
hereunder will not be registered under the Act in reliance upon the
exemption afforded by Section 4(2) thereof for transactions by an
issuer not involving any public offering, and will not be registered or
qualified under any other applicable securities laws;
(ii) Until such time as the following legend is no
longer required, the BRI Shares will bear a legend substantially to the
effect of the following:
"The securities represented by this
certificate have not been registered under
the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state.
The securities may not be offered, sold,
transferred, pledged or otherwise disposed
of without an effective registration statement
under the Act and under any applicable state
securities laws, receipt of a no-action
letter issued by the Securities and Exchange
Commission (together with either
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registration or an, exemption under applicable
state securities laws) or an opinion of counsel
(which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.)
that the proposed transaction will be exempt
from registration under the Act and its
applicable state securities laws"; and
(iii) BRI reserves the right to place a stop
order against the transfer of the BRI Shares and to refuse to effect any
transfers thereof, in the absence of satisfying the conditions contained in the
foregoing legend.
(g) The address of each Stockholder set forth on
Schedule 2.2 attached hereto is the address of such Stockholder's principal
residence or principal place of business, and such Stockholder has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal residence or principal place
of business is situated.
(h) The provisions of this Section 3.2 shall survive
the Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and to
carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied; and (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other documents
and instruments contemplated hereby and the performance by BRI of its
obligations hereunder and thereunder do not and will not constitute a default
under,
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or conflict with or violate, any provision of the Certificate of
Incorporation or By-Laws of BRI or any other material agreement to which BRI is
a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as filed
with the Securities and Exchange Commission, and all Quarterly Reports on Form
10-Q and Current Reports on Form 8-K filed by BRI with the Securities and
Exchange Commission since December 31, 1996 (the "SEC Filings"). The financial
statements of BRI included or incorporated by reference in the SEC Filings and
the PPM have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects the consolidated assets, liabilities and financial position of BRI as
of the dates thereof and the consolidated results of its operations and changes
in cash flow for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year ended adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of BRI in connection with the valid execution and delivery
of this Agreement by BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI
consists of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares
were issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly authorized,
validly issued, fully paid, nonassessable and free and clear of all preemptive
rights and of any lien, claim, change, pledge, encumbrance, limitation,
agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy, reorganization
or other similar proceedings are pending or, to BRI's knowledge, threatened
against BRI, nor are any of such proceedings anticipated or contemplated by BRI.
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4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Management Company or the Stockholders otherwise in writing)
and represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax
returns and information statements required to be filed by or on behalf of BRI
or for which BRI may have any liability have been accurately prepared in all
material respects and duly and timely filed (or requests for extensions have
been timely filed, granted and have not expired). As of the date hereof, there
is no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
(b) BRI has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or
investigation of BRI with respect to any liability for taxes relating to BRI, or
(B) any threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue
after Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
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4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI or
its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to enter
into it, or which would likely have, either individually or in the aggregate, a
material adverse effect on the business of BRI as such is presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries
or affiliates is the owner as described in the SEC Filings with good title to
its properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material adverse
effect on BRI and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals, consents, permits, licenses or certificates of occupancy (whether
governmental or otherwise) required for the current use and operation of any of
its properties have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
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5. Access to Information
5.1 Access to Management, Properties and Records; Due
Diligence. From the date of this Agreement until the Closing Date, BRI may
examine the accounting books and other business and financial records, plans,
reports and documents of the Management Company and its business, including all
corporate records, tax returns, contracts, licenses, business plans and
projections, audits and audit work papers, employee benefit plans, employee
records, management plans and records, and any and all other information
reasonably requested by BRI, and the Management Company and the Stockholders
shall cooperate fully with BRI's representatives and make themselves available,
so that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or copies
of, all such books and records. The Management Company shall furnish to BRI such
financial and operating data and other information as to the assets and the
business of the Management Company as BRI shall reasonably request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable
to the conduct of the business of the Management Company;
(b) Duly and timely file, or obtain appropriate
extensions of the time for filing, all material reports, and all tax returns and
other material documents required to be filed with federal, state, local and
other authorities;
(c) Unless the Management Company is contesting the
same in good faith and has established reasonable reserves therefor, pay when
required to be paid all taxes indicated by the Management Company's tax returns
or otherwise lawfully levied or assessed upon it, or any of its properties or
assets, or which it is otherwise legally obligated to pay; and
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(d) Comply in all material respects with each and
every undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may be
applicable:
(a) Take any action to materially amend the
Management Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other
corporate securities of the Management Company or grant any option or issue any
warrant to purchase or subscribe to any of such securities or issue any
securities convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of
the Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or
permit any other entity to merge into it; acquire any stock or partnership
interests; effect any reorganization or recapitalization; or acquire any
material assets of any other person, partnership, corporation or business
organization;
(f) Make any election or give any consent under the
Code or the tax statutes of any state or other jurisdiction or make any
termination, revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
(g) Waive any rights of material value relating to
the business of the Management Company;
(h) Modify, amend, alter or terminate any of its
management contracts or other material contracts;
(i) Take or permit any act or omission constituting
a breach or default under any Contract;
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(j) Fail to (i) preserve the possession and control
of its assets and business, (ii) keep in faithful service its present officers
and key employees, (iii) preserve the goodwill of its customers and others
having business relations with it, and (iv) keep and preserve its business
existing on the date hereof until the Closing Date provided that the Management
Company and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its
books, accounts and records in the customary manner and in the ordinary or
regular course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent
pursuant to the management contracts, enter into any leases, contracts,
agreements or understandings other than those entered into in the ordinary
course of business calling for payments which in the aggregate do not exceed
$50,000 for each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in
the future.
6.3 Taxes. The Management Company shall, on a timely basis,
file all tax returns for and pay any and all taxes which shall become due or
shall have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and 3
hereof being untrue in any respect.
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6.7 Continuing Obligation to Inform. From time to time prior
to the Closing, the Management Company and the Stockholders will deliver or
cause to be delivered to BRI supplemental information concerning events
subsequent to the date hereof which would render any statement, representation
or warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations and
statements of cash flows with respect to the Management Company for the one
month period that ended immediately preceding the month in which the Closing
occurs, certified by the Management Company's chief financial officer (the
"Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth on
Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate the
transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance
Policies in full force and effect following the Closing in accordance with the
terms thereof, or to maintain other insurance policies having terms that are no
less favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations and
warranties set forth in Sections 2 and 3 shall be true on and as of the Closing
Date as though such representations and warranties were made on and as of such
date, except for any changes permitted by the terms hereof or consented to in
writing by BRI. The Management Company and the Stockholders shall have performed
and complied with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or carry
out this Agreement shall have been taken.
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7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Management Company and the Stockholders
of the transactions contemplated by this Agreement shall have consented to,
authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the Stockholder
to consummate the transactions contemplated by this Agreement, including,
without limitation, those consents and approvals set forth on Schedule 2.3
attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly authorized
the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with BRI,
and Morton Gorn shall have executed and delivered a Consulting Agreement with
BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
7.10 Closing Deliveries. BRI shall have received at or prior
to the Closing each of the following documents:
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(a) such contracts, files and other data and
documents pertaining to the business of the Management Company as BRI may
reasonably request;
(b) copies of the general ledgers and books of
account of the Management Company, and all federal, state and local income,
franchise, property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and
the Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management
Company attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by the
Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates
as BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties of
BRI in this Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes consented to in writing by the Management Company. BRI shall have
performed and complied with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for
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the consummation by BRI of the transactions contemplated by this Agreement shall
have consented to, authorized, permitted or approved such transactions.
8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or approval
is required in order for BRI to consummate the transactions contemplated by this
Agreement, including, without limitation, those set forth on Schedule 8.4
attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the Closing
Date, substantially in the form of Exhibit 5 attached hereto and as to such
matters as may be reasonably requested by the Management Company or its counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with BRI,
and Morton Gorn shall have executed and delivered a Consulting Agreement with
BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such
other documents evidencing satisfaction of the conditions specified in this
Section 9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the
State of Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting
to the incumbency of BRI's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of BRI's Certificate of Incorporation;
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(d) the Registration Rights Agreement in the form
attached hereto as Exhibit 6 duly executed by BRI; and
(e) such other documents, instruments or certificates
as the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the
parties proceed to Closing, each Stockholder agrees, severally and not jointly,
to indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting from
any breach or default by the Management Company or such Stockholder of any
obligation of the Management Company or such Stockholder under this Agreement or
(ii) from liabilities for borrowed money incurred by the Management Company
prior to the Closing; provided that no Stockholder shall be required to
indemnify BRI for any amounts in excess of 50% of the fair market value of the
BRI shares received by such Stockholder as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Stockholders in Section 3.2, which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Shares received by such Stockholder
(collectively, the "Cap"); and provided further that to the extent any of the
Stockholders have any indemnification obligation to BRI, the Stockholder may
elect to satisfy such indemnification obligation by directing BRI to cancel such
amount of BRI shares acquired by such Stockholder pursuant to this Agreement
having a fair market value (measured at the time such BRI shares are returned or
cancelled) equal to the indemnification obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing Date,
resulting from (A) any inaccuracy in or breach of any representation or warranty
of BRI or (B) resulting from any breach or default by BRI of any obligation of
BRI under this Agreement or (ii) from liabilities of the Management Company
accruing after the Closing (including liabilities accruing after the Closing in
connection with employee benefit plans) (except for such liabilities resulting
from a breach or default by the Stockholder or the Management Company for which
BRI is indemnified under Section 9(a) above); provided that BRI shall not be
required to indemnify any Stockholder under Section 9(b)(i) for any amounts in
excess of 50% of the fair market value as of the date such
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indemnification obligation is satisfied of the BRI shares received by such
Stockholder (except for indemnification obligations with respect to Section 4.10
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI shares received by such
Stockholder; and
(c) The indemnification obligations of the
Stockholders and BRI, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 14. No such claim for indemnification shall be
deemed due and payable unless such claim has been agreed to by the parties or
has been finally determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability
under this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually reduce
the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall
have any liability for claims made under Section 9(a) or 9(b) unless and until
the aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding $50,000).
(f) The indemnification provided in this Section 9
shall be the sole and exclusive remedy after the Closing Date for damages
available to BRI or the Stockholders for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to BRI or the Management Company.
(g) Each of the Stockholders, the Management Company
and BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of
notice of the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action. In
case any such action is brought, the Stockholders shall be entitled, but shall
not be required, to participate in the defense
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thereof, or the Stockholders may elect to take charge of and control the defense
of such action, provided that the stockholders shall agree to pursue the defense
of such action or claim in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued.
10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall
terminate at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement
may be terminated by the mutual written agreement of the Parties. In the event
of such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further obligation
or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of
the Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if BRI
desires to consummate the Merger in accordance with the terms of this Agreement
and the Management Company or the Stockholders willfully refuse to perform their
respective obligations hereunder, BRI, at its option, shall have the right to
compel specific performance by the Management Company and the Stockholders to
close the transaction hereunder, in which event BRI shall have the right to
recover from the Management Company and the Stockholders the amount of all
reasonable legal fees, court costs and other litigation expenses incurred by BRI
in connection with the exercise of its right of specific performance.
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11.4 BRI's Default. If as of the Closing Date, BRI has failed
to perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days after
the Closing Date, and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if the
Management Company desires to consummate the Merger in accordance with the terms
of this Agreement and BRI willfully refuses to perform its obligations
hereunder, the Management Company, at its option, shall have the right to compel
specific performance by BRI to close the transaction, in which event the
Management Company (and the Stockholders) shall have the right to recover from
BRI the amount of all reasonable legal fees, court costs and other litigation
expenses incurred in connection with the exercise of their right of specific
performance.
11.5 Public Offering Condition. BRI has informed the
Management Company and the Shareholders that in connection with the consummation
of the various Related Transactions (as defined in Section 11.6 hereof), BRI
intends to undertake either or both of (i) a public offering of common stock or
other equity securities of BRI (the "Public Offering"), or (ii) a private
placement of common stock or other equity securities of BRI (the "Private
Placement"). The Management Company and the Shareholders shall supply any
documentation and additional information required by BRI in order to complete
the offering materials in connection with the Public Offering or the Private
Placement. The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum of
$75,000,000.00. If the Public Placement and the Private Placement do not in the
aggregate complete offerings which raise a minimum of $75,000,000 as aforesaid
prior to the Closing Date hereunder, BRI shall have the right to terminate this
Agreement effective as of the Closing Date, and, thereafter this Agreement shall
be void and without recourse to all parties except for provisions which are
expressly stated to survive termination of this Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured loans,
which agreements are more particularly described on Exhibit 4 attached hereto
(collectively the "Related Agreements"). (The transactions described in the
Related Agreements, including this Agreement, are collectively the "Related
Transactions"). Except to the extent the parties expressly agree otherwise in
writing or in that certain Kickout Agreement [as such term is defined in the
Related Agreements] (the "Kickout Agreement"), in the
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event that any of the Related Agreements is terminated pursuant to any
termination provision of any other Related Agreement or does not become
effective due to the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
unless such date is extended by the written consent of all of the parties
hereto, this Agreement shall terminate automatically simultaneously with the
termination of any such Related Agreement or upon the failure of all of the
other parties to the Related Agreement to execute the Related Agreement on or
before September 22, 1997, unless such date is extended by the written consent
of all of the parties hereto, whereupon this Agreement shall be void and without
recourse to all parties, except for provisions which are expressly stated to
survive the termination of this Agreement. The Closing under this Agreement
shall be simultaneous with the closings under the Related Agreements. Except as
provided in the Kickout Agreement, in the event the closing under any of the
Related Agreements is cancelled or postponed, the Closing under this Agreement
shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this transaction.
The Management Company understands that American Property Consultants ("APC")
had entered into a fee arrangement with Questar Properties, Inc. ("QPI"), which
might not apply to this transaction in any event. Nevertheless, to the extent
that it is determined that a commission or fee is owed to APC, it shall be the
obligation of the Stockholders and QPI in accordance with the provisions of
Section 12.3 hereof. In no event shall any commission be due unless and until
Closing has occurred and the transactions contemplated hereby have been
consummated and in no event shall BRI or the Management Company have any
obligation to pay any commission to APC.
12.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Management Company due to said
fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot be
so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the purposes of this Section 12.2, each of the
Stockholders hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent
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contribution of up to eighteen (18) properties and the management companies, as
described in the PPM by certain transferor partnerships and related entities
(collectively, the "Related Entities"), which shall be Indirect Costs (ii) to
the extent it is determined that APC is due any fee as described in Section 12.1
hereof, up to $1,000,000 of such fee (which may be paid at Closing or held back
in an escrow account by Questar Investment Corporation until such time as the
amount of such fee, if any, is determined) shall be included as Indirect Costs,
with any such fee in excess of $1,000,000 to APC being the sole responsibility
of QPI; and (iii) all legal and accounting fees of counsel and advisors to
Questar Investment Corporation shall also be Indirect Costs. Each of the
Stockholders acknowledges and agrees that (i) any and all Direct Costs shall be
allocated to each of them with respect to their interest in the Management
Company and (ii) any and all Indirect Costs shall be allocated among the
Stockholders and Related Entities at Closing based on the pro rata number of BRI
shares allocated at Closing to each of them. Each of the Stockholders further
acknowledges and agrees that Questar Investment Corporation shall be authorized
to determine the allocations of the transaction costs and expenses to be
allocated in accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be
made between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of
the Contracts;
(b) wages and pension benefits of all persons
employed by the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable
to the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in
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the furnishing of all information and documentation necessary to prepare such
calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any of
such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
13. Notices
All notices under this Agreement shall be in writing and shall
be delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Management Company, the Stockholders or BRI
shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Management c/o Questar Properties, Inc.
Company or the 124 Slade Avenue, Suite 200
Stockholders: Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
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<PAGE>
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business day
after deposited with such delivery service; or, if mailed, one business day
after the date deposited with the U.S. Postal Service.
14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions of
9(c)) shall survive the Closing indefinitely and an action based thereon may be
brought at any time after the Closing Date. Representations and warranties in
Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days after the
expiration of the applicable statute of limitations. Except as set forth in the
immediately preceding sentence or otherwise as specified in this Agreement, the
representations, warranties, covenants and other obligations of the Management
Company and the Stockholders set forth in Sections 2 (other than Section 2.10)
and 3 (other than Section 3.2) and the representations and warranties, covenants
and other obligations of BRI contained in Section 4 (other than Sections 4.7,
4.9 and 4.10) shall survive until 12 months after the Closing Date and
thereafter during the pendency of any claim based upon a breach thereof, and no
action based thereon shall be commenced more than 12 months after the Closing
Date. Except as otherwise specifically provided in this Agreement, no other
representations, warranties, covenants or other obligations of the Management
Company, the Stockholders or BRI set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after Closing.
15. Assignment. No Party may assign all or any portion of its interest
under this Agreement without the prior written consent of the other Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions contemplated
herein, and all prior agreements, understandings, representations and
statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provision hereof may be waived, modified, amended, discharged
or terminated except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or termination is
sought, and then only to the extent set forth in such instrument.
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<PAGE>
17. Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to assign
or transfer their right to receive BRI Shares.
20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to BRI
of a duly executed counterpart of this Agreement and the satisfaction of all
conditions under which such offer is made, but such offer may be revoked by BRI
by written notice given at any time prior to such acceptance and satisfaction.
21. Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
23. Publicity. In no event shall any Party issue any press release or
otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties have
consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be deemed
to limit or impair in any way any Party's ability to disclose the details of the
transactions contemplated
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<PAGE>
hereby to the accountants, attorneys or other authorized agents of such Party or
as such Party deems necessary or desirable pursuant to any court or governmental
order or applicable securities regulations or financial reporting requirements,
nor shall BRI be precluded from describing this Agreement and the transactions
herein contemplated in any filings made pursuant to any securities laws or in
connection with the Public Offering, or from filing this Agreement, the Exhibits
hereto and the Schedules as exhibits to any filings by BRI required by any
securities laws. Notwithstanding the foregoing, no Party hereunder shall have
any liability by reason of the details of the transactions contemplated hereby
becoming known by means beyond the reasonable control of such Party. The
provisions of this Section 24 shall survive the Closing.
24. Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE QUESTAR PROPERTY MANAGEMENT CORPORATION
By: /s/ Stephen M. Gorn
- -------------------------- ----------------------------------------
Name:
Title:
WITNESS: STOCKHOLDERS:
By: /s/ Morton Gorn
- -------------------------- ----------------------------------------
Morton Gorn
By: /s/ Stephen M. Gorn
- -------------------------- ----------------------------------------
Stephen M. Gorn
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<PAGE>
By: /s/ John B. Colvin
- -------------------------- ----------------------------------------
John B. Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
By: /s/ David J. Olney
- -------------------------- ----------------------------------------
Name: David J. Olney
Title: Senior Vice President
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List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE QUESTAR MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Questar Management
Company, a Maryland corporation (the "Management Company"), and the stockholders
set forth on Schedule 2.2 attached hereto (collectively the "Stockholders").
BRI, the Management Company and the Stockholders are referred to collectively
herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI in
exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions
of this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company file
the certificate of merger or other appropriate documents prepared and executed
in accordance with the relevant provisions of the Delaware General Corporation
Law (the "Certificate of Merger") with the Secretary of State of the State of
Delaware and the Maryland General Corporation Law with the Department of
Assessments and Taxation of the State of Maryland. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date ("Closing
Date") mutually agreed to in writing by the Parties, but not later than October
31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and documents
referred to in Section 8.10, (b) BRI shall deliver to the Company the various
certificates, instruments and documents referred to in Section 9.9, (c) the
Management
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Company and BRI shall file with the Secretary of State of the State of Delaware
the Certificate of Merger, (d) the Management Company and BRI shall file with
the Department of Assessments and Taxation of the State of Maryland the Articles
of Merger, (e) BRI shall deliver certificates for the BRI Shares (as defined
below) to the Stockholders, and (f) the Stockholders shall deliver certificates
for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of the Management Company, in order to
consummate the transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of any Party, each share of common stock,
$1.00 par value per share, of the Management Company ("Company Shares") issued
and outstanding immediately prior to the Effective Time shall be converted into
and represent the right to receive such number of shares of common stock, $.01
par value per share, of BRI ("BRI Common Stock") as is equal to one share of BRI
Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio" shall be
determined by dividing (i) the number of shares of BRI Common Stock equal in
value (as such value is determined at the time and in the manner provided herein
below) to $2,676,010 (the "Consideration Amount"), by (ii) the number of Company
Shares issued and outstanding immediately prior to the Effective Time; provided,
however, with respect to each property set forth on Exhibit 1 attached hereto,
as to which the transactions described in the applicable Related Agreement (as
defined in Section 11.6) have not been closed on or prior to the Closing Date
hereunder (a "Non-Acquired Property"), there shall be a reduction in the
Consideration Amount equal to the Reduction Amount for such property. The
Reduction Amount for each such property shall be equal to (A) .6 multiplied by
the amount of the Management Fees for such property as set forth on Exhibit 1
multiplied by (B) five (5). The shares of BRI Common Stock to be issued to the
holders of the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this
Agreement, the value of each share of BRI Common Stock ("BRI Share Value") shall
be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the period from, and including, August 1, 1997
through and including, the date of pricing of the Public Offering contemplated
under Section 11.5 hereof, provided that in any event the BRI Share Value shall
be not less than $10.50 per share (the "Fixed Floor") and not greater than
$11.75 per share (the "Fixed Ceiling"). The foregoing calculation of BRI Share
Value (including the Fixed Floor and Fixed Ceiling) will be
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adjusted as appropriate and customary upon the occurrence of any of the
following events to reflect a stock split, dividend (outside of the ordinary
course), recapitalization or other similar event outside of the ordinary course.
(c) The Management Company and the Stockholders
acknowledge and agree that after the execution hereof, the price of the BRI
Common Stock may increase or decrease in value as the result of market
fluctuations prior and subsequent to the Public Offering. Notwithstanding these
fluctuations, once the value and number of BRI Shares have been established as
provided in this Section 1.5, BRI will not be required to increase or be
permitted to decrease the number of BRI Shares to be issued to the Stockholders
in the event of a decrease or increase in the market value of the BRI Common
Stock subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the nearest
whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the Certificate
of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after the
Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to do
business and is in good standing in all other jurisdictions in which the failure
to be so qualified and in good standing would have a material adverse effect on
the Management Company's business (a "Material Adverse Effect"). Such
jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2 attached
hereto, including the number of Company Shares outstanding. Such Company Shares
are held of record and beneficially owned by the Stockholders as set forth on
Schedule 2.2 attached hereto. All of such Company Shares have been duly and
validly issued, are fully paid and nonassessable and free of all preemptive
rights and were issued in compliance with applicable federal and state
securities laws. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Management Company is a party or
which are binding upon the Management Company providing for the issuance,
disposition or acquisition of any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Management Company. There are no agreements, voting trusts, proxies, or
understandings with respect to the voting, or registration under the Securities
Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this
Agreement and the agreements provided for herein by the Management Company, and
the consummation by the Management Company of all transactions contemplated
hereby and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management Company,
enforceable against the Management Company in accordance with their respective
terms, subject only to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws for the relief of debtors theretofore or hereafter
enacted to the extent that the same may be constitutionally applied. The
execution, delivery and performance by the
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Management Company of this Agreement and the agreements provided for herein, and
the consummation by the Management Company of the transactions contemplated
hereby and thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Management Company; (b) violate the provisions of
the Certificate of Incorporation or By-laws of the Management Company; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator which would have a Material Adverse Effect; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Management
Company pursuant to, any indenture, mortgage, deed of trust or other instrument
or agreement to which the Management Company is a party or by which the
Management Company or any of its properties is or may be bound which would have
a Material Adverse Effect. Schedule 2.3 attached hereto sets forth a true,
correct and complete list of all material consents and approvals of third
parties that are required in connection with the consummation by the Management
Company of the transactions contemplated by this Agreement and the agreements
provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the Closing)
other than (i) the Contracts and (ii) the assets set forth on Schedule 2.4
hereto. The Management Company shall distribute the Excluded Assets prior to
Closing to the Shareholders. Upon the Closing, the Management Company will own
all tangible assets set forth on Schedule 2.4 attached hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements") and
on or before August 31, 1997 the Management Company shall provide unaudited
financial statements (the "Current Financial Statements") for the six-month
period ending June 30, 1997 (the "Balance Sheet Date"). The December 31
Financial Statements, the Current Financial Statements and the Closing Financial
Statement to be delivered pursuant to Section 6.8 are collectively referred to
as the "Financial Statements". The Financial Statements fairly present the
financial condition of the Management Company as of the respective statement
dates in accordance with generally accepted accounting principles consistently
applied (except as may be indicated in the notes thereto), and reflect all
liabilities, fixed, contingent or otherwise, required to be disclosed in such
Financial Statements in accordance with generally accepted accounting principles
(subject, in the case of any unaudited interim financial statements, to normal
year end adjustments). The Financial Statements shall be certified by the
Management Company's chief financial officer.
