UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1 to 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
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(State or other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
or organization)
470 Atlantic Avenue, Boston, MA 02210
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 423-2233
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Item 7. Financial Statements and Exhibits.
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(c) Exhibits.
The following exhibits are filed herewith:
3(ii) Bylaws as amended of Berkshire Realty Company, Inc.
4.1 Certificate of Designation designating 2,737,000 shares of
Preferred Stock or 2,737,000 shares of Series 1997-A Convertible
Preferred Stock (par value $0.01 per share) dated September 30,
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
10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C.
dated as of August 25, 1997
10.32 Stock Purchase Agreement among Berkshire Realty Company, Inc.,
Westbrook Real Estate Fund II, L.P. and Westbrook Berkshire
Holdings, L.L.C. dated as of September 19, 1997
10.33 Exchange and Amendment Agreement among Berkshire Realty Company,
Inc., Westbrook Berkshire Holdings, L.L.C. and Morgan Stanley
Asset Management, Inc., as attorney in fact for certain clients,
dated as of September 30, 1997
10.34 Registration Rights Agreement between Berkshire Realty Company,
Inc. and Westbrook Berkshire Holdings, L.L.C.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BERKSHIRE REALTY COMPANY INC.
/s/ Marianne Pritchard
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Marianne Pritchard
Senior Vice President and
Chief Financial Officer
Date: November 5, 1997
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EXHIBIT INDEX
Exhibit No. Exhibit Item
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3(ii) Bylaws as amended of Berkshire Realty Company, Inc.
4.1 Certificate of Designation designating 2,737,000 shares of
Preferred Stock or 2,737,000 shares of Series 1997-A Convertible
Preferred Stock (par value $0.01 per share) dated September 30,
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
10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C.
dated as of August 25, 1997
10.32 Stock Purchase Agreement among Berkshire Realty Company, Inc.,
Westbrook Real Estate Fund II, L.P. and Westbrook Berkshire
Holdings, L.L.C. dated as of September 19, 1997
10.33 Exchange and Amendment Agreement among Berkshire Realty Company,
Inc., Westbrook Berkshire Holdings, L.L.C. and Morgan Stanley
Asset Management, Inc., as attorney in fact for certain clients,
dated as of September 30, 1997
10.34 Registration Rights Agreement between Berkshire Realty Company,
Inc. and Westbrook Berkshire Holdings, L.L.C.
BY-LAWS
of
BERKSHIRE REALTY COMPANY, INC.
(as amended through October 9, 1997)
ARTICLE I
SHAREHOLDERS
SECTION 1. Annual Meeting. The annual meeting of shareholders shall be
held on the first Tuesday of May in each year after 1990 (or if that be a legal
holiday in the place where the meeting is to be held, on the next succeeding
full business day) at the principal office of the Corporation in Massachusetts
at ten o'clock a.m., unless a different hour, date or place within or without
the United States is fixed by the Board of Directors, the Chairman of the Board,
if one is elected, or the President. If no annual meeting has been held on the
date fixed as above provided, a special meeting in lieu thereof may