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<PAGE>
2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course of
business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of the
date of Closing, the Management Company shall have no liabilities or obligations
(absolute or contingent) for borrowed money and shall have no other liabilities
or obligations (absolute or contingent) of any kind, other than (a) liabilities
and obligations incurred in the ordinary course of the Management Company's
business which are either (i) in the aggregate, not material, or (ii) approved
by the BRI Partnership in writing; and (b) liabilities resulting from or
incurred in the ordinary course of business arising under the Contracts. For
purposes of this Subsection 2.6, "material" means any amount in excess of
$50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the Management
Company or the Stockholders, proceeding or investigation pending or threat
thereof, against the Management Company or the Stockholders which questions the
validity of this Agreement or the right of the Management Company or the
Stockholders to enter into it, or which might result in or have, either
individually or in the aggregate, a Material Adverse Effect on the Management
Company. The Management Company is not in violation of or in default with
respect to any judgment, order, writ, injunction, decree or rule of any court,
administrative agency or governmental authority or any regulation of any
administrative agency or governmental authority except for such violations or
defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims thereunder.
The Management Company has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Management Company's knowledge, there
are no material disputes with underwriters of any such Insurance Policies and
there are no pending or threatened terminations with respect to any of such
policies.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development
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which would have a Material Adverse Effect on the business, properties, assets,
condition or prospects of the Management Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns
and information statements required to be filed by or on behalf of the
Management Company, or for which the Management Company may have any liability,
have been accurately prepared in all material respects and duly and timely filed
(or requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation or
matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The Management Company has not executed an
extension or waiver that is currently in effect of any statute of limitations on
the assessment or collection of any tax.
(c) Neither the Management Company, nor the
Stockholders, know of (A) any audit or investigation of the Management Company
with respect to any liability for taxes relating to the Management Company, or
(B) any threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and
complete copy of the Federal Income Tax Return for 1996 for the Management
Company, as filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of
account of the Management Company, all federal, state and local income,
franchise, property and other tax returns filed by the Management Company, and
all other books and records of the Management Company are in all material
respects complete and correct and have been maintained in accordance with good
business practice and in accordance with all applicable procedures required by
laws and regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true,
complete and correct list of the following contracts and agreements, whether
written or oral (collectively, the "Contracts"):
(i) all management contracts to which the
Management Company is a party;
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(ii) all loan agreements, indentures, mortgages
and guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title
retention agreements, security agreements, personal property leases and lease
purchase agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other
understandings or arrangements between the Management Company and any
stockholder or affiliate of the Management Company except those described in the
Financial Statements or in writing to BRI; and
(v) any other material agreement or contract
entered into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached
hereto:
(i) each Contract is a valid and binding
agreement of the Management Company, enforceable against the Management Company
in accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company
and the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
(iii) To the knowledge of the Management Company
and the Stockholders, the Management Company is not in breach of or default
under any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance, thereunder
or pursuant thereto except for such defaults, losses, liens, changes or
encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management
Company and the Stockholders, there is no existing breach or default by any
other party to any
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Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto except, in each case, as would not have a
Material Adverse Effect.
(d) Except as set forth on Schedule 2.12, the
continuation, validity and effectiveness of each Contract will not be affected
by the Merger
(e) True, correct and complete copies of all
Contracts have previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management
Company has all requisite licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local
authorities necessary to conduct its business and own and operate its assets
(collectively, the "Permits") except as would not have a Material Adverse
Effect. The Management Company is not in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, disposal of hazardous substances,
land use or similar matters) relating to its properties, the violation of which
would have a Material Adverse Effect on the Management Company or its
properties. The business of the Management Company does not violate, in any
material respect, any federal, state, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment discrimination, occupational safety, environmental protection,
hazardous waste (as defined in the Resource Conservation and Recovery Act, as
amended, and the regulations adopted pursuant thereto), conservation, or corrupt
practices, the enforcement of which would have a Material Adverse Effect on the
Management Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have a
Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached hereto,
since the Balance Sheet Date, the Management Company has not entered into any
transaction which is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, the Management Company has
not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge
or other encumbrance any assets of the Management Company;
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(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Management Company and which are
necessary for the execution and delivery by the Management Company of this
Agreement and the documents to be executed and delivered by the Management
Company in connection herewith are set forth on Schedule 2.16 attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of
the Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate
list of all Employee Benefit Plans (as defined below) maintained, or contributed
to, by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the
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regulations under Section 414(o) of the Code), any of which includes the
Management Company. Complete and accurate copies of (i) all Employee Benefits
Plans, (ii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iii) all annual reports filed on IRS Form 5500, 5500C or
5500R for the last three plan years for each Employee Benefit Plan, have been
delivered to the BRI. Each Employee Benefit Plan has been administered in all
material respects in accordance with its terms and each of the Management
Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Management Company and all Employee Benefit Plans are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder.
(c) There are no investigations by an governmental
entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders), suits or proceedings
against or involving any Employee Benefit Plan or asserting any rights or claims
to benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and revocation has
not been threatened, no such Employee Benefit Plan has been amended since the
date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would likely result in a
revocation of such determination.
(e) Neither the Management Company nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(f) At no time has the Management Company or any
ERISA Affiliate been obligated to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any
Employee Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code and insurance conversion privileges under state law.
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3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and
authority to enter into and deliver this Agreement and the other agreements
provided for herein and to consummate the transactions contemplated hereby and
thereby. This Agreement and all such other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby
constitute the valid and legally binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (c) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the Company Shares of
such Stockholder pursuant to, any indenture, mortgage, deed of trust or other
instrument or agreement to which such Stockholder is a party or by which such
Stockholder is or may be bound. Schedule 3.1 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required in connection with the consummation by such Stockholder of the
transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the Registration Rights Agreement (as defined
below).
(b) Such Stockholder understands that the BRI Shares
to be issued to Stockholder will not be registered under the Act, or the
securities laws of any state ("Blue Sky Laws") by reason of a specific exemption
or exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on
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<PAGE>
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that,
for the reasons set forth in paragraphs (a) and (b) above, the BRI Shares may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under the
Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter issued
by the Securities and Exchange Commission to the effect that a proposed transfer
of the BRI Shares may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon BRI receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Stockholder must bear the economic risk of an investment in the BRI Shares for
an indefinite period of time. Such Stockholder acknowledges, represents and
agrees that (i) his or her economic circumstances are such that he or she is
able to bear all risks of the investment in BRI and the BRI Shares for an
indefinite period of time, including the risk of a complete loss of his or her
investment in the BRI Shares, (ii) he or she has knowledge and experience in
financial and business matters sufficient to evaluate the risks of investment in
BRI, and (iii) he or she has consulted with his or her own separate counsel and
tax advisor, to the extent necessary, as to all legal and taxation matters
covered by this Agreement and has not relied upon BRI, its affiliates or its
legal counsel and advisors for any explanation of the application of the various
United States or state securities laws or tax laws with regard to his or her
acquisition of the BRI Shares. Such Stockholder further acknowledges and
represents that he or she has made his or her own independent investigation of
BRI and the business conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment
in BRI involves substantial risks; such Stockholder acknowledges that he or she
has (i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and information
relevant to its decision to enter into this Agreement and to invest in BRI,
including, without limitation, BRI's SEC Filings (as defined below) and the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of BRI and its management concerning
his or her investment in BRI and the transactions contemplated hereby, which
questions were answered to his or her satisfaction.
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(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her
hereunder will not be registered under the Act in reliance upon the
exemption afforded by Section 4(2) thereof for transactions by an
issuer not involving any public offering, and will not be registered or
qualified under any other applicable securities laws;
(ii) Until such time as the following legend is no
longer required, the BRI Shares will bear a legend substantially to the
effect of the following:
"The securities represented by this
certificate have not been registered under
the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state.
The securities may not be offered, sold,
transferred, pledged or otherwise disposed
of without an effective registration
statement under the Act and under any
applicable state securities laws, receipt of
a no-action letter issued by the Securities
and Exchange Commission (together with
either registration or an, exemption under
applicable state securities laws) or an
opinion of counsel (which opinion and which
counsel shall be acceptable to Berkshire
Realty Company, Inc.) that the proposed
transaction will be exempt from registration
under the Act and its applicable state
securities laws"; and
(iii) BRI reserves the right to place a stop order
against the transfer of the BRI Shares and to refuse to effect any
transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address of each Stockholder set forth on
Schedule 2.2 attached hereto is the address of such Stockholder's principal
residence or principal place of business, and such Stockholder has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal residence or principal place
of business is situated.
(h) The provisions of this Section 3.2 shall survive
the Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
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4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and to
carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied; and (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other documents
and instruments contemplated hereby and the performance by BRI of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the Certificate of
Incorporation or By-Laws of BRI or any other material agreement to which BRI is
a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as filed
with the Securities and Exchange Commission, and all Quarterly Reports on Form
10-Q and Current Reports on Form 8-K filed by BRI with the Securities and
Exchange Commission since December 31, 1996 (the "SEC Filings"). The financial
statements of BRI included or incorporated by reference in the SEC Filings and
the PPM have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects the consolidated assets, liabilities and financial position of BRI as
of the dates thereof and the consolidated results of its operations and changes
in cash flow for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year ended adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part
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of BRI in connection with the valid execution and delivery of this Agreement by
BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI
consists of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares
were issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly authorized,
validly issued, fully paid, nonassessable and free and clear of all preemptive
rights and of any lien, claim, change, pledge, encumbrance, limitation,
agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy, reorganization
or other similar proceedings are pending or, to BRI's knowledge, threatened
against BRI, nor are any of such proceedings anticipated or contemplated by BRI.
4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Management Company or the Stockholders otherwise in writing)
and represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax
returns and information statements required to be filed by or on behalf of BRI
or for which BRI may have any liability have been accurately prepared in all
material respects and duly and timely filed (or requests for extensions have
been timely filed, granted and have not expired). As of the date hereof, there
is no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
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(b) BRI has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or
investigation of BRI with respect to any liability for taxes relating to BRI, or
(B) any threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue
after Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI or
its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to enter
into it, or which would likely have, either individually or in the aggregate, a
material adverse effect on the business of BRI as such is presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries
or affiliates is the owner as described in the SEC Filings with good title to
its properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material adverse
effect on BRI and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals,
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consents, permits, licenses or certificates of occupancy (whether governmental
or otherwise) required for the current use and operation of any of its
properties have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii) any fees and
charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
5. Access to Information
5.1 Access to Management, Properties and Records; Due
Diligence. From the date of this Agreement until the Closing Date, BRI may
examine the accounting books and other business and financial records, plans,
reports and documents of the Management Company and its business, including all
corporate records, tax returns, contracts, licenses, business plans and
projections, audits and audit work papers, employee benefit plans, employee
records, management plans and records, and any and all other information
reasonably requested by BRI, and the Management Company and the Stockholders
shall cooperate fully with BRI's representatives and make themselves available,
so that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or copies
of, all such books and records. The Management Company shall furnish to BRI such
financial and operating data and other information as to the assets and the
business of the Management Company as BRI shall reasonably request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable
to the conduct of the business of the Management Company;
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(b) Duly and timely file, or obtain appropriate
extensions of the time for filing, all material reports, and all tax returns and
other material documents required to be filed with federal, state, local and
other authorities;
(c) Unless the Management Company is contesting the
same in good faith and has established reasonable reserves therefor, pay when
required to be paid all taxes indicated by the Management Company's tax returns
or otherwise lawfully levied or assessed upon it, or any of its properties or
assets, or which it is otherwise legally obligated to pay; and
(d) Comply in all material respects with each and
every undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may be
applicable:
(a) Take any action to materially amend the
Management Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other
corporate securities of the Management Company or grant any option or issue any
warrant to purchase or subscribe to any of such securities or issue any
securities convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of
the Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or
permit any other entity to merge into it; acquire any stock or partnership
interests; effect any reorganization or recapitalization; or acquire any
material assets of any other person, partnership, corporation or business
organization;
(f) Make any election or give any consent under the
Code or the tax statutes of any state or other jurisdiction or make any
termination, revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
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(g) Waive any rights of material value relating to
the business of the Management Company;
(h) Modify, amend, alter or terminate any of its
management contracts or other material contracts;
(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control
of its assets and business, (ii) keep in faithful service its present officers
and key employees, (iii) preserve the goodwill of its customers and others
having business relations with it, and (iv) keep and preserve its business
existing on the date hereof until the Closing Date provided that the Management
Company and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its
books, accounts and records in the customary manner and in the ordinary or
regular course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent
pursuant to the management contracts, enter into any leases, contracts,
agreements or understandings other than those entered into in the ordinary
course of business calling for payments which in the aggregate do not exceed
$50,000 for each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis,
file all tax returns for and pay any and all taxes which shall become due or
shall have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
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6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and 3
hereof being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior
to the Closing, the Management Company and the Stockholders will deliver or
cause to be delivered to BRI supplemental information concerning events
subsequent to the date hereof which would render any statement, representation
or warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations and
statements of cash flows with respect to the Management Company for the one
month period that ended immediately preceding the month in which the Closing
occurs, certified by the Management Company's chief financial officer (the
"Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth on
Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate the
transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance
Policies in full force and effect following the Closing in accordance with the
terms thereof, or to maintain other insurance policies having terms that are no
less favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations and
warranties set forth in Sections 2 and 3 shall be true on and as of the Closing
Date as though such representations and warranties were made on and as of such
date, except for any changes permitted by the terms hereof or consented to in
writing by BRI. The Management Company and the Stockholders shall have performed
and complied with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or carry
out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Management Company and the Stockholders
of the transactions contemplated by this Agreement shall have consented to,
authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the Stockholder
to consummate the transactions contemplated by this Agreement, including,
without limitation, those consents and approvals set forth on Schedule 2.3
attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly authorized
the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with BRI,
and Morton Gorn shall have executed and delivered a Consulting Agreement with
BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
7.10 Closing Deliveries. BRI shall have received at or prior
to the Closing each of the following documents:
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(a) such contracts, files and other data and
documents pertaining to the business of the Management Company as BRI may
reasonably request;
(b) copies of the general ledgers and books of
account of the Management Company, and all federal, state and local income,
franchise, property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and
the Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management
Company attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by the
Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates
as BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties of
BRI in this Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes consented to in writing by the Management Company. BRI shall have
performed and complied with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by BRI of the transactions contemplated by this
Agreement shall have consented to, authorized, permitted or approved such
transactions.
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8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or approval
is required in order for BRI to consummate the transactions contemplated by this
Agreement, including, without limitation, those set forth on Schedule 8.4
attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the Closing
Date, substantially in the form of Exhibit 5 attached hereto and as to such
matters as may be reasonably requested by the Management Company or its counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with BRI,
and Morton Gorn shall have executed and delivered a Consulting Agreement with
BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such
other documents evidencing satisfaction of the conditions specified in this
Section 9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the
State of Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting
to the incumbency of BRI's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form
attached hereto as Exhibit 6 duly executed by BRI; and
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(e) such other documents, instruments or certificates
as the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the
parties proceed to Closing, each Stockholder agrees, severally and not jointly,
to indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting from
any breach or default by the Management Company or such Stockholder of any
obligation of the Management Company or such Stockholder under this Agreement or
(ii) from liabilities for borrowed money incurred by the Management Company
prior to the Closing; provided that no Stockholder shall be required to
indemnify BRI for any amounts in excess of 50% of the fair market value of the
BRI shares received by such Stockholder as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Stockholders in Section 3.2, which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Shares received by such Stockholder
(collectively, the "Cap"); and provided further that to the extent any of the
Stockholders have any indemnification obligation to BRI, the Stockholder may
elect to satisfy such indemnification obligation by directing BRI to cancel such
amount of BRI shares acquired by such Stockholder pursuant to this Agreement
having a fair market value (measured at the time such BRI shares are returned or
cancelled) equal to the indemnification obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing Date,
resulting from (A) any inaccuracy in or breach of any representation or warranty
of BRI or (B) resulting from any breach or default by BRI of any obligation of
BRI under this Agreement or (ii) from liabilities of the Management Company
accruing after the Closing (including liabilities accruing after the Closing in
connection with employee benefit plans) (except for such liabilities resulting
from a breach or default by the Stockholder or the Management Company for which
BRI is indemnified under Section 9(a) above); provided that BRI shall not be
required to indemnify any Stockholder under Section 9(b)(i) for any amounts in
excess of 50% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI shares received by such Stockholder (except
for indemnification obligations with respect to Section 4.10 which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI shares received by such Stockholder; and
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(c) The indemnification obligations of the
Stockholders and BRI, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 14. No such claim for indemnification shall be
deemed due and payable unless such claim has been agreed to by the parties or
has been finally determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability
under this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually reduce
the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall
have any liability for claims made under Section 9(a) or 9(b) unless and until
the aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding $50,000).
(f) The indemnification provided in this Section 9
shall be the sole and exclusive remedy after the Closing Date for damages
available to BRI or the Stockholders for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to BRI or the Management Company.
(g) Each of the Stockholders, the Management Company
and BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of
notice of the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action. In
case any such action is brought, the Stockholders shall be entitled, but shall
not be required, to participate in the defense thereof, or the Stockholders may
elect to take charge of and control the defense of such action, provided that
the stockholders shall agree to pursue the defense of such action or claim in
good faith by appropriate actions or proceedings promptly taken or instituted
and diligently pursued.
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10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall
terminate at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement
may be terminated by the mutual written agreement of the Parties. In the event
of such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further obligation
or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of
the Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if BRI
desires to consummate the Merger in accordance with the terms of this Agreement
and the Management Company or the Stockholders willfully refuse to perform their
respective obligations hereunder, BRI, at its option, shall have the right to
compel specific performance by the Management Company and the Stockholders to
close the transaction hereunder, in which event BRI shall have the right to
recover from the Management Company and the Stockholders the amount of all
reasonable legal fees, court costs and other litigation expenses incurred by BRI
in connection with the exercise of its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed
to perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days after
the Closing Date, and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if the
Management Company desires to consummate the Merger in accordance with the terms
of this Agreement and BRI
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willfully refuses to perform its obligations hereunder, the Management Company,
at its option, shall have the right to compel specific performance by BRI to
close the transaction, in which event the Management Company (and the
Stockholders) shall have the right to recover from BRI the amount of all
reasonable legal fees, court costs and other litigation expenses incurred in
connection with the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the
Management Company and the Shareholders that in connection with the consummation
of the various Related Transactions (as defined in Section 11.6 hereof), BRI
intends to undertake either or both of (i) a public offering of common stock or
other equity securities of BRI (the "Public Offering"), or (ii) a private
placement of common stock or other equity securities of BRI (the "Private
Placement"). The Management Company and the Shareholders shall supply any
documentation and additional information required by BRI in order to complete
the offering materials in connection with the Public Offering or the Private
Placement. The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum of
$75,000,000.00. If the Public Placement and the Private Placement do not in the
aggregate complete offerings which raise a minimum of $75,000,000 as aforesaid
prior to the Closing Date hereunder, BRI shall have the right to terminate this
Agreement effective as of the Closing Date, and, thereafter this Agreement shall
be void and without recourse to all parties except for provisions which are
expressly stated to survive termination of this Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured loans,
which agreements are more particularly described on Exhibit 4 attached hereto
(collectively the "Related Agreements"). (The transactions described in the
Related Agreements, including this Agreement, are collectively the "Related
Transactions"). Except to the extent the parties expressly agree otherwise in
writing or in that certain Kickout Agreement [as such term is defined in the
Related Agreements] (the "Kickout Agreement"), in the event that any of the
Related Agreements is terminated pursuant to any termination provision of any
other Related Agreement or does not become effective due to the failure of all
of the other parties to the Related Agreement to execute the Related Agreement
on or before September 22, 1997, unless such date is extended by the written
consent of all of the parties hereto, this Agreement shall terminate
automatically simultaneously with the termination of any such Related Agreement
or upon the failure of all of the other parties to the Related Agreement to
execute the Related Agreement on or before September 22, 1997, unless such date
is extended by the written consent of all of the parties hereto, whereupon this
Agreement shall be void and without recourse to all parties, except for
provisions which are expressly
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stated to survive the termination of this Agreement. The Closing under this
Agreement shall be simultaneous with the closings under the Related Agreements.
Except as provided in the Kickout Agreement, in the event the closing under any
of the Related Agreements is cancelled or postponed, the Closing under this
Agreement shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this transaction.
The Management Company understands that American Property Consultants ("APC")
had entered into a fee arrangement with Questar Properties, Inc. ("QPI"), which
might not apply to this transaction in any event. Nevertheless, to the extent
that it is determined that a commission or fee is owed to APC, it shall be the
obligation of the Stockholders and QPI in accordance with the provisions of
Section 12.3 hereof. In no event shall any commission be due unless and until
Closing has occurred and the transactions contemplated hereby have been
consummated and in no event shall BRI or the Management Company have any
obligation to pay any commission to APC.
21.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Management Company due to said
fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot be
so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the purposes of this Section 12.2, each of the
Stockholders hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM by certain transferor partnerships and related entities (collectively, the
"Related Entities"), which shall be Indirect Costs (ii) to the extent it is
determined that APC is due any fee as described in Section 12.1 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by Questar Investment Corporation until such time as the amount of such
fee, if any, is determined) shall be included as Indirect Costs, with any such
fee in excess of $1,000,000 to APC being the sole responsibility of QPI; and
(iii) all legal and accounting fees of counsel and advisors to Questar
Investment Corporation shall also be Indirect Costs. Each of the Stockholders
acknowledges and agrees that (i) any and all Direct Costs shall be allocated to
each of them with respect to their interest in the Management Company and (ii)
any and all Indirect Costs shall be allocated among
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the Stockholders and Related Entities at Closing based on the pro rata number of
BRI shares allocated at Closing to each of them. Each of the Stockholders
further acknowledges and agrees that Questar Investment Corporation shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be
made between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of
the Contracts;
(b) wages and pension benefits of all persons
employed by the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable
to the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation necessary
to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any of
such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
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13. Notices
All notices under this Agreement shall be in writing and shall
be delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Management Company, the Stockholders or BRI
shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Management c/o Questar Properties, Inc.
Company or the 124 Slade Avenue, Suite 200
Stockholders: Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business day
after deposited with such delivery service; or, if mailed, one business day
after the date deposited with the U.S. Postal Service.
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14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions of
9(c)) shall survive the Closing indefinitely and an action based thereon may be
brought at any time after the Closing Date. Representations and warranties in
Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days after the
expiration of the applicable statute of limitations. Except as set forth in the
immediately preceding sentence or otherwise as specified in this Agreement, the
representations, warranties, covenants and other obligations of the Management
Company and the Stockholders set forth in Sections 2 (other than Section 2.10)
and 3 (other than Section 3.2) and the representations and warranties, covenants
and other obligations of BRI contained in Section 4 (other than Sections 4.7,
4.9 and 4.10) shall survive until 12 months after the Closing Date and
thereafter during the pendency of any claim based upon a breach thereof, and no
action based thereon shall be commenced more than 12 months after the Closing
Date. Except as otherwise specifically provided in this Agreement, no other
representations, warranties, covenants or other obligations of the Management
Company, the Stockholders or BRI set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions contemplated
herein, and all prior agreements, understandings, representations and
statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provision hereof may be waived, modified, amended, discharged
or terminated except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or termination is
sought, and then only to the extent set forth in such instrument.
17. Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to assign
or transfer their right to receive BRI Shares.
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<PAGE>
20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to BRI
of a duly executed counterpart of this Agreement and the satisfaction of all
conditions under which such offer is made, but such offer may be revoked by BRI
by written notice given at any time prior to such acceptance and satisfaction.
21. Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
23. Publicity. In no event shall any Party issue any press release or
otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties have
consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be deemed
to limit or impair in any way any Party's ability to disclose the details of the
transactions contemplated hereby to the accountants, attorneys or other
authorized agents of such Party or as such Party deems necessary or desirable
pursuant to any court or governmental order or applicable securities regulations
or financial reporting requirements, nor shall BRI be precluded from describing
this Agreement and the transactions herein contemplated in any filings made
pursuant to any securities laws or in connection with the Public Offering, or
from filing this Agreement, the Exhibits hereto and the Schedules as exhibits to
any filings by BRI required by any securities laws. Notwithstanding the
foregoing, no Party hereunder shall have any liability by reason of the details
of the transactions contemplated hereby becoming known by means beyond the
reasonable control of such Party. The provisions of this Section 24 shall
survive the Closing.
24. Counterparts. This Agreement may be executed and delivered
in any number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE QUESTAR MANAGEMENT COMPANY
By: /s/ Stephen M. Gorn
- -------------------------- ----------------------------------------
Name:
Title:
WITNESS: STOCKHOLDERS:
By: /s/ Morton Gorn
- -------------------------- ----------------------------------------
Morton Gorn
By: /s/ Stephen M. Gorn
- -------------------------- ----------------------------------------
Stephen M. Gorn
By: /s/ John B. Colvin
- -------------------------- ----------------------------------------
John B. Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
By: /s/ David J. Olney
- -------------------------- ----------------------------------------
Name: David J. Olney
Title: Senior Vice President
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<PAGE>
List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE KINGSWOOD MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Kingswood Management
Company, a Maryland corporation (the "Management Company"), and the
stockholders set forth on Schedule 2.2 attached hereto (collectively the
"Stockholders"). BRI, the Management Company and the Stockholders are
referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI
in exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company
file the certificate of merger or other appropriate documents prepared and
executed in accordance with the relevant provisions of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of
the State of Delaware and the Maryland General Corporation Law with the
Department of Assessments and Taxation of the State of Maryland. The Merger
shall have the effects set forth in Section 259 of the Delaware General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date
("Closing Date") mutually agreed to in writing by the Parties, but not later
than October 31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and
documents referred to in Section 8.10, (b) BRI shall deliver to the Company
the various certificates, instruments and documents referred to in Section
9.9, (c) the Management
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<PAGE>
Company and BRI shall file with the Secretary of State of the State of Delaware
the Certificate of Merger, (d) the Management Company and BRI shall file with
the Department of Assessments and Taxation of the State of Maryland the Articles
of Merger, (e) BRI shall deliver certificates for the BRI Shares (as defined
below) to the Stockholders, and (f) the Stockholders shall deliver certificates
for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the Effective
Time, take any action, including executing and delivering any document, in the
name and on behalf of the Management Company, in order to consummate the
transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of any Party, each share of common stock, no
par value per share, of the Management Company ("Company Shares") issued and
outstanding immediately prior to the Effective Time shall be converted into
and represent the right to receive such number of shares of common stock, $.01
par value per share, of BRI ("BRI Common Stock") as is equal to one share of
BRI Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio"
shall be determined by dividing (i) the number of shares of BRI Common Stock
equal in value (as such value is determined at the time and in the manner
provided herein below) to $65,755
(the "Consideration Amount"), by (ii) the number of Company Shares issued and
outstanding immediately prior to the Effective Time; provided, however, with
respect to each property set forth on Exhibit 1 attached hereto, as to which
the transactions described in the applicable Related Agreement (as defined in
Section 11.6) have not been closed on or prior to the Closing Date hereunder
(a "Non-Acquired Property"), there shall be a reduction in the Consideration
Amount equal to the Reduction Amount for such property. The Reduction Amount
for each such property shall be equal to (A) .6 multiplied by the amount of
the Management Fees for such property as set forth on Exhibit 1 multiplied by
(B) five (5). The shares of BRI Common Stock to be issued to the holders of
the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this Agreement,
the value of each share of BRI Common Stock ("BRI Share Value") shall be the
average of the closing price per share, rounded to the nearest one-thousandth,
of one share of common stock of BRI as such price is published by The Wall
Street Journal for the period from, and including, August 1, 1997 through and
including, the date of pricing of the Public Offering contemplated under
Section 11.5 hereof, provided that in any event the BRI Share Value shall be
not less than $10.50 per share (the "Fixed Floor") and not greater than $11.75
per share (the "Fixed Ceiling"). The foregoing calculation of BRI Share Value
(including the Fixed Floor and Fixed Ceiling) will be
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<PAGE>
adjusted as appropriate
and customary upon the occurrence of any of the following events to reflect a
stock split, dividend (outside of the ordinary course), recapitalization or
other similar event outside of the ordinary course.
(c) The Management Company and the Stockholders acknowledge
and agree that after the execution hereof, the price of the BRI Common Stock
may increase or decrease in value as the result of market fluctuations prior
and subsequent to the Public Offering. Notwithstanding these fluctuations,
once the value and number of BRI Shares have been established as provided in
this Section 1.5, BRI will not be required to increase or be permitted to
decrease the number of BRI Shares to be issued to the Stockholders in the
event of a decrease or increase in the market value of the BRI Common Stock
subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the
nearest whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after
the Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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<PAGE>
2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to
do business and is in good standing in all other jurisdictions in which the
failure to be so qualified and in good standing would have a material adverse
effect on the Management Company's business (a "Material Adverse Effect").
Such jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2
attached hereto, including the number of Company Shares outstanding. Such
Company Shares are held of record and beneficially owned by the Stockholders
as set forth on Schedule 2.2 attached hereto. All of such Company Shares have
been duly and validly issued, are fully paid and nonassessable and free of all
preemptive rights and were issued in compliance with applicable federal and
state securities laws. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Management Company is
a party or which are binding upon the Management Company providing for the
issuance, disposition or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Management Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this Agreement
and the agreements provided for herein by the Management Company, and the
consummation by the Management Company of all transactions contemplated hereby
and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management
Company, enforceable against the Management Company in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors
theretofore or hereafter enacted to the extent that the same may be
constitutionally applied. The execution, delivery and performance by the
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<PAGE>
Management Company of this Agreement and the agreements provided for herein,
and the consummation by the Management Company of the transactions
contemplated hereby and thereby, will not, with or without the giving of
notice or the passage of time or both, (a) violate the provisions of any law,
rule or regulation applicable to the Management Company; (b) violate the
provisions of the Certificate of Incorporation or By-laws of the Management
Company; (c) violate any judgment, decree, order or award of any court, governme
ntal body or arbitrator which would have a Material Adverse Effect; or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or cause
the creation of any lien, charge or encumbrance upon the properties or assets
of the Management Company pursuant to, any indenture, mortgage, deed of trust
or other instrument or agreement to which the Management Company is a party or
by which the Management Company or any of its properties is or may be bound
which would have a Material Adverse Effect. Schedule 2.3 attached hereto sets
forth a true, correct and complete list of all material consents and approvals
of third parties that are required in connection with the consummation by the
Management Company of the transactions contemplated by this Agreement and the
agreements provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the
Closing) other than (i) the Contracts and (ii) the assets set forth on
Schedule 2.4 hereto. The Management Company shall distribute the Excluded
Assets prior to Closing to the Shareholders. Upon the Closing, the Management
Company will own all tangible assets set forth on Schedule 2.4 attached
hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements")
and on or before August 31, 1997 the Management Company shall provide
unaudited financial statements (the "Current Financial Statements") for the
six-month period ending June 30, 1997 (the "Balance Sheet Date"). The
December 31 Financial Statements, the Current Financial Statements and the
Closing Financial Statement to be delivered pursuant to Section 6.8 are
collectively referred to as the "Financial Statements". The Financial
Statements fairly present the financial condition of the Management Company as
of the respective statement dates in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto), and reflect all liabilities, fixed, contingent or otherwise,
required to be disclosed in such Financial Statements in accordance with
generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments). The
Financial Statements shall be certified by the Management Company&WP1-9;s
chief financial officer.
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<PAGE>
2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course
of business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of
the date of Closing, the Management Company shall have no liabilities or
obligations (absolute or contingent) for borrowed money and shall have no
other liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Management Company's business which are either (i) in the aggregate, not
material, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Contracts. For purposes of this Subsection 2.6, "material"
means any amount in excess of $50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the
Management Company or the Stockholders, proceeding or investigation pending or
threat thereof, against the Management Company or the Stockholders which
questions the validity of this Agreement or the right of the Management
Company or the Stockholders to enter into it, or which might result in or
have, either individually or in the aggregate, a Material Adverse Effect on
the Management Company. The Management Company is not in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule
of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority except for
such violations or defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims
thereunder. The Management Company has done nothing to reduce or impair the
insurance afforded by the Insurance Policies. To the Management Company's
knowledge, there are no material disputes with underwriters of any such
Insurance Policies and there are no pending or threatened terminations with
respect to any of such policies.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development
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<PAGE>
which would have a Material Adverse Effect on the business, properties, assets,
condition or prospects of the Management Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Management
Company, or for which the Management Company may have any liability, have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation
or matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due
with respect to completed and settled examinations or concluded litigation
have been paid.
(b) The Management Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) Neither the Management Company, nor the Stockholders,
know of (A) any audit or investigation of the Management Company with respect
to any liability for taxes relating to the Management Company, or (B) any
threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and complete
copy of the Federal Income Tax Return for 1996 for the Management Company, as
filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of account
of the Management Company, all federal, state and local income, franchise,
property and other tax returns filed by the Management Company, and all other
books and records of the Management Company are in all material respects complet
e and correct and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true, complete
and correct list of the following contracts and agreements, whether written or
oral (collectively, the "Contracts"):
(i) all management contracts to which the Management
Company is a party;
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<PAGE>
(ii) all loan agreements, indentures, mortgages and
guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title retention
agreements, security agreements, personal property leases and lease purchase
agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other understandings
or arrangements between the Management Company and any stockholder or
affiliate of the Management Company except those described in the Financial
Statements or in writing to BRI; and
(v) any other material agreement or contract entered
into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached hereto:
(i) each Contract is a valid and binding agreement of
the Management Company, enforceable against the Management Company in
accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company and
the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
(iii) To the knowledge of the Management Company and
the Stockholders, the Management Company is not in breach of or default under
any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto except for such defaults, losses, liens,
changes or encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management Company
and the Stockholders, there is no existing breach or default by any other
party to any
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<PAGE>
Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto except, in each case, as would not have a
Material Adverse Effect.
(c) Except as set forth on Schedule 2.12, the continuation,
validity and effectiveness of each Contract will not be affected by the Merger
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management Company
has all requisite licenses, permits and certificates, including environmental,
health and safety permits, from federal, state and local authorities necessary
to conduct its business and own and operate its assets (collectively, the
"Permits") except as would not have a Material Adverse Effect. The
Management Company is not in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties, the violation of which would have
a Material Adverse Effect on the Management Company or its properties. The
business of the Management Company does not violate, in any material respect,
any federal, state, local or foreign laws, regulations or orders (including,
but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste
(as defined in the Resource Conservation and Recovery Act, as amended, and the
regulations adopted pursuant thereto), conservation, or corrupt practices, the
enforcement of which would have a Material Adverse Effect on the Management
Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have
a Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached
hereto, since the Balance Sheet Date, the Management Company has not entered
into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the
Management Company has not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge or
other encumbrance any assets of the Management Company;
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<PAGE>
(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or
regulation which must be obtained or satisfied by the Management Company and
which are necessary for the execution and delivery by the Management Company
of this Agreement and the documents to be executed and delivered by the
Management Company in connection herewith are set forth on Schedule 2.16
attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of the
Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate list of
all Employee Benefit Plans (as defined below) maintained, or contributed to,
by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined under Section 414(m)
of the Code or the
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regulations under Section 414(o) of the Code), any of which includes the
Management Company. Complete and accurate copies of (i) all Employee Benefits
Plans, (ii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iii) all annual reports filed on IRS Form 5500, 5500C or
5500R for the last three plan years for each Employee Benefit Plan, have been
delivered to the BRI. Each Employee Benefit Plan has been administered in all
material respects in accordance with its terms and each of the Management
Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Management Company and all Employee Benefit Plans are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder.
(c) There are no investigations by an governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders), suits or proceedings against
or involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit
Plans are qualified and the plans and the trusts related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively, of
the Code, no such determination letter has been revoked and revocation has not
been threatened, no such Employee Benefit Plan has been amended since the date
of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would likely result in a
revocation of such determination.
(e) Neither the Management Company nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(f) At no time has the Management Company or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
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3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and authority
to enter into and deliver this Agreement and the other agreements provided for
herein and to consummate the transactions contemplated hereby and thereby.
This Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby constitute
the valid and legally binding obligations of such Stockholder, enforceable
against such Stockholder in accordance with their respective terms, subject
only to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or
arbitrator; or (c) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
Company Shares of such Stockholder pursuant to, any indenture, mortgage, deed
of trust or other instrument or agreement to which such Stockholder is a party
or by which such Stockholder is or may be bound. Schedule 3.1 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation by such
Stockholder of the transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of
the Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the
registration requirements or exemption provisions of any applicable securities
laws and in accordance with the terms of the Registration Rights Agreement (as
defined below).
(b) Such Stockholder understands that the BRI Shares to be
issued to Stockholder will not be registered under the Act, or the securities
laws of any state ("Blue Sky Laws") by reason of a specific exemption or
exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on
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such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that, for the
reasons set forth in paragraphs (a) and (b) above, the BRI Shares may not be
offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under
the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter
issued by the Securities and Exchange Commission to the effect that a proposed
transfer of the BRI Shares may be made without registration under the Act,
together with either registration or an exemption under applicable Blue Sky
Laws, or (iii) upon BRI receiving an opinion of counsel knowledgeable in
securities law matters (and which opinion and counsel shall be reasonably
acceptable to BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and
that, accordingly, such Stockholder must bear the economic risk of an
investment in the BRI Shares for an indefinite period of time. Such
Stockholder acknowledges, represents and agrees that (i) his or her economic
circumstances are such that he or she is able to bear all risks of the
investment in BRI and the BRI Shares for an indefinite period of time,
including the risk of a complete loss of his or her investment in the BRI
Shares, (ii) he or she has knowledge and experience in financial and business
matters sufficient to evaluate the risks of investment in BRI, and (iii) he or
she has consulted with his or her own separate counsel and tax advisor, to the
extent necessary, as to all legal and taxation matters covered by this
Agreement and has not relied upon BRI, its affiliates or its legal counsel and
advisors for any explanation of the application of the various United States
or state securities laws or tax laws with regard to his or her acquisition of
the BRI Shares. Such Stockholder further acknowledges and represents that he
or she has made his or her own independent investigation of BRI and the
business conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment in BRI
involves substantial risks; such Stockholder acknowledges that he or she has
(i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and
information relevant to its decision to enter into this Agreement and to
invest in BRI, including, without limitation, BRI's SEC Filings (as defined
below) and the Private Placement Memorandum of BRI, dated as of August 25,
1997 (the "PPM") and (iii) had the opportunity to ask questions of BRI and its
management concerning his or her investment in BRI and the transactions
contemplated hereby, which questions were answered to his or her satisfaction.
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(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her hereunder will not be
registered under the Act in reliance upon the exemption afforded by Section
4(2) thereof for transactions by an issuer not involving any public offering,
and will not be registered or qualified under any other applicable securities
laws;
(ii) Until such time as the following legend is no longer required,
the BRI Shares will bear a legend substantially to the effect of the
following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state. The securities may not be offered, sold,
transferred, pledged or otherwise disposed of without an effective
registration statement under the Act and under any applicable state securities
laws, receipt of a no-action letter issued by the Securities and Exchange
Commission (together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which opinion and
which counsel shall be acceptable to Berkshire Realty Company, Inc.) that the
proposed transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) BRI reserves the right to place a stop order against the
transfer of the BRI Shares and to refuse to effect any transfers thereof, in
the absence of satisfying the conditions contained in the foregoing legend.
(g) The address of each Stockholder set forth on Schedule
2.2 attached hereto is the address of such Stockholder's principal residence
or principal place of business, and such Stockholder has no present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such principal residence or principal place of
business is situated.
(h) The provisions of this Section 3.2 shall survive the
Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
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4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and
to carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to
the extent that the same may be constitutionally applied; and (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other
documents and instruments contemplated hereby and the performance by BRI of
its obligations hereunder and thereunder do not and will not constitute a
default under, or conflict with or violate, any provision of the Certificate
of Incorporation or By-Laws of BRI or any other material agreement to which
BRI is a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as
filed with the Securities and Exchange Commission, and all Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed by BRI with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of BRI included or incorporated by reference in the SEC
Filings and the PPM have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated assets, liabilities and financial
position of BRI as of the dates thereof and the consolidated results of its
operations and changes in cash flow for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year ended
adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part
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of BRI in connection with the valid execution and delivery of this Agreement by
BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI consists
of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares were
issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free and clear of
all preemptive rights and of any lien, claim, change, pledge, encumbrance,
limitation, agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other similar proceedings are pending or, to BRI's
knowledge, threatened against BRI, nor are any of such proceedings anticipated
or contemplated by BRI.
4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has received
all of the documents described herein as delivered thereto (unless it has
notified the Management Company or the Stockholders otherwise in writing) and
represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax returns and
information statements required to be filed by or on behalf of BRI or for
which BRI may have any liability have been accurately prepared in all material
respects and duly and timely filed (or requests for extensions have been
timely filed, granted and have not expired). As of the date hereof, there is
no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
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(b) BRI has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or investigation of
BRI with respect to any liability for taxes relating to BRI, or (B) any
threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue after
Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI
or its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to
enter into it, or which would likely have, either individually or in the
aggregate, a material adverse effect on the business of BRI as such is
presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries or
affiliates is the owner as described in the SEC Filings with good title to its
properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material
adverse effect on BRI and BRI is not in material violation of any
Environmental Laws to such an extent that it would have a material adverse
effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals,
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consents, permits, licenses or certificates of occupancy (whether governmental
or otherwise) required for the current use and operation of any of its
properties have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii) any fees and
charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
5. Access to Information
5.1 Access to Management, Properties and Records; Due Diligence.
From the date of this Agreement until the Closing Date, BRI may examine the
accounting books and other business and financial records, plans, reports and
documents of the Management Company and its business, including all corporate
records, tax returns, contracts, licenses, business plans and projections,
audits and audit work papers, employee benefit plans, employee records,
management plans and records, and any and all other information reasonably
requested by BRI, and the Management Company and the Stockholders shall
cooperate fully with BRI's representatives and make themselves available, so
that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or
copies of, all such books and records. The Management Company shall furnish
to BRI such financial and operating data and other information as to the
assets and the business of the Management Company as BRI shall reasonably
request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable to the
conduct of the business of the Management Company;
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(b) Duly and timely file, or obtain appropriate extensions
of the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(c) Unless the Management Company is contesting the same in
good faith and has established reasonable reserves therefor, pay when required
to be paid all taxes indicated by the Management Company's tax returns or
otherwise lawfully levied or assessed upon it, or any of its properties or
assets, or which it is otherwise legally obligated to pay; and
(d) Comply in all material respects with each and every
undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may
be applicable:
(a) Take any action to materially amend the Management
Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other corporate
securities of the Management Company or grant any option or issue any warrant
to purchase or subscribe to any of such securities or issue any securities
convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of the
Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or permit
any other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets
of any other person, partnership, corporation or business organization;
(f) Make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise
or settle any claim for past or present tax due;
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(g) Waive any rights of material value relating to the
business of the Management Company;
(h) Modify, amend, alter or terminate any of its management
contracts or other material contracts;
(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control of its
assets and business, (ii) keep in faithful service its present officers and
key employees, (iii) preserve the goodwill of its customers and others having
business relations with it, and (iv) keep and preserve its business existing
on the date hereof until the Closing Date provided that the Management Company
and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its books,
accounts and records in the customary manner and in the ordinary or regular
course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent pursuant to
the management contracts, enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of
business calling for payments which in the aggregate do not exceed $50,000 for
each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis, file
all tax returns for and pay any and all taxes which shall become due or shall
have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
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6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and
3 hereof being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior to
the Closing, the Management Company and the Stockholders will deliver or cause
to be delivered to BRI supplemental information concerning events subsequent
to the date hereof which would render any statement, representation or
warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations
and statements of cash flows with respect to the Management Company for the
one month period that ended immediately preceding the month in which the
Closing occurs, certified by the Management Company&WP1-9;s chief financial
officer (the "Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth
on Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate
the transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance Policies
in full force and effect following the Closing in accordance with the terms
thereof, or to maintain other insurance policies having terms that are no less
favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations
and warranties set forth in Sections 2 and 3 shall be true on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes permitted by the terms hereof or
consented to in writing by BRI. The Management Company and the Stockholders
shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or
carry out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by the Management Company and
the Stockholders of the transactions contemplated by this Agreement shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the
Stockholder to consummate the transactions contemplated by this Agreement,
including, without limitation, those consents and approvals set forth on
Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly
authorized the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
7.10. Closing Deliveries. BRI shall have received at or prior to
the Closing each of the following documents:
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(a) such contracts, files and other data and documents
pertaining to the business of the Management Company as BRI may reasonably
request;
(b) copies of the general ledgers and books of account of
the Management Company, and all federal, state and local income, franchise,
property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and the
Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management Company
attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by
the Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates as
BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties
of BRI in this Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Management Company. BRI shall
have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by BRI of the transactions
contemplated by this Agreement shall have consented to, authorized, permitted
or approved such transactions.
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8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or
approval is required in order for BRI to consummate the transactions
contemplated by this Agreement, including, without limitation, those set forth
on Schedule 8.4 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the
Closing Date, substantially in the form of Exhibit 5 attached hereto and as to
such matters as may be reasonably requested by the Management Company or its
counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting to the
incumbency of BRI's officers, the authenticity of the resolutions authorizing
the transactions contemplated by this Agreement, and the authenticity and
continuing validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form attached
hereto as Exhibit 6 duly executed by BRI; and
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(e) such other documents, instruments or certificates as
the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the parties
proceed to Closing, each Stockholder agrees, severally and not jointly, to
indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting
from any breach or default by the Management Company or such Stockholder of
any obligation of the Management Company or such Stockholder under this
Agreement or (ii) from liabilities for borrowed money incurred by the
Management Company prior to the Closing; provided that no Stockholder shall be
required to indemnify BRI for any amounts in excess of 50% of the fair market
value of the BRI shares received by such Stockholder as of the date such
indemnification obligation is satisfied (except for indemnification
obligations with respect to representations of each of the Stockholders in
Section 3.2, which shall be limited to 100% of the fair market value as of the
date such indemnification obligation is satisfied of the BRI Shares received
by such Stockholder (collectively, the "Cap"); and provided further that to
the extent any of the Stockholders have any indemnification obligation to BRI,
the Stockholder may elect to satisfy such indemnification obligation by
directing BRI to cancel such amount of BRI shares acquired by such Stockholder
pursuant to this Agreement having a fair market value (measured at the time
such BRI shares are returned or cancelled) equal to the indemnification
obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing
Date, resulting from (A) any inaccuracy in or breach of any representation or
warranty of BRI or (B) resulting from any breach or default by BRI of any
obligation of BRI under this Agreement or (ii) from liabilities of the
Management Company accruing after the Closing (including liabilities accruing
after the Closing in connection with employee benefit plans) (except for such
liabilities resulting from a breach or default by the Stockholder or the
Management Company for which BRI is indemnified under Section 9(a) above);
provided that BRI shall not be required to indemnify any Stockholder under
Section 9(b)(i) for any amounts in excess of 50% of the fair market value as
of the date such indemnification obligation is satisfied of the BRI shares
received by such Stockholder (except for indemnification obligations with
respect to Section 4.10 which shall be limited to 100% of the fair market
value as of the date such indemnification obligation is satisfied of the BRI sha
res received by such Stockholder; and
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(c) The indemnification obligations of the Stockholders
and BRI, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 14. No such claim for indemnification shall be deemed due and
payable unless such claim has been agreed to by the parties or has been
finally determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually
reduce the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall have any
liability for claims made under Section 9(a) or 9(b) unless and until the
aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 9 shall be
the sole and exclusive remedy after the Closing Date for damages available to
BRI or the Stockholders for a breach of any of the terms, conditions,
representations or warranties contained herein, and each party acknowledges
and agrees that other than the representations and warranties set forth
herein, no other representations and warranties are being made with respect to
BRI or the Management Company.
(g) Each of the Stockholders, the Management Company and
BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the
other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of notice of
the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action.
In case any such action is brought, the Stockholders shall be entitled, but
shall not be required, to participate in the defense thereof, or the
Stockholders may elect to take charge of and control the defense of such
action, provided that the stockholders shall agree to pursue the defense of
such action or claim in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued.
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10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate
at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may
be terminated by the mutual written agreement of the Parties. In the event of
such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further
obligation or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of the
Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if BRI desires to consummate the Merger in accordance with the
terms of this Agreement and the Management Company or the Stockholders
willfully refuse to perform their respective obligations hereunder, BRI, at
its option, shall have the right to compel specific performance by the
Management Company and the Stockholders to close the transaction hereunder, in
which event BRI shall have the right to recover from the Management Company
and the Stockholders the amount of all reasonable legal fees, court costs and
other litigation expenses incurred by BRI in connection with the exercise of
its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed to
perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the Management Company desires to consummate the Merger in
accordance with the terms of this Agreement and BRI
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willfully refuses to perform its obligations hereunder, the Management Company,
at its option, shall have the right to compel specific performance by BRI to
close the transaction, in which event the Management Company (and the
Stockholders) shall have the right to recover from BRI the amount of all
reasonable legal fees, court costs and other litigation expenses incurred in
connection with the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the Management
Company and the Shareholders that in connection with the consummation of the
various Related Transactions (as defined in Section 11.6 hereof), BRI intends
to undertake either or both of (i) a public offering of common stock or other
equity securities of BRI (the "Public Offering"), or (ii) a private placement
of common stock or other equity securities of BRI (the "Private Placement").
The Management Company and the Shareholders shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement.
The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum
of $75,000,000.00. If the Public Placement and the Private Placement do not
in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, BRI shall have the right to
terminate this Agreement effective as of the Closing Date, and, thereafter
this Agreement shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured
loans, which agreements are more particularly described on Exhibit 4 attached
hereto (collectively the "Related Agreements"). (The transactions described
in the Related Agreements, including this Agreement, are collectively the
"Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement [as such term is
defined in the Related Agreements] (the "Kickout Agreement"), in the event
that any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to
the failure of all of the other parties to the Related Agreement to execute
the Related Agreement on or before September 22, 1997, unless such date is
extended by the written consent of all of the parties hereto, this Agreement
shall terminate automatically simultaneously with the termination of any such
Related Agreement or upon the failure of all of the other parties to the
Related Agreement to execute the Related Agreement on or before September 22,
1997, unless such date is extended by the written consent of all of the
parties hereto, whereupon this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly
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<PAGE>
stated to survive the termination of this Agreement. The Closing under this
Agreement shall be simultaneous with the closings under the Related Agreements.
Except as provided in the Kickout Agreement, in the event the closing under any
of the Related Agreements is cancelled or postponed, the Closing under this
Agreement shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this
transaction. The Management Company understands that American Property
Consultants ("APC") had entered into a fee arrangement with Questar
Properties, Inc. ("QPI"), which might not apply to this transaction in any
event. Nevertheless, to the extent that it is determined that a commission or
fee is owed to APC, it shall be the obligation of the Stockholders and QPI in
accordance with the provisions of Section 12.3 hereof. In no event shall any
commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall BRI or the
Management Company have any obligation to pay any commission to APC.
12.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and
expenses attributable to this transaction will be divided into two
categories: (i) those fees which can be specifically allocated to the
Management Company due to said fees solely benefiting it ("Direct Costs") and
(ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the purposes of
this Section 12.2, each of the Stockholders hereby agrees that: (i) QPI shall
be entitled to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM by certain transferor
partnerships and related entities (collectively, the "Related Entities"),
which shall be Indirect Costs (ii) to the extent it is determined that APC is
due any fee as described in Section 12.1 hereof, up to $1,000,000 of such fee
(which may be paid at Closing or held back in an escrow account by Questar
Investment Corporation until such time as the amount of such fee, if any, is
determined) shall be included as Indirect Costs, with any such fee in excess
of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all legal
and accounting fees of counsel and advisors to Questar Investment Corporation
shall also be Indirect Costs. Each of the Stockholders acknowledges and
agrees that (i) any and all Direct Costs shall be allocated to each of them
with respect to their interest in the Management Company and (ii) any and all
Indirect Costs shall be allocated among
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the Stockholders and Related Entities at Closing based on the pro rata number of
BRI shares allocated at Closing to each of them. Each of the Stockholders
further acknowledges and agrees that Questar Investment Corporation shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of the
Contracts;
(b) wages and pension benefits of all persons employed by
the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable to
the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation
necessary to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any
of such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
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13. Notices
All notices under this Agreement shall be in writing and shall be
delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed
as follows (or to such address as the Management Company, the Stockholders or
BRI shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the c/o Questar Properties, Inc.
Management 124 Slade Avenue, Suite 200
Company or the Baltimore, MD 21208
Stockholders: Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business
day after deposited with such delivery service; or, if mailed, one business
day after the date deposited with the U.S. Postal Service.
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<PAGE>
14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions
of 9(c)) shall survive the Closing indefinitely and an action based thereon
may be brought at any time after the Closing Date. Representations and
warranties in Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days
after the expiration of the applicable statute of limitations. Except as set
forth in the immediately preceding sentence or otherwise as specified in this
Agreement, the representations, warranties, covenants and other obligations of
the Management Company and the Stockholders set forth in Sections 2 (other
than Section 2.10) and 3 (other than Section 3.2) and the representations and
warranties, covenants and other obligations of BRI contained in Section 4
(other than Sections 4.7, 4.9 and 4.10) shall survive until 12 months after
the Closing Date and thereafter during the pendency of any claim based upon a
breach thereof, and no action based thereon shall be commenced more than 12
months after the Closing Date. Except as otherwise specifically provided in
this Agreement, no other representations, warranties, covenants or other
obligations of the Management Company, the Stockholders or BRI set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions
contemplated herein, and all prior agreements, understandings, representations
and statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provision hereof may be waived, modified, amended,
discharged or terminated except by an instrument signed by the party against
whom the enforcement of such waiver, modification, amendment, discharge or
termination is sought, and then only to the extent set forth in such
instrument.
17. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the
scope or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to
assign or transfer their right to receive BRI Shares.
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20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to
BRI of a duly executed counterpart of this Agreement and the satisfaction of
all conditions under which such offer is made, but such offer may be revoked
by BRI by written notice given at any time prior to such acceptance and
satisfaction.
21. Number and Gender. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall include the plural
and the plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the
contrary, and all references to Schedules and Exhibits shall be to the
specified Schedules and Exhibits annexed hereto. All Schedules and Exhibits
annexed hereto are made a part hereof. All terms defined herein shall have
the same meanings in the Schedules and Exhibits, except as otherwise provided
therein. All references in this Agreement shall be deemed to include the
Schedules and Exhibits.
23. Publicity. In no event shall any Party issue any press release
or otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties
have consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be
deemed to limit or impair in any way any Party's ability to disclose the
details of the transactions contemplated hereby to the accountants, attorneys
or other authorized agents of such Party or as such Party deems necessary or
desirable pursuant to any court or governmental order or applicable securities
regulations or financial reporting requirements, nor shall BRI be precluded
from describing this Agreement and the transactions herein contemplated in any
filings made pursuant to any securities laws or in connection with the Public
Offering, or from filing this Agreement, the Exhibits hereto and the Schedules
as exhibits to any filings by BRI required by any securities laws.
Notwithstanding the foregoing, no Party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known
by means beyond the reasonable control of such Party. The provisions of this
Section 24 shall survive the Closing.
24. Counterparts. This Agreement may be executed and delivered in
any number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE KINGSWOOD MANAGEMENT COMPANY
/s/ By: /s/
- ---------------------------- -------------------------------------
Name:
Title: President
WITNESS: STOCKHOLDERS:
/s/ By: /s/ Morton Gorn
- ---------------------------- -------------------------------------
Morton Gorn
/s/ By: /s/ Stephen M. Gorn
- ---------------------------- -------------------------------------
Stephen M. Gorn
/s/ By: /s/ John B. Colvin
- ---------------------------- -------------------------------------
John B. Colvin
/s/ By: /s/ Karen Colvin
- ---------------------------- -------------------------------------
Karen Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
/s/ By: /s/ David J. Olney
- ---------------------------- -------------------------------------
Name: David J. Olney
Title: Senior Vice President
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List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE VECTOR PROPERTY MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Vector Property
Management Company, a Maryland corporation (the "Management Company"), and the
stockholders set forth on Schedule 2.2 attached hereto (collectively the
"Stockholders"). BRI, the Management Company and the Stockholders are
referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI
in exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company
file the certificate of merger or other appropriate documents prepared and
executed in accordance with the relevant provisions of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of
the State of Delaware and the Maryland General Corporation Law with the
Department of Assessments and Taxation of the State of Maryland. The Merger
shall have the effects set forth in Section 259 of the Delaware General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date
("Closing Date") mutually agreed to in writing by the Parties, but not later
than October 31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and
documents referred to in Section 8.10, (b) BRI shall deliver to the Company
the various certificates, instruments and documents referred to in Section
9.9, (c) the Management
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<PAGE>
Company and BRI shall file with the Secretary of State of the State of Delaware
the Certificate of Merger, (d) the Management Company and BRI shall file with
the Department of Assessments and Taxation of the State of Maryland the Articles
of Merger, (e) BRI shall deliver certificates for the BRI Shares (as defined
below) to the Stockholders, and (f) the Stockholders shall deliver certificates
for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the Effective
Time, take any action, including executing and delivering any document, in the
name and on behalf of the Management Company, in order to consummate the
transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of any Party, each share of common stock, $1.00
par value per share, of the Management Company ("Company Shares") issued and
outstanding immediately prior to the Effective Time shall be converted into and
represent the right to receive such number of shares of common stock, $.01 par
value per share, of BRI ("BRI Common Stock") as is equal to one share of BRI
Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio" shall be
determined by dividing (i) the number of shares of BRI Common Stock equal in
value (as such value is determined at the time and in the manner provided herein
below) to $425,280 (the "Consideration Amount"), by (ii) the number of Company
Shares issued and outstanding immediately prior to the Effective Time; provided,
however, with respect to each property set forth on Exhibit 1 attached hereto,
as to which the transactions described in the applicable Related Agreement (as
defined in Section 11.6) have not been closed on or prior to the Closing Date
hereunder (a "Non-Acquired Property"), there shall be a reduction in the
Consideration Amount equal to the Reduction Amount for such property. The
Reduction Amount for each such property shall be equal to (A) .6 multiplied by
the amount of the Management Fees for such property as set forth on Exhibit 1
multiplied by (B) five (5). The shares of BRI Common Stock to be issued to the
holders of the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this Agreement,
the value of each share of BRI Common Stock ("BRI Share Value") shall be the
average of the closing price per share, rounded to the nearest one-thousandth,
of one share of common stock of BRI as such price is published by The Wall
Street Journal for the period from, and including, August 1, 1997 through and
including, the date of pricing of the Public Offering contemplated under
Section 11.5 hereof, provided that in any event the BRI Share Value shall be
not less than $10.50 per share (the "Fixed Floor") and not greater than $11.75
per share (the "Fixed Ceiling"). The foregoing calculation of BRI Share Value
(including the Fixed Floor and Fixed Ceiling) will be
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<PAGE>
adjusted as appropriate and customary upon the occurrence of any of the
following events to reflect a stock split, dividend (outside of the ordinary
course), recapitalization or other similar event outside of the ordinary course.
(c) The Management Company and the Stockholders acknowledge
and agree that after the execution hereof, the price of the BRI Common Stock
may increase or decrease in value as the result of market fluctuations prior
and subsequent to the Public Offering. Notwithstanding these fluctuations,
once the value and number of BRI Shares have been established as provided in
this Section 1.5, BRI will not be required to increase or be permitted to
decrease the number of BRI Shares to be issued to the Stockholders in the
event of a decrease or increase in the market value of the BRI Common Stock
subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the
nearest whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after
the Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to
do business and is in good standing in all other jurisdictions in which the
failure to be so qualified and in good standing would have a material adverse
effect on the Management Company's business (a "Material Adverse Effect").
Such jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2
attached hereto, including the number of Company Shares outstanding. Such
Company Shares are held of record and beneficially owned by the Stockholders
as set forth on Schedule 2.2 attached hereto. All of such Company Shares have
been duly and validly issued, are fully paid and nonassessable and free of all
preemptive rights and were issued in compliance with applicable federal and
state securities laws. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Management Company is
a party or which are binding upon the Management Company providing for the
issuance, disposition or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Management Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this Agreement
and the agreements provided for herein by the Management Company, and the
consummation by the Management Company of all transactions contemplated hereby
and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management
Company, enforceable against the Management Company in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors
theretofore or hereafter enacted to the extent that the same may be
constitutionally applied. The execution, delivery and performance by the
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Management Company of this Agreement and the agreements provided for herein,
and the consummation by the Management Company of the transactions
contemplated hereby and thereby, will not, with or without the giving of
notice or the passage of time or both, (a) violate the provisions of any law,
rule or regulation applicable to the Management Company; (b) violate the
provisions of the Certificate of Incorporation or By-laws of the Management
Company; (c) violate any judgment, decree, order or award of any court, governme
ntal body or arbitrator which would have a Material Adverse Effect; or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or cause
the creation of any lien, charge or encumbrance upon the properties or assets
of the Management Company pursuant to, any indenture, mortgage, deed of trust
or other instrument or agreement to which the Management Company is a party or
by which the Management Company or any of its properties is or may be bound
which would have a Material Adverse Effect. Schedule 2.3 attached hereto sets
forth a true, correct and complete list of all material consents and approvals
of third parties that are required in connection with the consummation by the
Management Company of the transactions contemplated by this Agreement and the
agreements provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the
Closing) other than (i) the Contracts and (ii) the assets set forth on
Schedule 2.4 hereto. The Management Company shall distribute the Excluded
Assets prior to Closing to the Shareholders. Upon the Closing, the Management
Company will own all tangible assets set forth on Schedule 2.4 attached
hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements")
and on or before August 31, 1997 the Management Company shall provide
unaudited financial statements (the "Current Financial Statements") for the
six-month period ending June 30, 1997 (the "Balance Sheet Date"). The
December 31 Financial Statements, the Current Financial Statements and the
Closing Financial Statement to be delivered pursuant to Section 6.8 are
collectively referred to as the "Financial Statements". The Financial
Statements fairly present the financial condition of the Management Company as
of the respective statement dates in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto), and reflect all liabilities, fixed, contingent or otherwise,
required to be disclosed in such Financial Statements in accordance with
generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments). The
Financial Statements shall be certified by the Management Company&WP1-9;s
chief financial officer.
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2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course
of business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of
the date of Closing, the Management Company shall have no liabilities or
obligations (absolute or contingent) for borrowed money and shall have no
other liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Management Company's business which are either (i) in the aggregate, not
material, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Contracts. For purposes of this Subsection 2.6, "material"
means any amount in excess of $50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the
Management Company or the Stockholders, proceeding or investigation pending or
threat thereof, against the Management Company or the Stockholders which
questions the validity of this Agreement or the right of the Management
Company or the Stockholders to enter into it, or which might result in or
have, either individually or in the aggregate, a Material Adverse Effect on
the Management Company. The Management Company is not in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule
of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority except for
such violations or defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims
thereunder. The Management Company has done nothing to reduce or impair the
insurance afforded by the Insurance Policies. To the Management Company's
knowledge, there are no material disputes with underwriters of any such
Insurance Policies and there are no pending or threatened terminations with
respect to any of such policies.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development which would have a Material Adverse Effect on
the business, properties, assets, condition or prospects of the Management
Company.
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<PAGE>
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Management
Company, or for which the Management Company may have any liability, have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation
or matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due
with respect to completed and settled examinations or concluded litigation
have been paid.
(b) The Management Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) Neither the Management Company, nor the Stockholders,
know of (A) any audit or investigation of the Management Company with respect
to any liability for taxes relating to the Management Company, or (B) any
threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and complete
copy of the Federal Income Tax Return for 1996 for the Management Company, as
filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of account
of the Management Company, all federal, state and local income, franchise,
property and other tax returns filed by the Management Company, and all other
books and records of the Management Company are in all material respects complet
e and correct and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true, complete
and correct list of the following contracts and agreements, whether written or
oral (collectively, the "Contracts"):
(i) all management contracts to which the Management
Company is a party;
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<PAGE>
(ii) all loan agreements, indentures, mortgages and
guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title retention
agreements, security agreements, personal property leases and lease purchase
agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other understandings
or arrangements between the Management Company and any stockholder or
affiliate of the Management Company except those described in the Financial
Statements or in writing to BRI; and
(v) any other material agreement or contract entered
into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached hereto:
(i) each Contract is a valid and binding agreement of
the Management Company, enforceable against the Management Company in
accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company and
the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
(iii) To the knowledge of the Management Company and
the Stockholders, the Management Company is not in breach of or default under
any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto except for such defaults, losses, liens,
changes or encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management Company
and the Stockholders, there is no existing breach or default by any other
party to any
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<PAGE>
Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto except, in each case, as would not have a
Material Adverse Effect.
(c) Except as set forth on Schedule 2.12, the continuation,
validity and effectiveness of each Contract will not be affected by the Merger
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management Company
has all requisite licenses, permits and certificates, including environmental,
health and safety permits, from federal, state and local authorities necessary
to conduct its business and own and operate its assets (collectively, the
"Permits") except as would not have a Material Adverse Effect. The
Management Company is not in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties, the violation of which would have
a Material Adverse Effect on the Management Company or its properties. The
business of the Management Company does not violate, in any material respect,
any federal, state, local or foreign laws, regulations or orders (including,
but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste
(as defined in the Resource Conservation and Recovery Act, as amended, and the
regulations adopted pursuant thereto), conservation, or corrupt practices, the
enforcement of which would have a Material Adverse Effect on the Management
Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have
a Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached
hereto, since the Balance Sheet Date, the Management Company has not entered
into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the
Management Company has not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge or
other encumbrance any assets of the Management Company;
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<PAGE>
(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or
regulation which must be obtained or satisfied by the Management Company and
which are necessary for the execution and delivery by the Management Company
of this Agreement and the documents to be executed and delivered by the
Management Company in connection herewith are set forth on Schedule 2.16
attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of the
Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate list of
all Employee Benefit Plans (as defined below) maintained, or contributed to,
by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined under Section 414(m)
of the Code or the
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<PAGE>
regulations under Section 414(o) of the Code), any of which includes the
Management Company. Complete and accurate copies of (i) all Employee Benefits
Plans, (ii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iii) all annual reports filed on IRS Form 5500, 5500C or
5500R for the last three plan years for each Employee Benefit Plan, have been
delivered to the BRI. Each Employee Benefit Plan has been administered in all
material respects in accordance with its terms and each of the Management
Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Management Company and all Employee Benefit Plans are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder.
(c) There are no investigations by an governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders), suits or proceedings against
or involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit
Plans are qualified and the plans and the trusts related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively, of
the Code, no such determination letter has been revoked and revocation has not
been threatened, no such Employee Benefit Plan has been amended since the date
of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would likely result in a
revocation of such determination.
(e) Neither the Management Company nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(f) At no time has the Management Company or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
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3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and authority
to enter into and deliver this Agreement and the other agreements provided for
herein and to consummate the transactions contemplated hereby and thereby.
This Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby constitute
the valid and legally binding obligations of such Stockholder, enforceable
against such Stockholder in accordance with their respective terms, subject
only to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or
arbitrator; or (c) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
Company Shares of such Stockholder pursuant to, any indenture, mortgage, deed
of trust or other instrument or agreement to which such Stockholder is a party
or by which such Stockholder is or may be bound. Schedule 3.1 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation by such
Stockholder of the transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of
the Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the
registration requirements or exemption provisions of any applicable securities
laws and in accordance with the terms of the Registration Rights Agreement (as
defined below).
(b) Such Stockholder understands that the BRI Shares to be
issued to Stockholder will not be registered under the Act, or the securities
laws of any state ("Blue Sky Laws") by reason of a specific exemption or
exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on such exemptions is predicated in part on the accuracy
and completeness of the representations and warranties of such Stockholder.
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<PAGE>
(c) Such Stockholder acknowledges and agrees that, for the
reasons set forth in paragraphs (a) and (b) above, the BRI Shares may not be
offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under
the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter
issued by the Securities and Exchange Commission to the effect that a proposed
transfer of the BRI Shares may be made without registration under the Act,
together with either registration or an exemption under applicable Blue Sky
Laws, or (iii) upon BRI receiving an opinion of counsel knowledgeable in
securities law matters (and which opinion and counsel shall be reasonably
acceptable to BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and
that, accordingly, such Stockholder must bear the economic risk of an
investment in the BRI Shares for an indefinite period of time. Such
Stockholder acknowledges, represents and agrees that (i) his or her economic
circumstances are such that he or she is able to bear all risks of the
investment in BRI and the BRI Shares for an indefinite period of time,
including the risk of a complete loss of his or her investment in the BRI
Shares, (ii) he or she has knowledge and experience in financial and business
matters sufficient to evaluate the risks of investment in BRI, and (iii) he or
she has consulted with his or her own separate counsel and tax advisor, to the
extent necessary, as to all legal and taxation matters covered by this
Agreement and has not relied upon BRI, its affiliates or its legal counsel and
advisors for any explanation of the application of the various United States
or state securities laws or tax laws with regard to his or her acquisition of
the BRI Shares. Such Stockholder further acknowledges and represents that he
or she has made his or her own independent investigation of BRI and the
business conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment in BRI
involves substantial risks; such Stockholder acknowledges that he or she has
(i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and
information relevant to its decision to enter into this Agreement and to
invest in BRI, including, without limitation, BRI's SEC Filings (as defined
below) and the Private Placement Memorandum of BRI, dated as of August 25,
1997 (the "PPM") and (iii) had the opportunity to ask questions of BRI and its
management concerning his or her investment in BRI and the transactions
contemplated hereby, which questions were answered to his or her satisfaction.
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<PAGE>
(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her hereunder will not be
registered under the Act in reliance upon the exemption afforded by Section
4(2) thereof for transactions by an issuer not involving any public offering,
and will not be registered or qualified under any other applicable securities
laws;
(ii) Until such time as the following legend is no longer required,
the BRI Shares will bear a legend substantially to the effect of the
following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state. The securities may not be offered, sold,
transferred, pledged or otherwise disposed of without an effective
registration statement under the Act and under any applicable state securities
laws, receipt of a no-action letter issued by the Securities and Exchange
Commission (together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which opinion and
which counsel shall be acceptable to Berkshire Realty Company, Inc.) that the
proposed transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) BRI reserves the right to place a stop order against the
transfer of the BRI Shares and to refuse to effect any transfers thereof, in
the absence of satisfying the conditions contained in the foregoing legend.
(g) The address of each Stockholder set forth on Schedule
2.2 attached hereto is the address of such Stockholder's principal residence
or principal place of business, and such Stockholder has no present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such principal residence or principal place of
business is situated.
(h) The provisions of this Section 3.2 shall survive the
Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
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4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and
to carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to
the extent that the same may be constitutionally applied; and (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other
documents and instruments contemplated hereby and the performance by BRI of
its obligations hereunder and thereunder do not and will not constitute a
default under, or conflict with or violate, any provision of the Certificate
of Incorporation or By-Laws of BRI or any other material agreement to which
BRI is a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as
filed with the Securities and Exchange Commission, and all Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed by BRI with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of BRI included or incorporated by reference in the SEC
Filings and the PPM have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated assets, liabilities and financial
position of BRI as of the dates thereof and the consolidated results of its
operations and changes in cash flow for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year ended
adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part
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of BRI in connection with the valid execution and delivery of this Agreement by
BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI consists
of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares were
issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free and clear of
all preemptive rights and of any lien, claim, change, pledge, encumbrance,
limitation, agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other similar proceedings are pending or, to BRI's
knowledge, threatened against BRI, nor are any of such proceedings anticipated
or contemplated by BRI.
4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has received
all of the documents described herein as delivered thereto (unless it has
notified the Management Company or the Stockholders otherwise in writing) and
represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax returns and
information statements required to be filed by or on behalf of BRI or for
which BRI may have any liability have been accurately prepared in all material
respects and duly and timely filed (or requests for extensions have been
timely filed, granted and have not expired). As of the date hereof, there is
no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
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(b) BRI has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or investigation of
BRI with respect to any liability for taxes relating to BRI, or (B) any
threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue after
Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI
or its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to
enter into it, or which would likely have, either individually or in the
aggregate, a material adverse effect on the business of BRI as such is
presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries or
affiliates is the owner as described in the SEC Filings with good title to its
properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material
adverse effect on BRI and BRI is not in material violation of any
Environmental Laws to such an extent that it would have a material adverse
effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals,
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consents, permits, licenses or certificates of occupancy (whether governmental
or otherwise) required for the current use and operation of any of its
properties have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii) any fees and
charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
5. Access to Information
5.1 Access to Management, Properties and Records; Due Diligence.
From the date of this Agreement until the Closing Date, BRI may examine the
accounting books and other business and financial records, plans, reports and
documents of the Management Company and its business, including all corporate
records, tax returns, contracts, licenses, business plans and projections,
audits and audit work papers, employee benefit plans, employee records,
management plans and records, and any and all other information reasonably
requested by BRI, and the Management Company and the Stockholders shall
cooperate fully with BRI's representatives and make themselves available, so
that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or
copies of, all such books and records. The Management Company shall furnish
to BRI such financial and operating data and other information as to the
assets and the business of the Management Company as BRI shall reasonably
request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable to the
conduct of the business of the Management Company;
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(b) Duly and timely file, or obtain appropriate extensions
of the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(c) Unless the Management Company is contesting the same in
good faith and has established reasonable reserves therefor, pay when required
to be paid all taxes indicated by the Management Company's tax returns or
otherwise lawfully levied or assessed upon it, or any of its properties or
assets, or which it is otherwise legally obligated to pay; and
(d) Comply in all material respects with each and every
undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may
be applicable:
(a) Take any action to materially amend the Management
Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other corporate
securities of the Management Company or grant any option or issue any warrant
to purchase or subscribe to any of such securities or issue any securities
convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of the
Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or permit
any other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets
of any other person, partnership, corporation or business organization;
(f) Make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise
or settle any claim for past or present tax due;
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(g) Waive any rights of material value relating to the
business of the Management Company;
(h) Modify, amend, alter or terminate any of its management
contracts or other material contracts;
(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control of its
assets and business, (ii) keep in faithful service its present officers and
key employees, (iii) preserve the goodwill of its customers and others having
business relations with it, and (iv) keep and preserve its business existing
on the date hereof until the Closing Date provided that the Management Company
and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its books,
accounts and records in the customary manner and in the ordinary or regular
course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent pursuant to
the management contracts, enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of
business calling for payments which in the aggregate do not exceed $50,000 for
each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis, file
all tax returns for and pay any and all taxes which shall become due or shall
have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
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6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and
3 hereof being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior to
the Closing, the Management Company and the Stockholders will deliver or cause
to be delivered to BRI supplemental information concerning events subsequent
to the date hereof which would render any statement, representation or
warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations
and statements of cash flows with respect to the Management Company for the
one month period that ended immediately preceding the month in which the
Closing occurs, certified by the Management Company&WP1-9;s chief financial
officer (the "Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth
on Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate
the transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance Policies
in full force and effect following the Closing in accordance with the terms
thereof, or to maintain other insurance policies having terms that are no less
favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations
and warranties set forth in Sections 2 and 3 shall be true on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes permitted by the terms hereof or
consented to in writing by BRI. The Management Company and the Stockholders
shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or
carry out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by the Management Company and
the Stockholders of the transactions contemplated by this Agreement shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the
Stockholder to consummate the transactions contemplated by this Agreement,
including, without limitation, those consents and approvals set forth on
Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly
authorized the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
7.10 Closing Deliveries. BRI shall have received at or prior to
the Closing each of the following documents:
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(a) such contracts, files and other data and documents
pertaining to the business of the Management Company as BRI may reasonably
request;
(b) copies of the general ledgers and books of account of
the Management Company, and all federal, state and local income, franchise,
property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and the
Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management Company
attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by
the Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates as
BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties
of BRI in this Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Management Company. BRI shall
have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by BRI of the transactions
contemplated by this Agreement shall have consented to, authorized, permitted
or approved such transactions.
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8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or
approval is required in order for BRI to consummate the transactions
contemplated by this Agreement, including, without limitation, those set forth
on Schedule 8.4 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the
Closing Date, substantially in the form of Exhibit 5 attached hereto and as to
such matters as may be reasonably requested by the Management Company or its
counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting to the
incumbency of BRI's officers, the authenticity of the resolutions authorizing
the transactions contemplated by this Agreement, and the authenticity and
continuing validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form attached
hereto as Exhibit 6 duly executed by BRI; and
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(e) such other documents, instruments or certificates as
the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the parties
proceed to Closing, each Stockholder agrees, severally and not jointly, to
indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting
from any breach or default by the Management Company or such Stockholder of
any obligation of the Management Company or such Stockholder under this
Agreement or (ii) from liabilities for borrowed money incurred by the
Management Company prior to the Closing; provided that no Stockholder shall be
required to indemnify BRI for any amounts in excess of 50% of the fair market
value of the BRI shares received by such Stockholder as of the date such
indemnification obligation is satisfied (except for indemnification
obligations with respect to representations of each of the Stockholders in
Section 3.2, which shall be limited to 100% of the fair market value as of the
date such indemnification obligation is satisfied of the BRI Shares received
by such Stockholder (collectively, the "Cap"); and provided further that to
the extent any of the Stockholders have any indemnification obligation to BRI,
the Stockholder may elect to satisfy such indemnification obligation by
directing BRI to cancel such amount of BRI shares acquired by such Stockholder
pursuant to this Agreement having a fair market value (measured at the time
such BRI shares are returned or cancelled) equal to the indemnification
obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing
Date, resulting from (A) any inaccuracy in or breach of any representation or
warranty of BRI or (B) resulting from any breach or default by BRI of any
obligation of BRI under this Agreement or (ii) from liabilities of the
Management Company accruing after the Closing (including liabilities accruing
after the Closing in connection with employee benefit plans) (except for such
liabilities resulting from a breach or default by the Stockholder or the
Management Company for which BRI is indemnified under Section 9(a) above);
provided that BRI shall not be required to indemnify any Stockholder under
Section 9(b)(i) for any amounts in excess of 50% of the fair market value as
of the date such indemnification obligation is satisfied of the BRI shares
received by such Stockholder (except for indemnification obligations with
respect to Section 4.10 which shall be limited to 100% of the fair market
value as of the date such indemnification obligation is satisfied of the BRI sha
res received by such Stockholder; and
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(c) The indemnification obligations of the Stockholders
and BRI, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 14. No such claim for indemnification shall be deemed due and
payable unless such claim has been agreed to by the parties or has been
finally determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually
reduce the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall have any
liability for claims made under Section 9(a) or 9(b) unless and until the
aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 9 shall be
the sole and exclusive remedy after the Closing Date for damages available to
BRI or the Stockholders for a breach of any of the terms, conditions,
representations or warranties contained herein, and each party acknowledges
and agrees that other than the representations and warranties set forth
herein, no other representations and warranties are being made with respect to
BRI or the Management Company.
(g) Each of the Stockholders, the Management Company and
BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the
other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of notice of
the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action.
In case any such action is brought, the Stockholders shall be entitled, but
shall not be required, to participate in the defense thereof, or the
Stockholders may elect to take charge of and control the defense of such
action, provided that the stockholders shall agree to pursue the defense of
such action or claim in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued.
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10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate
at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may
be terminated by the mutual written agreement of the Parties. In the event of
such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further
obligation or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of the
Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if BRI desires to consummate the Merger in accordance with the
terms of this Agreement and the Management Company or the Stockholders
willfully refuse to perform their respective obligations hereunder, BRI, at
its option, shall have the right to compel specific performance by the
Management Company and the Stockholders to close the transaction hereunder, in
which event BRI shall have the right to recover from the Management Company
and the Stockholders the amount of all reasonable legal fees, court costs and
other litigation expenses incurred by BRI in connection with the exercise of
its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed to
perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the Management Company desires to consummate the Merger in
accordance with the terms of this Agreement and BRI
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willfully refuses to perform its obligations hereunder, the Management Company,
at its option, shall have the right to compel specific performance by BRI to
close the transaction, in which event the Management Company (and the
Stockholders) shall have the right to recover from BRI the amount of all
reasonable legal fees, court costs and other litigation expenses incurred in
connection with the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the Management
Company and the Shareholders that in connection with the consummation of the
various Related Transactions (as defined in Section 11.6 hereof), BRI intends
to undertake either or both of (i) a public offering of common stock or other
equity securities of BRI (the "Public Offering"), or (ii) a private placement
of common stock or other equity securities of BRI (the "Private Placement").
The Management Company and the Shareholders shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement.
The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum
of $75,000,000.00. If the Public Placement and the Private Placement do not
in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, BRI shall have the right to
terminate this Agreement effective as of the Closing Date, and, thereafter
this Agreement shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured
loans, which agreements are more particularly described on Exhibit 4 attached
hereto (collectively the "Related Agreements"). (The transactions described
in the Related Agreements, including this Agreement, are collectively the
"Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement [as such term is
defined in the Related Agreements] (the "Kickout Agreement"), in the event
that any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to
the failure of all of the other parties to the Related Agreement to execute
the Related Agreement on or before September 22, 1997, unless such date is
extended by the written consent of all of the parties hereto, this Agreement
shall terminate automatically simultaneously with the termination of any such
Related Agreement or upon the failure of all of the other parties to the
Related Agreement to execute the Related Agreement on or before September 22,
1997, unless such date is extended by the written consent of all of the
parties hereto, whereupon this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly
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stated to survive the termination of this Agreement. The Closing under this
Agreement shall be simultaneous with the closings under the Related Agreements.
Except as provided in the Kickout Agreement, in the event the closing under any
of the Related Agreements is cancelled or postponed, the Closing under this
Agreement shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this
transaction. The Management Company understands that American Property
Consultants ("APC") had entered into a fee arrangement with Questar
Properties, Inc. ("QPI"), which might not apply to this transaction in any
event. Nevertheless, to the extent that it is determined that a commission or
fee is owed to APC, it shall be the obligation of the Stockholders and QPI in
accordance with the provisions of Section 12.3 hereof. In no event shall any
commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall BRI or the
Management Company have any obligation to pay any commission to APC.
12.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and
expenses attributable to this transaction will be divided into two
categories: (i) those fees which can be specifically allocated to the
Management Company due to said fees solely benefiting it ("Direct Costs") and
(ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the purposes of
this Section 12.2, each of the Stockholders hereby agrees that: (i) QPI shall
be entitled to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM by certain transferor
partnerships and related entities (collectively, the "Related Entities"),
which shall be Indirect Costs (ii) to the extent it is determined that APC is
due any fee as described in Section 12.1 hereof, up to $1,000,000 of such fee
(which may be paid at Closing or held back in an escrow account by Questar
Investment Corporation until such time as the amount of such fee, if any, is
determined) shall be included as Indirect Costs, with any such fee in excess
of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all legal
and accounting fees of counsel and advisors to Questar Investment Corporation
shall also be Indirect Costs. Each of the Stockholders acknowledges and
agrees that (i) any and all Direct Costs shall be allocated to each of them
with respect to their interest in the Management Company and (ii) any and all
Indirect Costs shall be allocated among
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the Stockholders and Related Entities at Closing based on the pro rata number of
BRI shares allocated at Closing to each of them. Each of the Stockholders
further acknowledges and agrees that Questar Investment Corporation shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of the
Contracts;
(b) wages and pension benefits of all persons employed by
the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable to
the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation
necessary to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any
of such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
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<PAGE>
13. Notices
All notices under this Agreement shall be in writing and shall be
delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed
as follows (or to such address as the Management Company, the Stockholders or
BRI shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the c/o Questar Properties, Inc.
Management 124 Slade Avenue, Suite 200
Company or the Baltimore, MD 21208
Stockholders: Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business
day after deposited with such delivery service; or, if mailed, one business
day after the date deposited with the U.S. Postal Service.
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<PAGE>
14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions
of 9(c)) shall survive the Closing indefinitely and an action based thereon
may be brought at any time after the Closing Date. Representations and
warranties in Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days
after the expiration of the applicable statute of limitations. Except as set
forth in the immediately preceding sentence or otherwise as specified in this
Agreement, the representations, warranties, covenants and other obligations of
the Management Company and the Stockholders set forth in Sections 2 (other
than Section 2.10) and 3 (other than Section 3.2) and the representations and
warranties, covenants and other obligations of BRI contained in Section 4
(other than Sections 4.7, 4.9 and 4.10) shall survive until 12 months after
the Closing Date and thereafter during the pendency of any claim based upon a
breach thereof, and no action based thereon shall be commenced more than 12
months after the Closing Date. Except as otherwise specifically provided in
this Agreement, no other representations, warranties, covenants or other
obligations of the Management Company, the Stockholders or BRI set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions
contemplated herein, and all prior agreements, understandings, representations
and statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provision hereof may be waived, modified, amended,
discharged or terminated except by an instrument signed by the party against
whom the enforcement of such waiver, modification, amendment, discharge or
termination is sought, and then only to the extent set forth in such
instrument.
17. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the
scope or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to
assign or transfer their right to receive BRI Shares.
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<PAGE>
20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to
BRI of a duly executed counterpart of this Agreement and the satisfaction of
all conditions under which such offer is made, but such offer may be revoked
by BRI by written notice given at any time prior to such acceptance and
satisfaction.
21. Number and Gender. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall include the plural
and the plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the
contrary, and all references to Schedules and Exhibits shall be to the
specified Schedules and Exhibits annexed hereto. All Schedules and Exhibits
annexed hereto are made a part hereof. All terms defined herein shall have
the same meanings in the Schedules and Exhibits, except as otherwise provided
therein. All references in this Agreement shall be deemed to include the
Schedules and Exhibits.
23. Publicity. In no event shall any Party issue any press release
or otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties
have consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be
deemed to limit or impair in any way any Party's ability to disclose the
details of the transactions contemplated hereby to the accountants, attorneys
or other authorized agents of such Party or as such Party deems necessary or
desirable pursuant to any court or governmental order or applicable securities
regulations or financial reporting requirements, nor shall BRI be precluded
from describing this Agreement and the transactions herein contemplated in any
filings made pursuant to any securities laws or in connection with the Public
Offering, or from filing this Agreement, the Exhibits hereto and the Schedules
as exhibits to any filings by BRI required by any securities laws.
Notwithstanding the foregoing, no Party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known
by means beyond the reasonable control of such Party. The provisions of this
Section 24 shall survive the Closing.
24. Counterparts. This Agreement may be executed and delivered in
any number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE QUESTAR MANAGEMENT COMPANY
/s/ By: /s/
- ------------------------- ---------------------------------------
Name:
Title: President
WITNESS: STOCKHOLDERS:
/s/ By: /s/ Morton Gorn
- ------------------------- ---------------------------------------
Morton Gorn
/s/ By: /s/ Stephen M. Gorn
- ------------------------- ---------------------------------------
Stephen M. Gorn
/s/ By: /s/ John B. Colvin
- ------------------------- ---------------------------------------
John B. Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
/s/ By: /s/ David J.Olney
- ------------------------- ---------------------------------------
Name: David J. Olney
Title: Senior Vice President
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<PAGE>
List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE GORN MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Gorn Management
Company, a Maryland corporation (the "Management Company"), and the
stockholders set forth on Schedule 2.2 attached hereto (collectively the
"Stockholders"). BRI, the Management Company and the Stockholders are
referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI
in exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company
file the certificate of merger or other appropriate documents prepared and
executed in accordance with the relevant provisions of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of
the State of Delaware and the Maryland General Corporation Law with the
Department of Assessments and Taxation of the State of Maryland. The Merger
shall have the effects set forth in Section 259 of the Delaware General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date
("Closing Date") mutually agreed to in writing by the Parties, but not later
than October 31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and
documents
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<PAGE>
referred to in Section 8.10, (b) BRI shall deliver to the Company the various
certificates, instruments and documents referred to in Section 9.9, (c) the
Management Company and BRI shall file with the Secretary of State of the State
of Delaware the Certificate of Merger, (d) the Management Company and BRI shall
file with the Department of Assessments and Taxation of the State of Maryland
the Articles of Merger, (e) BRI shall deliver certificates for the BRI Shares
(as defined below) to the Stockholders, and (f) the Stockholders shall deliver
certificates for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the Effective
Time, take any action, including executing and delivering any document, in the
name and on behalf of the Management Company, in order to consummate the
transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of any Party, each share of common stock, no par
value per share, of the Management Company ("Company Shares") issued and
outstanding immediately prior to the Effective Time shall be converted into and
represent the right to receive such number of shares of common stock, $.01 par
value per share, of BRI ("BRI Common Stock") as is equal to one share of BRI
Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio" shall be
determined by dividing (i) the number of shares of BRI Common Stock equal in
value (as such value is determined at the time and in the manner provided herein
below) to $1,259,775 (the "Consideration Amount"), by (ii) the number of Company
Shares issued and outstanding immediately prior to the Effective Time; provided,
however, with respect to each property set forth on Exhibit 1 attached hereto,
as to which the transactions described in the applicable Related Agreement (as
defined in Section 11.6) have not been closed on or prior to the Closing Date
hereunder (a "Non-Acquired Property"), there shall be a reduction in the
Consideration Amount equal to the Reduction Amount for such property. The
Reduction Amount for each such property shall be equal to (A) .6 multiplied by
the amount of the Management Fees for such property as set forth on Exhibit 1
multiplied by (B) five (5). The shares of BRI Common Stock to be issued to the
holders of the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this Agreement,
the value of each share of BRI Common Stock ("BRI Share Value") shall be the
average of the closing price per share, rounded to the nearest one-thousandth,
of one share of common stock of BRI as such price is published by The Wall
Street Journal for the period from, and including, August 1, 1997 through and
including, the date of
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<PAGE>
pricing of the Public Offering contemplated under Section 11.5 hereof, provided
that in any event the BRI Share Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Share Value (including the Fixed Floor and
Fixed Ceiling) will be adjusted as appropriate and customary upon the occurrence
of any of the following events to reflect a stock split, dividend (outside of
the ordinary course), recapitalization or other similar event outside of the
ordinary course.
(c) The Management Company and the Stockholders acknowledge
and agree that after the execution hereof, the price of the BRI Common Stock
may increase or decrease in value as the result of market fluctuations prior
and subsequent to the Public Offering. Notwithstanding these fluctuations,
once the value and number of BRI Shares have been established as provided in
this Section 1.5, BRI will not be required to increase or be permitted to
decrease the number of BRI Shares to be issued to the Stockholders in the
event of a decrease or increase in the market value of the BRI Common Stock
subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the
nearest whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after
the Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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<PAGE>
2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to
do business and is in good standing in all other jurisdictions in which the
failure to be so qualified and in good standing would have a material adverse
effect on the Management Company's business (a "Material Adverse Effect").
Such jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2
attached hereto, including the number of Company Shares outstanding. Such
Company Shares are held of record and beneficially owned by the Stockholders
as set forth on Schedule 2.2 attached hereto. All of such Company Shares have
been duly and validly issued, are fully paid and nonassessable and free of all
preemptive rights and were issued in compliance with applicable federal and
state securities laws. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Management Company is
a party or which are binding upon the Management Company providing for the
issuance, disposition or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Management Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this Agreement
and the agreements provided for herein by the Management Company, and the
consummation by the Management Company of all transactions contemplated hereby
and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management
Company, enforceable against the Management Company in accordance with their
respective terms, subject
-4-
<PAGE>
only to applicable bankruptcy, insolvency, reorganization, moratorium and other
laws for the relief of debtors theretofore or hereafter enacted to the extent
that the same may be constitutionally applied. The execution, delivery and
performance by the Management Company of this Agreement and the agreements
provided for herein, and the consummation by the Management Company of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Management Company; (b) violate
the provisi ons of the Certificate of Incorporation or By-laws of the Management
Company; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator which would have a Material Adverse Effect; or
(d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the properties or
assets of the Management Company pursuant to, any indenture, mortgage, deed of
trust or other instrument or agreement to which the Management Company is a
party or by which the Management Company or any of its properties is or may be
bound which would have a Material Adverse Effect. Schedule 2.3 attached hereto
sets forth a true, correct and complete list of all material consents and
approvals of third parties that are required in connection with the consummation
by the Management Company of the transactions contemplated by this Agreement and
the agreements provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the
Closing) other than (i) the Contracts (except as noted on Schedule 2.12) and
(ii) the assets set forth on Schedule 2.4 hereto. The Management Company
shall distribute the Excluded Assets prior to Closing to the Shareholders.
Upon the Closing, the Management Company will own all tangible assets set
forth on Schedule 2.4 attached hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements")
and on or before August 31, 1997 the Management Company shall provide
unaudited financial statements (the "Current Financial Statements") for the
six-month period ending June 30, 1997 (the "Balance Sheet Date"). The
December 31 Financial Statements, the Current Financial Statements and the
Closing Financial Statement to be delivered pursuant to Section 6.8 are
collectively referred to as the "Financial Statements". The Financial
Statements fairly present the financial condition of the Management Company as
of the respective statement dates in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes
-5-
<PAGE>
thereto), and reflect all liabilities, fixed, contingent or otherwise, required
to be disclosed in such Financial Statements in accordance with generally
accepted accounting principles (subject, in the case of any unaudited interim
financial statements, to normal year end adjustments). The Financial Statements
shall be certified by the Management Company&WP1-9;s chief financial officer.
2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course
of business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of
the date of Closing, the Management Company shall have no liabilities or
obligations (absolute or contingent) for borrowed money and shall have no
other liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Management Company's business which are either (i) in the aggregate, not materia
l, or (ii) approved by the BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under
the Contracts. For purposes of this Subsection 2.6, "material" means any
amount in excess of $50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the
Management Company or the Stockholders, proceeding or investigation pending or
threat thereof, against the Management Company or the Stockholders which
questions the validity of this Agreement or the right of the Management
Company or the Stockholders to enter into it, or which might result in or
have, either individually or in the aggregate, a Material Adverse Effect on
the Management Company. The Management Company is not in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule
of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority except for
such violations or defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims
thereunder. The Management Company has done nothing to reduce or impair the
insurance afforded by the Insurance Policies. To the Management Company's
knowledge, there are no material
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<PAGE>
disputes with underwriters of any such Insurance Policies and there are no
pending or threatened terminations with respect to any of such policies.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development which would have a Material Adverse Effect on
the business, properties, assets, condition or prospects of the Management
Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Management
Company, or for which the Management Company may have any liability, have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation
or matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due
with respect to completed and settled examinations or concluded litigation
have been paid.
(b) The Management Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) Neither the Management Company, nor the Stockholders,
know of (A) any audit or investigation of the Management Company with respect
to any liability for taxes relating to the Management Company, or (B) any
threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and complete
copy of the Federal Income Tax Return for 1996 for the Management Company, as
filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of account
of the Management Company, all federal, state and local income, franchise,
property and other tax returns filed by the Management Company, and all other
books and records of the Management Company are in all material respects
complete and
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<PAGE>
correct and have been maintained in accordance with good business practice and
in accordance with all applicable procedures required by laws and regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true, complete
and correct list of the following contracts and agreements, whether written or
oral (collectively, the "Contracts"):
(i) all management contracts to which the Management
Company is a party;
(ii) all loan agreements, indentures, mortgages and
guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title retention
agreements, security agreements, personal property leases and lease purchase
agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other understandings
or arrangements between the Management Company and any stockholder or
affiliate of the Management Company except those described in the Financial
Statements or in writing to BRI; and
(v) any other material agreement or contract entered
into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached hereto:
(i) each Contract is a valid and binding agreement of
the Management Company, enforceable against the Management Company in
accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company and
the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due,
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<PAGE>
all of its obligations under the Contracts which remain to be performed after
the date hereof except those obligations the failure to fulfill would not have a
Material Adverse Effect;
(iii) To the knowledge of the Management Company and
the Stockholders, the Management Company is not in breach of or default under
any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto except for such defaults, losses, liens,
changes or encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management Company
and the Stockholders, there is no existing breach or default by any other
party to any Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute a default by such other
party, result in a loss of rights or result in the creation of any lien,
charge or encumbrance thereunder or pursuant thereto except, in each case, as
would not have a Material Adverse Effect.
(c) Except as set forth on Schedule 2.12, the continuation,
validity and effectiveness of each Contract will not be affected by the Merger
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management Company
has all requisite licenses, permits and certificates, including environmental,
health and safety permits, from federal, state and local authorities necessary
to conduct its business and own and operate its assets (collectively, the
"Permits") except as would not have a Material Adverse Effect. The
Management Company is not in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties, the violation of which would have
a Material Adverse Effect on the Management Company or its properties. The
business of the Management Company does not violate, in any material respect,
any federal, state, local or foreign laws, regulations or orders (including,
but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste
(as defined in the Resource Conservation and Recovery Act, as amended, and the
regulations adopted pursuant thereto), conservation, or corrupt practices, the
enforcement of which would have a Material Adverse Effect on the Management
Company. Except as set forth on Schedule 2.13 attached hereto, the
Management
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<PAGE>
Company has not since January 1, 1997 received any notice or communication from
any federal, state or local governmental or regulatory authority or otherwise of
any such violation or noncompliance which would have a Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached
hereto, since the Balance Sheet Date, the Management Company has not entered
into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the
Management Company has not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge or
other encumbrance any assets of the Management Company;
(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or
regulation which must be obtained or satisfied by the Management Company and
which are necessary for the execution and delivery by the Management Company
of this Agreement and the documents to be executed and delivered by the
Management Company in connection herewith are set forth on Schedule 2.16
attached hereto.
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2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of the
Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate list of
all Employee Benefit Plans (as defined below) maintained, or contributed to,
by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined under Section 414(m)
of the Code or the regulations under Section 414(o) of the Code), any of which
includes the Management Company. Complete and accurate copies of (i) all
Employee Benefits Plans, (ii) all related trust agreements, insurance
contracts and summary plan descriptions, and (iii) all annual reports filed on
IRS Form 5500, 5500C or 5500R for the last three plan years for each Employee
Benefit Plan, have been delivered to the BRI. Each Employee Benefit Plan has
been administered in all material respects in accordance with its terms and
each of the Management Company and the ERISA Affiliates has in all material
respects met its obligations with respect to such Employee Benefit Plan and
has made all required contributions thereto. The Management Company and all
Employee Benefit Plans are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder.
(c) There are no investigations by an governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders), suits or proceedings against
or involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from
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the Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, no such Employee Benefit Plan has been amended since the date of its
most recent determination letter or application therefor in any respect, and no
act or omission has occurred, that would likely result in a revocation of such
determination.
(e) Neither the Management Company nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(f) At no time has the Management Company or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and authority
to enter into and deliver this Agreement and the other agreements provided for
herein and to consummate the transactions contemplated hereby and thereby.
This Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby constitute
the valid and legally binding obligations of such Stockholder, enforceable
against such Stockholder in accordance with their respective terms, subject
only to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court,
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governmental body or arbitrator; or (c) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the Company Shares of such Stockholder pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which such
Stockholder is a party or by which such Stockholder is or may be bound. Schedule
3.1 attached hereto sets forth a true, correct and complete list of all consents
and approvals of third parties that are required in connection with the
consummation by such Stockholder of the transactions contemplated by this
Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of
the Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the
registration requirements or exemption provisions of any applicable securities
laws and in accordance with the terms of the Registration Rights Agreement (as
defined below).
(b) Such Stockholder understands that the BRI Shares to be
issued to Stockholder will not be registered under the Act, or the securities
laws of any state ("Blue Sky Laws") by reason of a specific exemption or
exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on such exemptions is predicated in part on the accuracy
and completeness of the representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that, for the
reasons set forth in paragraphs (a) and (b) above, the BRI Shares may not be
offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under
the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter
issued by the Securities and Exchange Commission to the effect that a proposed
transfer of the BRI Shares may be made without registration under the Act,
together with either registration or an exemption under applicable Blue Sky
Laws, or (iii) upon BRI receiving an opinion of counsel knowledgeable in
securities law matters (and which opinion and counsel shall be reasonably
acceptable to BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and
that, accordingly, such Stockholder must bear the economic risk of an
investment in the BRI Shares for an indefinite period of time. Such
Stockholder acknowledges, represents and agrees that (i) his or her economic
circumstances are such that he or she is able to bear all risks of the
investment in BRI and the BRI
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<PAGE>
Shares for an indefinite period of time, including the risk of a complete loss
of his or her investment in the BRI Shares, (ii) he or she has knowledge and
experience in financial and business matters sufficient to evaluate the risks of
investment in BRI, and (iii) he or she has consulted with his or her own
separate counsel and tax advisor, to the extent necessary, as to all legal and
taxation matters covered by this Agreement and has not relied upon BRI, its
affiliates or its legal counsel and advisors for any explanation of the
application of the various United States or state securities laws or tax laws
with regard to his or her acquisition of the BRI Shares. Such Stockholder
further acknowledges and represents that he or she has made his or her own
independent investigation of BRI and the business conducted or proposed to be
conducted by BRI.
(d) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment in BRI
involves substantial risks; such Stockholder acknowledges that he or she has
(i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and
information relevant to its decision to enter into this Agreement and to
invest in BRI, including, without limitation, BRI's SEC Filings (as defined
below) and the Private Placement Memorandum of BRI, dated as of August 25,
1997 (the "PPM") and (iii) had the opportunity to ask questions of BRI and its
management concerning his or her investment in BRI and the transactions
contemplated hereby, which questions were answered to his or her satisfaction.
(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her hereunder will not be
registered under the Act in reliance upon the exemption afforded by Section
4(2) thereof for transactions by an issuer not involving any public offering,
and will not be registered or qualified under any other applicable securities
laws;
(ii) Until such time as the following legend is no longer required,
the BRI Shares will bear a legend substantially to the effect of the
following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state. The
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<PAGE>
securities may not be offered, sold, transferred, pledged or
otherwise disposed of without an effective registration statement
under the Act and under any applicable state securities laws,
receipt of a no-action letter issued by the Securities and
Exchange Commission (together with either registration or an,
exemption under applicable state securities laws) or an opinion
of counsel (which opinion and which counsel shall be acceptable
to Berkshire Realty Company, Inc.) that the proposed transaction
will be exempt from registration under the Act and its applicable
state securities laws"; and
(iii) BRI reserves the right to place a stop order against the
transfer of the BRI Shares and to refuse to effect any transfers thereof, in
the absence of satisfying the conditions contained in the foregoing legend.
(g) The address of each Stockholder set forth on Schedule
2.2 attached hereto is the address of such Stockholder's principal residence
or principal place of business, and such Stockholder has no present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such principal residence or principal place of
business is situated.
(h) The provisions of this Section 3.2 shall survive the
Closing indefinitely.
3. Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and
to carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or
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<PAGE>
hereafter enacted to the extent that the same may be constitutionally applied;
and (d) assuming compliance with the terms of this Agreement by the parties
hereto other than BRI, the execution and delivery by BRI of this Agreement and
all other documents and instruments contemplated hereby and the performance by
BRI of its obligations hereunder and thereunder do not and will not constitute a
default under, or conflict with or violate, any provision of the Certificate of
Incorporation or By-Laws of BRI or any other material agreement to which BRI is
a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as
filed with the Securities and Exchange Commission, and all Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed by BRI with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of BRI included or incorporated by reference in the SEC
Filings and the PPM have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated assets, liabilities and financial
position of BRI as of the dates thereof and the consolidated results of its
operations and changes in cash flow for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year ended
adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of BRI in connection with the valid execution and
delivery of this Agreement by BRI and the performance of BRI's obligations
hereunder.
4.4 Capitalization. The authorized capital stock of BRI consists
of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares were
issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free and clear of
all preemptive rights and of any lien, claim, change, pledge, encumbrance,
limitation, agreement or instrument whatsoever.
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4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other similar proceedings are pending or, to BRI's
knowledge, threatened against BRI, nor are any of such proceedings anticipated
or contemplated by BRI.
4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has received
all of the documents described herein as delivered thereto (unless it has
notified the Management Company or the Stockholders otherwise in writing) and
represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax returns and
information statements required to be filed by or on behalf of BRI or for
which BRI may have any liability have been accurately prepared in all material
respects and duly and timely filed (or requests for extensions have been
timely filed, granted and have not expired). As of the date hereof, there is
no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
(b) BRI has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or investigation of
BRI with respect to any liability for taxes relating to BRI, or (B) any
threatened claims or assessments for taxes against or relating to BRI.
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4.10 Continuity of Business Enterprise. BRI will continue after
Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI
or its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to
enter into it, or which would likely have, either individually or in the
aggregate, a material adverse effect on the business of BRI as such is
presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries or
affiliates is the owner as described in the SEC Filings with good title to its
properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material
adverse effect on BRI and BRI is not in material violation of any
Environmental Laws to such an extent that it would have a material adverse
effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals, consents, permits, licenses or certificates of occupancy (whether
governmental or otherwise) required for the current use and operation of any
of its properties have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation
in any material respect of any laws or (iv) any
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governmental authority has a current plan that would adversely affect the
continued use and operation of any of its properties as currently used and
operated except, in the case of clauses (i), (ii), (iii) and (iv), as would not
have a Material Adverse Effect.
5. Access to Information
5.1 Access to Management, Properties and Records; Due Diligence.
From the date of this Agreement until the Closing Date, BRI may examine the
accounting books and other business and financial records, plans, reports and
documents of the Management Company and its business, including all corporate
records, tax returns, contracts, licenses, business plans and projections,
audits and audit work papers, employee benefit plans, employee records,
management plans and records, and any and all other information reasonably
requested by BRI, and the Management Company and the Stockholders shall
cooperate fully with BRI's representatives and make themselves available, so
that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or
copies of, all such books and records. The Management Company shall furnish
to BRI such financial and operating data and other information as to the
assets and the business of the Management Company as BRI shall reasonably
request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable to the
conduct of the business of the Management Company;
(b) Duly and timely file, or obtain appropriate extensions
of the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(c) Unless the Management Company is contesting the same in
good faith and has established reasonable reserves therefor, pay when required
to be paid all taxes indicated by the Management Company's tax returns or
otherwise
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lawfully levied or assessed upon it, or any of its properties or assets, or
which it is otherwise egally obligated to pay; and
(d) Comply in all material respects with each and every
undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may
be applicable:
(a) Take any action to materially amend the Management
Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other corporate
securities of the Management Company or grant any option or issue any warrant
to purchase or subscribe to any of such securities or issue any securities
convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of the
Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or permit
any other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets
of any other person, partnership, corporation or business organization;
(f) Make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise
or settle any claim for past or present tax due;
(g) Waive any rights of material value relating to the
business of the Management Company;
(h) Modify, amend, alter or terminate any of its management
contracts or other material contracts;
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(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control of its
assets and business, (ii) keep in faithful service its present officers and
key employees, (iii) preserve the goodwill of its customers and others having
business relations with it, and (iv) keep and preserve its business existing
on the date hereof until the Closing Date provided that the Management Company
and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its books,
accounts and records in the customary manner and in the ordinary or regular
course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent pursuant to
the management contracts, enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of
business calling for payments which in the aggregate do not exceed $50,000 for
each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis, file
all tax returns for and pay any and all taxes which shall become due or shall
have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result
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in any of the representations or warranties set forth in Sections 2 and 3 hereof
being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior to
the Closing, the Management Company and the Stockholders will deliver or cause
to be delivered to BRI supplemental information concerning events subsequent
to the date hereof which would render any statement, representation or
warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations
and statements of cash flows with respect to the Management Company for the
one month period that ended immediately preceding the month in which the
Closing occurs, certified by the Management Company&WP1-9;s chief financial
officer (the "Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth
on Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate
the transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance Policies
in full force and effect following the Closing in accordance with the terms
thereof, or to maintain other insurance policies having terms that are no less
favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations
and warranties set forth in Sections 2 and 3 shall be true on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes permitted by the terms hereof or
consented to in writing by BRI. The Management Company and the Stockholders
shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or
carry out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by the Management Company and
the Stockholders of the transactions contemplated by this Agreement shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the
Stockholder to consummate the transactions contemplated by this Agreement,
including, without limitation, those consents and approvals set forth on
Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly
authorized the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
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7.10 Closing Deliveries. BRI shall have received at or prior to
the Closing each of the following documents:
(a) such contracts, files and other data and documents
pertaining to the business of the Management Company as BRI may reasonably
request;
(b) copies of the general ledgers and books of account of
the Management Company, and all federal, state and local income, franchise,
property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and the
Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management Company
attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by
the Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates as
BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties
of BRI in this Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Management Company. BRI shall
have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
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8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by BRI of the transactions
contemplated by this Agreement shall have consented to, authorized, permitted
or approved such transactions.
8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or
approval is required in order for BRI to consummate the transactions
contemplated by this Agreement, including, without limitation, those set forth
on Schedule 8.4 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the
Closing Date, substantially in the form of Exhibit 5 attached hereto and as to
such matters as may be reasonably requested by the Management Company or its
counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting to the
incumbency of BRI's officers, the authenticity of the resolutions authorizing
the
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transactions contemplated by this Agreement, and the authenticity and continuing
validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form attached
hereto as Exhibit 6 duly executed by BRI; and
(e) such other documents, instruments or certificates as
the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the parties
proceed to Closing, each Stockholder agrees, severally and not jointly, to
indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting
from any breach or default by the Management Company or such Stockholder of
any obligation of the Management Company or such Stockholder under this
Agreement or (ii) from liabilities for borrowed money incurred by the
Management Company prior to the Closing; provided that no Stockholder shall be
required to indemnify BRI for any amounts in excess of 50% of the fair market
value of the BRI shares received by such Stockholder as of the date such
indemnification obligation is satisfied (except for indemnification
obligations with respect to representations of each of the Stockholders in
Section 3.2, which shall be limited to 100% of the fair market value as of the
date such indemnification obligation is satisfied of the BRI Shares received
by such Stockholder (collectively, the "Cap"); and provided further that to
the extent any of the Stockholders have any indemnification obligation to BRI,
the Stockholder may elect to satisfy such indemnification obligation by
directing BRI to cancel such amount of BRI shares acquired by such Stockholder
pursuant to this Agreement having a fair market value (measured at the time
such BRI shares are returned or cancelled) equal to the indemnification
obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing
Date, resulting from (A) any inaccuracy in or breach of any representation or
warranty of BRI or (B) resulting from any breach or default by BRI of any
obligation of BRI under this Agreement or (ii) from liabilities of the
Management Company accruing after the Closing (including liabilities accruing
after the Closing in connection with employee benefit plans) (except for such
liabilities resulting from a breach or default by the Stockholder or
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the Management Company for which BRI is indemnified under Section 9(a) above);
provided that BRI shall not be required to indemnify any Stockholder under
Section 9(b)(i) for any amounts in excess of 50% of the fair market value as of
the date such indemnification obligation is satisfied of the BRI shares received
by such Stockholder (except for indemnification obligations with respect to
Section 4.10 which shall be limited to 100% of the fair market value as of the
date such indemnification obligation is satisfied of the BRI shares received by
such Stockholder; and
(c) The indemnification obligations of the Stockholders and
BRI, respectively, with respect to any representation or warranty, shall be
limited to claims made prior to the last date of survival thereof set forth in
Section 14. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually
reduce the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall have any
liability for claims made under Section 9(a) or 9(b) unless and until the
aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 9 shall be
the sole and exclusive remedy after the Closing Date for damages available to
BRI or the Stockholders for a breach of any of the terms, conditions,
representations or warranties contained herein, and each party acknowledges
and agrees that other than the representations and warranties set forth
herein, no other representations and warranties are being made with respect to
BRI or the Management Company.
(g) Each of the Stockholders, the Management Company and
BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the
other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of notice of
the commencement of any action to which any party is entitled to
indemnification under
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this Section 9, such party shall use its best efforts to notify each other party
hereto in writing of the commencement of such action. In case any such action is
brought, the Stockholders shall be entitled, but shall not be required, to
participate in the defense thereof, or the Stockholders may elect to take charge
of and control the defense of such action, provided that the stockholders shall
agree to pursue the defense of such action or claim in good faith by appropriate
actions or proceedings promptly taken or instituted and diligently pursued.
10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate
at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may
be terminated by the mutual written agreement of the Parties. In the event of
such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further
obligation or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of the
Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if BRI desires to consummate the Merger in accordance with the
terms of this Agreement and the Management Company or the Stockholders
willfully refuse to perform their respective obligations hereunder, BRI, at
its option, shall have the right to compel specific performance by the
Management Company and the Stockholders to close the transaction hereunder, in
which event BRI shall have the right to recover from the Management Company
and the Stockholders the amount of all reasonable legal fees, court costs and
other
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litigation expenses incurred by BRI in connection with the exercise of
its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed to
perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the Management Company desires to consummate the Merger in
accordance with the terms of this Agreement and BRI willfully refuses to
perform its obligations hereunder, the Management Company, at its option,
shall have the right to compel specific performance by BRI to close the
transaction, in which event the Management Company (and the Stockholders)
shall have the right to recover from BRI the amount of all reasonable legal
fees, court costs and other litigation expenses incurred in connection with
the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the Management
Company and the Shareholders that in connection with the consummation of the
various Related Transactions (as defined in Section 11.6 hereof), BRI intends
to undertake either or both of (i) a public offering of common stock or other
equity securities of BRI (the "Public Offering"), or (ii) a private placement
of common stock or other equity securities of BRI (the "Private Placement").
The Management Company and the Shareholders shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement.
The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum
of $75,000,000.00. If the Public Placement and the Private Placement do not
in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, BRI shall have the right to
terminate this Agreement effective as of the Closing Date, and, thereafter
this Agreement shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured
loans, which agreements are more particularly described on Exhibit 4 attached
hereto (collectively the "Related Agreements"). (The transactions described
in the Related Agreements, including this
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Agreement, are collectively the "Related Transactions"). Except to the extent
the parties expressly agree otherwise in writing or in that certain Kickout
Agreement [as such term is defined in the Related Agreements] (the "Kickout
Agreement"), in the event that any of the Related Agreements is terminated
pursuant to any termination provision of any other Related Agreement or does not
become effective due to the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
unless such date is extended by the written consent of all of the parties
hereto, this Agreement shall terminate automatically simultaneously with the
termination of any such Related Agreement or upon the failure of all of the
other parties to the Related Agreement to execute the Related Agreement on or
before September 22, 1997, unless such date is extended by the written consent
of all of the parties hereto, whereupon this Agreement shall be void and without
recourse to all parties, except for provisions which are expressly stated to
survive the termination of this Agreement. The Closing under this Agreement
shall be simultaneous with the closings under the Related Agreements. Except as
provided in the Kickout Agreement, in the event the closing under any of the
Related Agreements is cancelled or postponed, the Closing under this Agreement
shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this
transaction. The Management Company understands that American Property
Consultants ("APC") had entered into a fee arrangement with Questar
Properties, Inc. ("QPI"), which might not apply to this transaction in any
event. Nevertheless, to the extent that it is determined that a commission or
fee is owed to APC, it shall be the obligation of the Stockholders and QPI in
accordance with the provisions of Section 12.3 hereof. In no event shall any
commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall BRI or the
Management Company have any obligation to pay any commission to APC.
12.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and
expenses attributable to this transaction will be divided into two
categories: (i) those fees which can be specifically allocated to the
Management Company due to said fees solely benefiting it ("Direct Costs") and
(ii) those fees which cannot be so allocated ("Indirect Costs").
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Notwithstanding anything to the contrary contained herein, for the purposes of
this Section 12.2, each of the Stockholders hereby agrees that: (i) QPI shall
be entitled to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM by certain transferor partnerships
and related entities (collectively, the "Related Entities"), which shall be
Indirect Costs (ii) to the extent it is determined that APC is due any fee as
described in Section 12.1 hereof, up to $1,000,000 of such fee (which may be
paid at Closing or held back in an escrow account by Questar Investment
Corporation until such time as the amount of such fee, if any, is determined)
shall be included as Indirect Costs, with any such fee in excess of $1,000,000
to APC being the sole responsibility of QPI; and (iii) all legal and
accounting fees of counsel and advisors to Questar Investment Corporation
shall also be Indirect Costs. Each of the Stockholders acknowledges and
agrees that (i) any and all Direct Costs shall be allocated to each of them
with respect to their interest in the Management Company and (ii) any and all
Indirect Costs shall be allocated among the Stockholders and Related Entities
at Closing based on the pro rata number of BRI shares allocated at Closing to
each of them. Each of the Stockholders further acknowledges and agrees that
Questar Investment Corporation shall be authorized to determine the
allocations of the transaction costs and expenses to be allocated in
accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of the
Contracts;
(b) wages and pension benefits of all persons employed by
the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable to
the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
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At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation
necessary to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any
of such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
13. Notices
All notices under this Agreement shall be in writing and shall be
delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed
as follows (or to such address as the Management Company, the Stockholders or
BRI shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the c/o Questar Properties, Inc.
Management 124 Slade Avenue, Suite 200
Company or the Baltimore, MD 21208
Stockholders: Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
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With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business
day after deposited with such delivery service; or, if mailed, one business
day after the date deposited with the U.S. Postal Service.
14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions
of 9(c)) shall survive the Closing indefinitely and an action based thereon
may be brought at any time after the Closing Date. Representations and
warranties in Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days
after the expiration of the applicable statute of limitations. Except as set
forth in the immediately preceding sentence or otherwise as specified in this
Agreement, the representations, warranties, covenants and other obligations of
the Management Company and the Stockholders set forth in Sections 2 (other
than Section 2.10) and 3 (other than Section 3.2) and the representations and
warranties, covenants and other obligations of BRI contained in Section 4
(other than Sections 4.7, 4.9 and 4.10) shall survive until 12 months after
the Closing Date and thereafter during the pendency of any claim based upon a
breach thereof, and no action based thereon shall be commenced more than 12
months after the Closing Date. Except as otherwise specifically provided in
this Agreement, no other representations, warranties, covenants or other
obligations of the Management Company, the Stockholders or BRI set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions
contemplated herein, and all prior agreements, understandings, representations
and statements, oral
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or written, are merged into this Agreement. Neither this Agreement nor any
provision hereof may be waived, modified, amended, discharged or terminated
except by an instrument signed by the party against whom the enforcement of such
waiver, modification, amendment, discharge or termination is sought, and then
only to the extent set forth in such instrument.
17. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the
scope or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to
assign or transfer their right to receive BRI Shares.
20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to
BRI of a duly executed counterpart of this Agreement and the satisfaction of
all conditions under which such offer is made, but such offer may be revoked
by BRI by written notice given at any time prior to such acceptance and
satisfaction.
21. Number and Gender. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall include the plural
and the plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the
contrary, and all references to Schedules and Exhibits shall be to the
specified Schedules and Exhibits annexed hereto. All Schedules and Exhibits
annexed hereto are made a part hereof. All terms defined herein shall have
the same meanings in the Schedules and Exhibits, except as otherwise provided
therein. All references in this Agreement shall be deemed to include the
Schedules and Exhibits.
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23. Publicity. In no event shall any Party issue any press release
or otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties
have consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be
deemed to limit or impair in any way any Party's ability to disclose the
details of the transactions contemplated hereby to the accountants, attorneys
or other authorized agents of such Party or as such Party deems necessary or
desirable pursuant to any court or governmental order or applicable securities
regulations or financial reporting requirements, nor shall BRI be precluded
from describing this Agreement and the transactions herein contemplated in any
filings made pursuant to any securities laws or in connection with the Public
Offering, or from filing this Agreement, the Exhibits hereto and the Schedules
as exhibits to any filings by BRI required by any securities laws.
Notwithstanding the foregoing, no Party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known
by means beyond the reasonable control of such Party. The provisions of this
Section 24 shall survive the Closing.
24. Counterparts. This Agreement may be executed and delivered in
any number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE GORN MANAGEMENT COMPANY
/s/ By: /s/
- --------------------------- --------------------------------------
Name:
Title: President
WITNESS: STOCKHOLDERS:
/s/ By: /s/ Morton Gorn
- --------------------------- --------------------------------------
Morton Gorn
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/s/ By: /s/ Stephen M. Gorn
- --------------------------- --------------------------------------
Stephen M. Gorn
/s/ By: /s/ Karen Colvin
- --------------------------- --------------------------------------
Karen Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
/s/ By: /s/ David J. Olney
- --------------------------- --------------------------------------
Name: David J. Olney
Title: Senior Vice President
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List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE ARBORVIEW MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Arborview Management
Company, a Maryland corporation (the "Management Company"), and the
stockholders set forth on Schedule 2.2 attached hereto (collectively the
"Stockholders"). BRI, the Management Company and the Stockholders are
referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI
in exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company
file the certificate of merger or other appropriate documents prepared and
executed in accordance with the relevant provisions of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of
the State of Delaware and the Maryland General Corporation Law with the
Department of Assessments and Taxation of the State of Maryland. The Merger
shall have the effects set forth in Section 259 of the Delaware General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date
("Closing Date") mutually agreed to in writing by the Parties, but not later
than October 31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and
documents referred to in Section 8.10, (b) BRI shall deliver to the Company
the various certificates, instruments and documents referred to in Section
9.9, (c) the Management
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Company and BRI shall file with the Secretary of State of the State of Delaware
the Certificate of Merger, (d) the Management Company and BRI shall file with
the Department of Assessments and Taxation of the State of Maryland the Articles
of Merger, (e) BRI shall deliver certificates for the BRI Shares (as defined
below) to the Stockholders, and (f) the Stockholders shall deliver certificates
for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the Effective
Time, take any action, including executing and delivering any document, in the
name and on behalf of the Management Company, in order to consummate the
transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of any Party, each share of common stock, no par
value per share, of the Management Company ("Company Shares") issued and
outstanding immediately prior to the Effective Time shall be converted into and
represent the right to receive such number of shares of common stock, $.01 par
value per share, of BRI ("BRI Common Stock") as is equal to one share of BRI
Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio" shall be
determined by dividing (i) the number of shares of BRI Common Stock equal in
value (as such value is determined at the time and in the manner provided herein
below) to $17,500 (the "Consideration Amount"), by (ii) the number of Company
Shares issued and outstanding immediately prior to the Effective Time; provided,
however, with respect to each property set forth on Exhibit 1 attached hereto,
as to which the transactions described in the applicable Related Agreement (as
defined in Section 11.6) have not been closed on or prior to the Closing Date
hereunder (a "Non-Acquired Property"), there shall be a reduction in the
Consideration Amount equal to the Reduction Amount for such property. The
Reduction Amount for each such property shall be equal to (A) .6 multiplied by
the amount of the Management Fees for such property as set forth on Exhibit 1
multiplied by (B) five (5). The shares of BRI Common Stock to be issued to the
holders of the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this Agreement,
the value of each share of BRI Common Stock ("BRI Share Value") shall be the
average of the closing price per share, rounded to the nearest one-thousandth,
of one share of common stock of BRI as such price is published by The Wall
Street Journal for the period from, and including, August 1, 1997 through and
including, the date of pricing of the Public Offering contemplated under
Section 11.5 hereof, provided that in any event the BRI Share Value shall be
not less than $10.50 per share (the "Fixed Floor") and not greater than $11.75
per share (the "Fixed Ceiling"). The foregoing calculation of BRI Share Value
(including the Fixed Floor and Fixed Ceiling) will be
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adjusted as appropriate and customary upon the occurrence of any of the
following events to reflect a stock split, dividend (outside of the ordinary
course), recapitalization or other similar event outside of the ordinary course.
(c) The Management Company and the Stockholders acknowledge
and agree that after the execution hereof, the price of the BRI Common Stock
may increase or decrease in value as the result of market fluctuations prior
and subsequent to the Public Offering. Notwithstanding these fluctuations,
once the value and number of BRI Shares have been established as provided in
this Section 1.5, BRI will not be required to increase or be permitted to
decrease the number of BRI Shares to be issued to the Stockholders in the
event of a decrease or increase in the market value of the BRI Common Stock
subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the
nearest whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after
the Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to
do business and is in good standing in all other jurisdictions in which the
failure to be so qualified and in good standing would have a material adverse
effect on the Management Company's business (a "Material Adverse Effect").
Such jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2
attached hereto, including the number of Company Shares outstanding. Such
Company Shares are held of record and beneficially owned by the Stockholders
as set forth on Schedule 2.2 attached hereto. All of such Company Shares have
been duly and validly issued, are fully paid and nonassessable and free of all
preemptive rights and were issued in compliance with applicable federal and
state securities laws. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Management Company is
a party or which are binding upon the Management Company providing for the
issuance, disposition or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Management Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this Agreement
and the agreements provided for herein by the Management Company, and the
consummation by the Management Company of all transactions contemplated hereby
and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management
Company, enforceable against the Management Company in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors
theretofore or hereafter enacted to the extent that the same may be
constitutionally applied. The execution, delivery and performance by the
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Management Company of this Agreement and the agreements provided for herein,
and the consummation by the Management Company of the transactions
contemplated hereby and thereby, will not, with or without the giving of
notice or the passage of time or both, (a) violate the provisions of any law,
rule or regulation applicable to the Management Company; (b) violate the
provisions of the Certificate of Incorporation or By-laws of the Management
Company; (c) violate any judgment, decree, order or award of any court, governme
ntal body or arbitrator which would have a Material Adverse Effect; or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or cause
the creation of any lien, charge or encumbrance upon the properties or assets
of the Management Company pursuant to, any indenture, mortgage, deed of trust
or other instrument or agreement to which the Management Company is a party or
by which the Management Company or any of its properties is or may be bound
which would have a Material Adverse Effect. Schedule 2.3 attached hereto sets
forth a true, correct and complete list of all material consents and approvals
of third parties that are required in connection with the consummation by the
Management Company of the transactions contemplated by this Agreement and the
agreements provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the
Closing) other than (i) the Contracts and (ii) the assets set forth on
Schedule 2.4 hereto. The Management Company shall distribute the Excluded
Assets prior to Closing to the Shareholders. Upon the Closing, the Management
Company will own all tangible assets set forth on Schedule 2.4 attached
hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements")
and on or before August 31, 1997 the Management Company shall provide
unaudited financial statements (the "Current Financial Statements") for the
six-month period ending June 30, 1997 (the "Balance Sheet Date"). The
December 31 Financial Statements, the Current Financial Statements and the
Closing Financial Statement to be delivered pursuant to Section 6.8 are
collectively referred to as the "Financial Statements". The Financial
Statements fairly present the financial condition of the Management Company as
of the respective statement dates in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto), and reflect all liabilities, fixed, contingent or otherwise,
required to be disclosed in such Financial Statements in accordance with
generally accepted accounting principles (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments). The
Financial Statements shall be certified by the Management Company&WP1-9;s
chief financial officer.
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2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course
of business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of
the date of Closing, the Management Company shall have no liabilities or
obligations (absolute or contingent) for borrowed money and shall have no
other liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Management Company's business which are either (i) in the aggregate, not
material, or (ii) approved by the BRI Partnership in writing; and (b)
liabilities resulting from or incurred in the ordinary course of business
arising under the Contracts. For purposes of this Subsection 2.6, "material"
means any amount in excess of $50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the
Management Company or the Stockholders, proceeding or investigation pending or
threat thereof, against the Management Company or the Stockholders which
questions the validity of this Agreement or the right of the Management
Company or the Stockholders to enter into it, or which might result in or
have, either individually or in the aggregate, a Material Adverse Effect on
the Management Company. The Management Company is not in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule
of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority except for
such violations or defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims
thereunder. The Management Company has done nothing to reduce or impair the
insurance afforded by the Insurance Policies. To the Management Company's
knowledge, there are no material disputes with underwriters of any such
Insurance Policies and there are no pending or threatened terminations with
respect to any of such policies.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development
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which would have a Material Adverse Effect on the business, properties, assets,
condition or prospects of the Management Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Management
Company, or for which the Management Company may have any liability, have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation
or matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due
with respect to completed and settled examinations or concluded litigation
have been paid.
(b) The Management Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) Neither the Management Company, nor the Stockholders,
know of (A) any audit or investigation of the Management Company with respect
to any liability for taxes relating to the Management Company, or (B) any
threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and complete
copy of the Federal Income Tax Return for 1996 for the Management Company, as
filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of account
of the Management Company, all federal, state and local income, franchise,
property and other tax returns filed by the Management Company, and all other
books and records of the Management Company are in all material respects complet
e and correct and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true, complete
and correct list of the following contracts and agreements, whether written or
oral (collectively, the "Contracts"):
(i) all management contracts to which the Management
Company is a party;
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(ii) all loan agreements, indentures, mortgages and
guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title retention
agreements, security agreements, personal property leases and lease purchase
agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other understandings
or arrangements between the Management Company and any stockholder or
affiliate of the Management Company except those described in the Financial
Statements or in writing to BRI; and
(v) any other material agreement or contract entered
into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached hereto:
(i) each Contract is a valid and binding agreement of
the Management Company, enforceable against the Management Company in
accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company and
the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
(iii) To the knowledge of the Management Company and
the Stockholders, the Management Company is not in breach of or default under
any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto except for such defaults, losses, liens,
changes or encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management Company
and the Stockholders, there is no existing breach or default by any other
party to any
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Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto except, in each case, as would not have a
Material Adverse Effect.
(c) Except as set forth on Schedule 2.12, the continuation,
validity and effectiveness of each Contract will not be affected by the Merger
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management Company
has all requisite licenses, permits and certificates, including environmental,
health and safety permits, from federal, state and local authorities necessary
to conduct its business and own and operate its assets (collectively, the
"Permits") except as would not have a Material Adverse Effect. The
Management Company is not in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties, the violation of which would have
a Material Adverse Effect on the Management Company or its properties. The
business of the Management Company does not violate, in any material respect,
any federal, state, local or foreign laws, regulations or orders (including,
but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste
(as defined in the Resource Conservation and Recovery Act, as amended, and the
regulations adopted pursuant thereto), conservation, or corrupt practices, the
enforcement of which would have a Material Adverse Effect on the Management
Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have
a Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached
hereto, since the Balance Sheet Date, the Management Company has not entered
into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the
Management Company has not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge or
other encumbrance any assets of the Management Company;
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(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or
regulation which must be obtained or satisfied by the Management Company and
which are necessary for the execution and delivery by the Management Company
of this Agreement and the documents to be executed and delivered by the
Management Company in connection herewith are set forth on Schedule 2.16
attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of the
Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate list of
all Employee Benefit Plans (as defined below) maintained, or contributed to,
by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined under Section 414(m)
of the Code or the
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regulations under Section 414(o) of the Code), any of which includes the
Management Company. Complete and accurate copies of (i) all Employee Benefits
Plans, (ii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iii) all annual reports filed on IRS Form 5500, 5500C or
5500R for the last three plan years for each Employee Benefit Plan, have been
delivered to the BRI. Each Employee Benefit Plan has been administered in all
material respects in accordance with its terms and each of the Management
Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Management Company and all Employee Benefit Plans are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder.
(c) There are no investigations by an governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders), suits or proceedings against
or involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit
Plans are qualified and the plans and the trusts related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively, of
the Code, no such determination letter has been revoked and revocation has not
been threatened, no such Employee Benefit Plan has been amended since the date
of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would likely result in a
revocation of such determination.
(e) Neither the Management Company nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(f) At no time has the Management Company or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
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3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and authority
to enter into and deliver this Agreement and the other agreements provided for
herein and to consummate the transactions contemplated hereby and thereby.
This Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby constitute
the valid and legally binding obligations of such Stockholder, enforceable
against such Stockholder in accordance with their respective terms, subject
only to applicable bankruptcy, insolvency, reorganization, moratorium and
other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or
arbitrator; or (c) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
Company Shares of such Stockholder pursuant to, any indenture, mortgage, deed
of trust or other instrument or agreement to which such Stockholder is a party
or by which such Stockholder is or may be bound. Schedule 3.1 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation by such
Stockholder of the transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of
the Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the
registration requirements or exemption provisions of any applicable securities
laws and in accordance with the terms of the Registration Rights Agreement (as
defined below).
(b) Such Stockholder understands that the BRI Shares to be
issued to Stockholder will not be registered under the Act, or the securities
laws of any state ("Blue Sky Laws") by reason of a specific exemption or
exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on
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such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that, for the
reasons set forth in paragraphs (a) and (b) above, the BRI Shares may not be
offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under
the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter
issued by the Securities and Exchange Commission to the effect that a proposed
transfer of the BRI Shares may be made without registration under the Act,
together with either registration or an exemption under applicable Blue Sky
Laws, or (iii) upon BRI receiving an opinion of counsel knowledgeable in
securities law matters (and which opinion and counsel shall be reasonably
acceptable to BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and
that, accordingly, such Stockholder must bear the economic risk of an
investment in the BRI Shares for an indefinite period of time. Such
Stockholder acknowledges, represents and agrees that (i) his or her economic
circumstances are such that he or she is able to bear all risks of the
investment in BRI and the BRI Shares for an indefinite period of time,
including the risk of a complete loss of his or her investment in the BRI
Shares, (ii) he or she has knowledge and experience in financial and business
matters sufficient to evaluate the risks of investment in BRI, and (iii) he or
she has consulted with his or her own separate counsel and tax advisor, to the
extent necessary, as to all legal and taxation matters covered by this
Agreement and has not relied upon BRI, its affiliates or its legal counsel and
advisors for any explanation of the application of the various United States
or state securities laws or tax laws with regard to his or her acquisition of
the BRI Shares. Such Stockholder further acknowledges and represents that he
or she has made his or her own independent investigation of BRI and the
business conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment in BRI
involves substantial risks; such Stockholder acknowledges that he or she has
(i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and
information relevant to its decision to enter into this Agreement and to
invest in BRI, including, without limitation, BRI's SEC Filings (as defined
below) and the Private Placement Memorandum of BRI, dated as of August 25,
1997 (the "PPM") and (iii) had the opportunity to ask questions of BRI and its
management concerning his or her investment in BRI and the transactions
contemplated hereby, which questions were answered to his or her satisfaction.
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(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her hereunder will not be
registered under the Act in reliance upon the exemption afforded by Section
4(2) thereof for transactions by an issuer not involving any public offering,
and will not be registered or qualified under any other applicable securities
laws;
(ii) Until such time as the following legend is no longer required,
the BRI Shares will bear a legend substantially to the effect of the
following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or the
securities laws of any state. The securities may not be offered, sold,
transferred, pledged or otherwise disposed of without an effective
registration statement under the Act and under any applicable state securities
laws, receipt of a no-action letter issued by the Securities and Exchange
Commission (together with either registration or an, exemption under
applicable state securities laws) or an opinion of counsel (which opinion and
which counsel shall be acceptable to Berkshire Realty Company, Inc.) that the
proposed transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) BRI reserves the right to place a stop order against the
transfer of the BRI Shares and to refuse to effect any transfers thereof, in
the absence of satisfying the conditions contained in the foregoing legend.
(g) The address of each Stockholder set forth on Schedule
2.2 attached hereto is the address of such Stockholder's principal residence
or principal place of business, and such Stockholder has no present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such principal residence or principal place of
business is situated.
(h) The provisions of this Section 3.2 shall survive the
Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
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4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and
to carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to
the extent that the same may be constitutionally applied; and (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other
documents and instruments contemplated hereby and the performance by BRI of
its obligations hereunder and thereunder do not and will not constitute a
default under, or conflict with or violate, any provision of the Certificate
of Incorporation or By-Laws of BRI or any other material agreement to which
BRI is a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as
filed with the Securities and Exchange Commission, and all Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K filed by BRI with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of BRI included or incorporated by reference in the SEC
Filings and the PPM have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
in all material respects the consolidated assets, liabilities and financial
position of BRI as of the dates thereof and the consolidated results of its
operations and changes in cash flow for the periods then ended (subject, in
the case of any unaudited interim financial statements, to normal year ended
adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part
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of BRI in connection with the valid execution and delivery of this Agreement by
BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI consists
of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares were
issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free and clear of
all preemptive rights and of any lien, claim, change, pledge, encumbrance,
limitation, agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other similar proceedings are pending or, to BRI's
knowledge, threatened against BRI, nor are any of such proceedings anticipated
or contemplated by BRI.
4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has received
all of the documents described herein as delivered thereto (unless it has
notified the Management Company or the Stockholders otherwise in writing) and
represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.10 Tax Matters.
(a) All federal, state, local, and foreign tax returns and
information statements required to be filed by or on behalf of BRI or for
which BRI may have any liability have been accurately prepared in all material
respects and duly and timely filed (or requests for extensions have been
timely filed, granted and have not expired). As of the date hereof, there is
no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
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(b) BRI has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or investigation of
BRI with respect to any liability for taxes relating to BRI, or (B) any
threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue after
Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI
or its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to
enter into it, or which would likely have, either individually or in the
aggregate, a material adverse effect on the business of BRI as such is
presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries or
affiliates is the owner as described in the SEC Filings with good title to its
properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material
adverse effect on BRI and BRI is not in material violation of any
Environmental Laws to such an extent that it would have a material adverse
effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals,
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consents, permits, licenses or certificates of occupancy (whether governmental
or otherwise) required for the current use and operation of any of its
properties have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii) any fees and
charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
5. Access to Information
5.1 Access to Management, Properties and Records; Due Diligence.
From the date of this Agreement until the Closing Date, BRI may examine the
accounting books and other business and financial records, plans, reports and
documents of the Management Company and its business, including all corporate
records, tax returns, contracts, licenses, business plans and projections,
audits and audit work papers, employee benefit plans, employee records,
management plans and records, and any and all other information reasonably
requested by BRI, and the Management Company and the Stockholders shall
cooperate fully with BRI's representatives and make themselves available, so
that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or
copies of, all such books and records. The Management Company shall furnish
to BRI such financial and operating data and other information as to the
assets and the business of the Management Company as BRI shall reasonably
request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable to the
conduct of the business of the Management Company;
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(b) Duly and timely file, or obtain appropriate extensions
of the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(c) Unless the Management Company is contesting the same in
good faith and has established reasonable reserves therefor, pay when required
to be paid all taxes indicated by the Management Company's tax returns or
otherwise lawfully levied or assessed upon it, or any of its properties or
assets, or which it is otherwise legally obligated to pay; and
(d) Comply in all material respects with each and every
undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may
be applicable:
(a) Take any action to materially amend the Management
Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other corporate
securities of the Management Company or grant any option or issue any warrant
to purchase or subscribe to any of such securities or issue any securities
convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of the
Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or permit
any other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets
of any other person, partnership, corporation or business organization;
(f) Make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise
or settle any claim for past or present tax due;
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(g) Waive any rights of material value relating to the
business of the Management Company;
(h) Modify, amend, alter or terminate any of its management
contracts or other material contracts;
(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control of its
assets and business, (ii) keep in faithful service its present officers and
key employees, (iii) preserve the goodwill of its customers and others having
business relations with it, and (iv) keep and preserve its business existing
on the date hereof until the Closing Date provided that the Management Company
and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its books,
accounts and records in the customary manner and in the ordinary or regular
course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent pursuant to
the management contracts, enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of
business calling for payments which in the aggregate do not exceed $50,000 for
each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis, file
all tax returns for and pay any and all taxes which shall become due or shall
have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
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6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and
3 hereof being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior to
the Closing, the Management Company and the Stockholders will deliver or cause
to be delivered to BRI supplemental information concerning events subsequent
to the date hereof which would render any statement, representation or
warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations
and statements of cash flows with respect to the Management Company for the
one month period that ended immediately preceding the month in which the
Closing occurs, certified by the Management Company&WP1-9;s chief financial
officer (the "Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth
on Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate
the transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance Policies
in full force and effect following the Closing in accordance with the terms
thereof, or to maintain other insurance policies having terms that are no less
favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations
and warranties set forth in Sections 2 and 3 shall be true on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes permitted by the terms hereof or
consented to in writing by BRI. The Management Company and the Stockholders
shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or
carry out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by the Management Company and
the Stockholders of the transactions contemplated by this Agreement shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the
Stockholder to consummate the transactions contemplated by this Agreement,
including, without limitation, those consents and approvals set forth on
Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly
authorized the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
7.10 Closing Deliveries. BRI shall have received at or prior to
the Closing each of the following documents:
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(a) such contracts, files and other data and documents
pertaining to the business of the Management Company as BRI may reasonably
request;
(b) copies of the general ledgers and books of account of
the Management Company, and all federal, state and local income, franchise,
property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and the
Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management Company
attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by
the Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates as
BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties
of BRI in this Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Management Company. BRI shall
have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by BRI of the transactions
contemplated by this Agreement shall have consented to, authorized, permitted
or approved such transactions.
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8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or
approval is required in order for BRI to consummate the transactions
contemplated by this Agreement, including, without limitation, those set forth
on Schedule 8.4 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the
Closing Date, substantially in the form of Exhibit 5 attached hereto and as to
such matters as may be reasonably requested by the Management Company or its
counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting to the
incumbency of BRI's officers, the authenticity of the resolutions authorizing
the transactions contemplated by this Agreement, and the authenticity and
continuing validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form attached
hereto as Exhibit 6 duly executed by BRI; and
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(e) such other documents, instruments or certificates as
the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the parties
proceed to Closing, each Stockholder agrees, severally and not jointly, to
indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting
from any breach or default by the Management Company or such Stockholder of
any obligation of the Management Company or such Stockholder under this
Agreement or (ii) from liabilities for borrowed money incurred by the
Management Company prior to the Closing; provided that no Stockholder shall be
required to indemnify BRI for any amounts in excess of 50% of the fair market
value of the BRI shares received by such Stockholder as of the date such
indemnification obligation is satisfied (except for indemnification
obligations with respect to representations of each of the Stockholders in
Section 3.2, which shall be limited to 100% of the fair market value as of the
date such indemnification obligation is satisfied of the BRI Shares received
by such Stockholder (collectively, the "Cap"); and provided further that to
the extent any of the Stockholders have any indemnification obligation to BRI,
the Stockholder may elect to satisfy such indemnification obligation by
directing BRI to cancel such amount of BRI shares acquired by such Stockholder
pursuant to this Agreement having a fair market value (measured at the time
such BRI shares are returned or cancelled) equal to the indemnification
obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing
Date, resulting from (A) any inaccuracy in or breach of any representation or
warranty of BRI or (B) resulting from any breach or default by BRI of any
obligation of BRI under this Agreement or (ii) from liabilities of the
Management Company accruing after the Closing (including liabilities accruing
after the Closing in connection with employee benefit plans) (except for such
liabilities resulting from a breach or default by the Stockholder or the
Management Company for which BRI is indemnified under Section 9(a) above);
provided that BRI shall not be required to indemnify any Stockholder under
Section 9(b)(i) for any amounts in excess of 50% of the fair market value as
of the date such indemnification obligation is satisfied of the BRI shares
received by such Stockholder (except for indemnification obligations with
respect to Section 4.10 which shall be limited to 100% of the fair market
value as of the date such indemnification obligation is satisfied of the BRI sha
res received by such Stockholder; and
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(c) The indemnification obligations of the Stockholders
and BRI, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 14. No such claim for indemnification shall be deemed due and
payable unless such claim has been agreed to by the parties or has been
finally determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually
reduce the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall have any
liability for claims made under Section 9(a) or 9(b) unless and until the
aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 9 shall be
the sole and exclusive remedy after the Closing Date for damages available to
BRI or the Stockholders for a breach of any of the terms, conditions,
representations or warranties contained herein, and each party acknowledges
and agrees that other than the representations and warranties set forth
herein, no other representations and warranties are being made with respect to
BRI or the Management Company.
(g) Each of the Stockholders, the Management Company and
BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the
other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of notice of
the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action.
In case any such action is brought, the Stockholders shall be entitled, but
shall not be required, to participate in the defense thereof, or the
Stockholders may elect to take charge of and control the defense of such
action, provided that the stockholders shall agree to pursue the defense of
such action or claim in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued.
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10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate
at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may
be terminated by the mutual written agreement of the Parties. In the event of
such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further
obligation or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of the
Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if BRI desires to consummate the Merger in accordance with the
terms of this Agreement and the Management Company or the Stockholders
willfully refuse to perform their respective obligations hereunder, BRI, at
its option, shall have the right to compel specific performance by the
Management Company and the Stockholders to close the transaction hereunder, in
which event BRI shall have the right to recover from the Management Company
and the Stockholders the amount of all reasonable legal fees, court costs and
other litigation expenses incurred by BRI in connection with the exercise of
its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed to
perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days
after the Closing Date, and thereafter this Agreement shall be void and
without recourse to any party hereunder except for provisions which are
expressly stated to survive termination of this Agreement. In addition to the
foregoing, if the Management Company desires to consummate the Merger in
accordance with the terms of this Agreement and BRI
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willfully refuses to perform its obligations hereunder, the Management Company,
at its option, shall have the right to compel specific performance by BRI to
close the transaction, in which event the Management Company (and the
Stockholders) shall have the right to recover from BRI the amount of all
reasonable legal fees, court costs and other litigation expenses incurred in
connection with the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the Management
Company and the Shareholders that in connection with the consummation of the
various Related Transactions (as defined in Section 11.6 hereof), BRI intends
to undertake either or both of (i) a public offering of common stock or other
equity securities of BRI (the "Public Offering"), or (ii) a private placement
of common stock or other equity securities of BRI (the "Private Placement").
The Management Company and the Shareholders shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement.
The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum
of $75,000,000.00. If the Public Placement and the Private Placement do not
in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, BRI shall have the right to
terminate this Agreement effective as of the Closing Date, and, thereafter
this Agreement shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured
loans, which agreements are more particularly described on Exhibit 4 attached
hereto (collectively the "Related Agreements"). (The transactions described
in the Related Agreements, including this Agreement, are collectively the
"Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement [as such term is
defined in the Related Agreements] (the "Kickout Agreement"), in the event
that any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to
the failure of all of the other parties to the Related Agreement to execute
the Related Agreement on or before September 22, 1997, unless such date is
extended by the written consent of all of the parties hereto, this Agreement
shall terminate automatically simultaneously with the termination of any such
Related Agreement or upon the failure of all of the other parties to the
Related Agreement to execute the Related Agreement on or before September 22,
1997, unless such date is extended by the written consent of all of the
parties hereto, whereupon this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly
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<PAGE>
stated to survive the termination of this Agreement. The Closing under this
Agreement shall be simultaneous with the closings under the Related Agreements.
Except as provided in the Kickout Agreement, in the event the closing under any
of the Related Agreements is cancelled or postponed, the Closing under this
Agreement shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this
transaction. The Management Company understands that American Property
Consultants ("APC") had entered into a fee arrangement with Questar
Properties, Inc. ("QPI"), which might not apply to this transaction in any
event. Nevertheless, to the extent that it is determined that a commission or
fee is owed to APC, it shall be the obligation of the Stockholders and QPI in
accordance with the provisions of Section 12.3 hereof. In no event shall any
commission be due unless and until Closing has occurred and the transactions
contemplated hereby have been consummated and in no event shall BRI or the
Management Company have any obligation to pay any commission to APC.
12.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and
expenses attributable to this transaction will be divided into two
categories: (i) those fees which can be specifically allocated to the
Management Company due to said fees solely benefiting it ("Direct Costs") and
(ii) those fees which cannot be so allocated ("Indirect Costs").
Notwithstanding anything to the contrary contained herein, for the purposes of
this Section 12.2, each of the Stockholders hereby agrees that: (i) QPI shall
be entitled to an aggregate administrative fee of $200,000 in connection with
the concurrent contribution of up to eighteen (18) properties and the
management companies, as described in the PPM by certain transferor
partnerships and related entities (collectively, the "Related Entities"),
which shall be Indirect Costs (ii) to the extent it is determined that APC is
due any fee as described in Section 12.1 hereof, up to $1,000,000 of such fee
(which may be paid at Closing or held back in an escrow account by Questar
Investment Corporation until such time as the amount of such fee, if any, is
determined) shall be included as Indirect Costs, with any such fee in excess
of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all legal
and accounting fees of counsel and advisors to Questar Investment Corporation
shall also be Indirect Costs. Each of the Stockholders acknowledges and
agrees that (i) any and all Direct Costs shall be allocated to each of them
with respect to their interest in the Management Company and (ii) any and all
Indirect Costs shall be allocated among
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the Stockholders and Related Entities at Closing based on the pro rata number of
BRI shares allocated at Closing to each of them. Each of the Stockholders
further acknowledges and agrees that Questar Investment Corporation shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of the
Contracts;
(b) wages and pension benefits of all persons employed by
the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable to
the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation
necessary to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any
of such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
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13. Notices
All notices under this Agreement shall be in writing and shall be
delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed
as follows (or to such address as the Management Company, the Stockholders or
BRI shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the c/o Questar Properties, Inc.
Managemetn 124 Slade Avenue, Suite 200
Company or the Baltimore, MD 21208
Stockholders: Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business
day after deposited with such delivery service; or, if mailed, one business
day after the date deposited with the U.S. Postal Service.
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<PAGE>
14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions
of 9(c)) shall survive the Closing indefinitely and an action based thereon
may be brought at any time after the Closing Date. Representations and
warranties in Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days
after the expiration of the applicable statute of limitations. Except as set
forth in the immediately preceding sentence or otherwise as specified in this
Agreement, the representations, warranties, covenants and other obligations of
the Management Company and the Stockholders set forth in Sections 2 (other
than Section 2.10) and 3 (other than Section 3.2) and the representations and
warranties, covenants and other obligations of BRI contained in Section 4
(other than Sections 4.7, 4.9 and 4.10) shall survive until 12 months after
the Closing Date and thereafter during the pendency of any claim based upon a
breach thereof, and no action based thereon shall be commenced more than 12
months after the Closing Date. Except as otherwise specifically provided in
this Agreement, no other representations, warranties, covenants or other
obligations of the Management Company, the Stockholders or BRI set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions
contemplated herein, and all prior agreements, understandings, representations
and statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provision hereof may be waived, modified, amended,
discharged or terminated except by an instrument signed by the party against
whom the enforcement of such waiver, modification, amendment, discharge or
termination is sought, and then only to the extent set forth in such
instrument.
17. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the
scope or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to
assign or transfer their right to receive BRI Shares.
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20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to
BRI of a duly executed counterpart of this Agreement and the satisfaction of
all conditions under which such offer is made, but such offer may be revoked
by BRI by written notice given at any time prior to such acceptance and
satisfaction.
21. Number and Gender. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall include the plural
and the plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the
contrary, and all references to Schedules and Exhibits shall be to the
specified Schedules and Exhibits annexed hereto. All Schedules and Exhibits
annexed hereto are made a part hereof. All terms defined herein shall have
the same meanings in the Schedules and Exhibits, except as otherwise provided
therein. All references in this Agreement shall be deemed to include the
Schedules and Exhibits.
23. Publicity. In no event shall any Party issue any press release
or otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties
have consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be
deemed to limit or impair in any way any Party's ability to disclose the
details of the transactions contemplated hereby to the accountants, attorneys
or other authorized agents of such Party or as such Party deems necessary or
desirable pursuant to any court or governmental order or applicable securities
regulations or financial reporting requirements, nor shall BRI be precluded
from describing this Agreement and the transactions herein contemplated in any
filings made pursuant to any securities laws or in connection with the Public
Offering, or from filing this Agreement, the Exhibits hereto and the Schedules
as exhibits to any filings by BRI required by any securities laws.
Notwithstanding the foregoing, no Party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known
by means beyond the reasonable control of such Party. The provisions of this
Section 24 shall survive the Closing.
24. Counterparts. This Agreement may be executed and delivered in
any number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE ARBORVIEW MANAGEMENT COMPANY
/s/ By: /s/ Patrick M. Connelly
- --------------------------- -------------------------------------
Name: Patrick M. Connelly
Title: President
WITNESS: STOCKHOLDERS:
/s/ By: /s/ Morton Gorn
- --------------------------- -------------------------------------
Morton Gorn
/s/ By: /s/ Stephen M. Gorn
- --------------------------- -------------------------------------
Stephen M. Gorn
/s/ By: /s/ John B. Colvin
- --------------------------- -------------------------------------
John B. Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
/s/ By: /s/ David J. Olney
- --------------------------- -------------------------------------
Name: David J. Olney
Title: Senior Vice President
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List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _________, 1997, by and among
BERKSHIRE REALTY COMPANY, INC., a Delaware corporation, its subsidiary,
Berkshire Apartments, Inc. (collectively, the "General Partner"), and each of
those parties who are or become parties to the Amended and Restated Agreement
of Limited Partnership of BRI OP Limited Partnership (the "Partnership") dated
as of _________, 1997, as amended (the "Partnership Agreement"), as limited
partners of the Partnership from time to time in accordance with the terms of
the Partnership Agreement (the "Rights Holders").
A. Pursuant to the Partnership Agreement, the Rights Holders have the
right at any time and from time to time to convert all or a portion of their
units of partnership interest in the Partnership "Partnership Units") into
shares (the "Shares") of the General Partner's common stock, par value $.01
per share (the "Common Stock"), or cash, as selected by the General Partner.
B. In order to induce the Rights Holders to enter into the
Partnership Agreement, the General Partner has agreed to provide certain
registration rights with respect to the Shares as set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. Securities Subject to this Agreement. The securities entitled to the
benefits of this Agreement are the Shares issued by the General Partner to the
Rights Holders upon conversion (pursuant to Article XI of the Partnership
Agreement) of Partnership Units held by such Rights Holders, and any other
securities issued by the General Partner in exchange
<PAGE>
for any of such Shares (collectively, the "Registrable Securities" but, with
respect to any particular Registrable Security, only so long as it continues to
be a Registrable Security. Registrable Securities shall include any securities
issued as a dividend or distribution on account of Registrable Securities or
resulting from a subdivision of the outstanding shares of Registrable Securities
into a greater number of shares (by reclassification, stock split or otherwise).
For the purposes of this Agreement, a security that was at one time a
Registrable Security shall cease to be a Registrable Security when (i) such
security has been effectively registered under the Securities Act and such
security has been disposed of pursuant to such registration statement, (ii) such
security is sold, or is capable of being sold, in reliance on Rule 144 (or any
similar provision then in effect) under the Securities Act, (iii) such security
has been otherwise transferred and (a) the General Partner has delivered a new
certificate or other evidence of ownership not bearing the legend set forth on
the Shares upon the initial issuance thereof (or other legend of similar import)
and (b) in the reasonable opinion of counsel to the General Partner, the
subsequent disposition of such security would not require the registration or
qualification under the Securities Act, or (iv) such security has ceased to be
outstanding.
2. Shelf Registration.
2.1 Initial Shelf Registration.
(a) The General Partner shall file a "shelf" registration
statement with respect to all Registrable Securities on any appropriate form
pursuant to Rule 415 (or similar rule that may be adopted by the Commission)
under the Act (the "Initial Shelf Registration") on or within two weeks either
side of the date which is one year and ten days after the closing date of the
Questar Transactions (the "Filing Date") (i) covering the issuance of the Common
Stock by the General Partner upon conversion of the Partnership
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<PAGE>
Units, and (ii) if required by any Rights Holder, the resale of such Rights
Holder's Common Stock issuable upon conversion of the Partnership Units and,
shall use its best efforts to have such Initial Shelf Registration declared
effective by the Commission on or prior to 90 days after the Filing Date.
(b) The General Partner shall use its best efforts to keep the Shelf
Registration continuously effective until all the Registrable Securities covered
by the Shelf Registration have been sold pursuant to the terms of the Shelf
Registration.
The Company further agrees: (i) if requested by any Rights Holder
in connection with any sale by such Rights Holder (other than pursuant to an
underwritten offering), to promptly include in any Initial Shelf Registration or
Demand Shelf Registration Statement (as defined below), as the case may be, and
related prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such Rights Holder(s) may reasonably request to
have included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Registrable Securities; and (ii) to make all
required filings of any prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be included
in such prospectus supplement or post-effective amendment.
2.2 Shelf Registration Upon Demand. In the event that the General
Partner is unable to perform the obligations set forth in Section 2.1 by reason
of a change in Commission policy or law or circumstances beyond the General
Partner's control, subject to the provisions of Section 2.3, upon the written
request of any Rights Holder at any time requesting that the General Partner
effect the registration rights provided under this Section 2 (the "Request"),
and specifying in the Request the number of Registrable Securities to be
registered and the intended method of disposition thereof, the General Partner
shall
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<PAGE>
promptly, but in any event within 10 days after receipt of the Request,
give written notice to all other Rights Holders that the General Partner has
received the Request (the "Notice"), and will thereupon use its best efforts to
file within 60 days after receipt of the Request a registration statement (a
"Demand Shelf Registration Statement"), on Form S-3 or other appropriate form
under the Securities Act for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 thereunder or any similar rule that may be adopted by
the Securities and Exchange Commission (the "Commission"), with respect to sales
in ordinary course brokerage or dealer transactions not involving an
underwritten public offering, covering (i) all Registrable Securities held by
the Rights Holder identified in the Request and (ii) all other Registrable
Securities which the General Partner has been requested to register by the
holders thereof by written request delivered to the General Partner within 30
days after the giving of the Notice by the General Partner (which request shall
specify the number of Registrable Securities to be registered and the intended
method of disposition thereof). The General Partner shall use all reasonable
efforts to cause the Demand Shelf Registration Statement to be declared
effective by the commission as soon as practicable after the filing thereof and
to keep the Demand Shelf Registration Statement continuously effective for a
period of two years from the date the Demand Shelf Registration Statement is
declared effective (or such shorter period ending upon the date that all
Registrable Securities initially covered by the Demand Shelf Registration
Statement cease to be Registrable Securities); provided that if the General
Partner shall furnish to the Rights Holders whose Registrable Securities are
covered by such Demand Shelf Registration Statement a certificate signed by the
President of the General Partner stating that, in the good faith judgment of the
Board of Directors of the General Partner, it would be significantly
disadvantageous to the General Partner and its stockholders for any such
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<PAGE>
Demand Shelf Registration Statement to be filed, amended or supplemented, the
General Partner may defer such filing, amending or supplementing of such Demand
Shelf Registration Statement for a period of not more than 60 days (the "No Sale
Period") and in such event such Rights Holders shall be required to discontinue
disposition of any Registrable Securities covered by such Demand Shelf
Registration Statement during such period, in which case the General Partner
shall extend the period during which such Demand Shelf Registration Statement
shall be maintained effective pursuant to this-Section 2.2 by the number of days
during the No Sale Period.
2.3 Limitation on Demand Registration Rights. Notwithstanding the
provisions of Section 2.2, the General Partner shall not be obligated to file a
Demand Shelf Registration Statement more often than once during any twelve-month
period.
3. Restrictions on Public Sale. In the event the General Partner intends to
issue shares of its capital stock to the public in an underwritten offering,
each of Messrs. Morton Gorn, Stephen M. Gorn and John B. Colvin agrees, if
requested by the managing underwriter or underwriters for such underwritten
offering, not to effect any public sale or distribution of Registrable
Securities or any securities convertible into or exchangeable or exercisable for
such Registrable Securities, including a sale pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act, during the 14 days
prior to, and during the 180-day period beginning on, the effective date of such
underwritten offering (except as part of such underwritten offering).
4. Registration Procedures. Whenever a Rights Holder has requested that any
Registrable Securities be registered pursuant to Section 2, the General Partner
shall:
(i) use all reasonable efforts to register or qualify such Registrable
Securities under such securities or "blue sky" laws of such jurisdictions as any
Rights Holder
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<PAGE>
identified in the Request reasonably requests in writing, and shall do any and
all other acts and things that may be reasonably necessary or advisable to
register or qualify for sale in such jurisdictions the Registrable securities
owned or to be acquired by such Rights Holder upon conversion of such Rights
Holder's Partnership Units; provided, however, that the General Partner shall
not be required to (a) qualify generally to do business in any jurisdiction
where it is not then so qualified, (b) subject itself to taxation in any such
jurisdiction, (c) consent to general service of process in any such jurisdiction
or (d) provide any undertaking required by such securities or "blue sky" laws or
make any change in its charter or bylaws that the Board of Directors determines
in good faith to be contrary to the best interests of the General Partner and
its stockholders;
(ii) notify the Rights Holders whose Registrable Securities are
covered by the Initial Shelf Registration or the Demand Shelf Registration
Statement, as the case may be, at any time when a prospectus relating to the
Initial Shelf Registration or the Demand Shelf Registration Statement, as the
case may be, is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
Initial Shelf Registration or such Demand Shelf Registration Statement, as the
case may be, contains an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare and file with the Commission a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of such Rights Holders' Registrable Securities, such prospectus will
not contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
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<PAGE>
(iii) use all reasonable efforts to cause all Registrable Securities
covered by the Initial Shelf Registration or the Demand Shelf Registration
Statement, as the case may be, to be listed on each securities exchange on which
similar securities issued by the General Partner are then listed, provided that
the applicable listing requirements are satisfied.
The General Partner may require any Rights Holder who is a seller or
prospective seller of Registrable Securities as to which a registration is being
effected to furnish to the General Partner such information regarding the
distribution of such Registrable Securities and other matters as may be required
to be included in the Initial Shelf Registration or the Demand Shelf
Registration Statement, as the case may be.
Each Rights Holder who is a seller or prospective seller of Registrable
Securities agrees that, upon receipt of any notice from the General Partner of
the happening of any event of the kind described in paragraph (ii) of this
Section 4, such Rights Holder shall forthwith discontinue disposition of
Registrable Securities pursuant to the Initial Shelf Registration or the Demand
Shelf Registration Statement, as the case may be, until such Rights Holder's
receipt of copies of the supplemented or amended prospectus contemplated by
paragraph (ii) of this Section 4 and, if so directed by the General Partner,
such Rights Holder shall deliver to the General Partner all copies of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. If the General Partner shall give any such notice, the General
Partner shall extend the period during which such Initial Shelf Registration or
such Demand Shelf Registration Statement, as the case may be, shall be
maintained effective pursuant to Section 2 by the number of days during the
period from and including the date of the giving of such notice pursuant to
paragraph (ii) of this Section 4 to and including the date when each Rights
Holder who is a seller or prospective seller of Registrable securities covered
by such Initial Shelf Registration or such Demand
-7-
<PAGE>
Shelf Registration Statement, as the case may be, shall have received the copies
of the supplemented or amended prospectus contemplated by paragraph (ii) of this
Section 4.
5. Registration Expenses. The General Partner shall pay all expenses
incident to its performance of or compliance with this Agreement, including,
without limitation, (i) all Commission, stock exchange and National Association
of Securities Dealers, Inc., registration, filing, transfer agent and listing
fees, (ii) all fees and expenses incurred in complying with securities or "blue
sky" laws (including reasonable fees and disbursements of counsel in connection
with "blue sky" qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, and (iv) all fees and disbursements
of the General Partner's independent public accountants and counsel, in each
case, regardless of whether such registration becomes effective, unless such
Initial Shelf Registration or such Demand Shelf Registration Statement, as the
case may be, fails to become effective as a result of the fault of a Rights
Holder; provided, however, that the General Partner shall not pay the costs and
expenses of any Rights Holder relating to selling commissions and discounts
relating to Registrable Securities to be sold by such Rights Holder, brokerage
fees, transfer taxes or the fees or expenses of any counsel, accountants or
other representatives retained by the Rights Holders, individually or in the
aggregate.
6. Indemnification; Contribution.
6.1 Indemnification by the General Partner, The General Partner agrees
to indemnify, to the fullest extent permitted by law, each Rights Holder, its
officers, directors, partners and agents and each person, if any, who controls
such Rights Holder (within the meaning of the Securities Act), against any and
all losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any
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<PAGE>
amendment thereof or supplement thereto or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, except insofar as the
same are caused by or contained in any information with respect to such Rights
Holder furnished in writing to the General Partner by such Rights Holder
expressly for use therein or by such Rights Holder's failure to deliver a copy
of the prospectus or any supplements thereto after the General Partner has
furnished such Rights Holder with a sufficient number of copies of the same or
by the delivery of prospectuses by such Rights Holder after the General Partner
notified such Rights Holder in writing to discontinue delivery of prospectuses.
6.2 Indemnification by Rights Holders. In connection with any registration
statement in which a Rights Holder is participating, each such Rights Holder
shall furnish to the General Partner in writing such information and affidavits
with respect to such Rights Holder as the General Partner reasonably requests
for use in connection with any such registration statement or prospectus and
agrees to indemnify, severally and not jointly, to the fullest extent permitted
by law, the General Partner, its officers, directors, partners and agents and
each person, if any, who controls the General Partner (within the meaning of the
Securities Act) against any and all losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to be
stated in any registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus, in light of the circumstances under which
they were made) not misleading, to the extent, but only to the extent, that such
untrue or alleged untrue statement or omission is contained in or omitted
-9-
<PAGE>
from, as the case may be, any information or affidavit with respect to such
Rights Holder so furnished in writing by such Rights Holder.
6.3 Conduct of Indemnification Proceedings. Any party that proposes to
assert the right to be indemnified under this Section 6 shall, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim is to be made against an indemnifying party or parties under this
Section 6, notify each such indemnifying party of the commencement of such
action, enclosing a copy of all papers served, but the omission so to notify
such indemnifying party will not relieve it from any liability that it may have
to any indemnified party under the foregoing provisions of this Section 6
unless, and only to the extent that, such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. If any such action is
brought against any indemnified party and it notifies the indemnifying party of
its commencement, the indemnifying party will be entitled to participate in and,
to the extent that it elects by delivering written notice to the indemnified
party promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the defense.
If the indemnifying party assumes the defense, the indemnifying party shall have
the right to settle such action without the consent of the indemnified party;
provided, however, that the indemnifying party shall be required to obtain such
consent (which consent shall not be unreasonably withheld) if the settlement
includes any admission of wrongdoing on the part
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of the indemnified party or any decree or restriction on the indemnified party
or its officers or directors; provided, further, that no indemnifying party, in
the defense of any such action, shall, except with the consent of the
indemnified party (which consent shall not be unreasonably withheld), consent to
entry of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such action.
The indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (i) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (ii)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(iii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party), or (iv) the indemnifying
party has not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice of the commencement of the
action, in each of which cases the reasonable fees, disbursements and other
charges of counsel will be at the expense of the indemnifying party or parties,
It is understood that the indemnifying party or parties shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees, disbursements and other charges of more than one
separate firm admitted to practice in such jurisdiction at any one time from all
such indemnified party or parties unless (a) the employment of more than one
counsel has been authorized in writing by the
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indemnifying party or parties, (b) an indemnified party has reasonably concluded
(based on advice of counsel) that there may be legal defenses available to it
that are different from or in addition to those available to the other
indemnified parties, or (c) a conflict or potential conflict exists (based on
advice of counsel to an indemnified party) between such indemnified party and
the other indemnified parties, in each of which cases the indemnifying party
shall be obligated to pay the reasonable fees and expenses of such additional
counsel or counsels. An indemnifying party will not be liable for any settlement
of any action or claim effected without its written consent (which consent shall
not be unreasonably withheld).
6.4 Contribution. If the indemnification provided for in this Section 6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, to the extent such indemnification is
unavailable, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in
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Section 6.3, any legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person,
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided in
Section 6.1 and 6.2 without regard to the relative fault of said indemnifying
parties or indemnified party.
7. Rule 144. The General Partner covenants that it shall use all reasonable
efforts to file the reports required to be filed by it under the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the
commission thereunder (or, if the General Partner ceases to be required to file
such reports, it shall, upon the request of any Rights Holder, make publicly
available other information), and it shall, if feasible, take such further
action as any Rights Holder may reasonably request, all to the extent required
from time to time to enable such Rights Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rules or regulations hereafter
adopted by the Commission. Upon the written request of any Rights Holder, the
General Partner shall deliver to such Rights Holder a written statement as to
whether it has complied with such requirements.
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8.Miscellaneous.
8.1 Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended in a manner adverse to the
Rights Holders unless the General Partner has obtained the written consent of
all Rights Holders existing at the time of such amendment.
8.2 Notices. Any notice or other communication required or permitted
hereunder shall be given in accordance with the terms of the Partnership
Agreement.
8.3 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective successors and permitted
assigns. No Rights Holder may assign its rights hereunder to any person who is
not a permitted transferee of such Rights Holder pursuant to the terms of the
Partnership Agreement and no Rights Holder may assign its rights hereunder to
any person who does not acquire all or substantially all of such Rights Holder's
Registrable securities or Partnership Units, as the case may be.
8.4 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE.
8.6 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, it
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being intended that all of the rights of the Rights Holders shall be enforceable
to the fullest extent permitted by law.
8.7 Entire Agreement. This Agreement, together with the Partnership
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings other
than those set forth or referred to herein or in the Partnership Agreement. This
Agreement, together with the Partnership Agreement, supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above.
BERKSHIRE REALTY COMPANY, INC.
By:
-----------------------------------
Name:
Title:
EACH PERSON WHO QUALIFIES AS A "RIGHTS HOLDER"
(as defined in the introductory paragraph hereof)
By: Berkshire Realty Company, Inc.,
pursuant to a power of attorney in Section 12.14
of the Partnership Agreement
By:
-----------------------------------
Name:
Title:
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CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the Registration Statement of
Berkshire Realty Company, Inc. and Subsidiaries on Form S-3 (File Nos.
333-32565, 333-34201 and 333-29831) of our report dated June 14, 1996 on our
audit of the combined statement of revenue over certain operating expenses of
the Merit Portfolio for the year ended December 31, 1995, of our report dated
September 25, 1997 on our audit of the combined statement of revenue over
certain operating expenses of Sunchase/Polos West Apartments for the year ended
December 31, 1996, of our report dated October 3, 1997 on our audit of the
combined statement of revenue over certain operating expenses of Questar
Portfolio for the year ended December 31, 1996, of our report dated October 3,
1997 on our audit of the statement of revenue over certain operating expenses of
Westchester Apartments for the year ended December 31, 1996, and of our report
dated October 9, 1997 on our audit of the combined statement of revenue over
certain operating expenses of the Emerald Portfolio for the year ended December
31, 1996, which reports are included in this Form 8-K.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 14, 1997
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion of our report dated October 3, 1997, with respect to
the combined statement of revenue over certain operating expenses of the
Citibank Portfolio for the year ended December 31, 1996, which report appears in
the Form 8-K of Berkshire Realty Company, Inc. dated October 14, 1997.
/s/ KPMG Peat Marwick LLP
Houston, Texas
October 3, 1997
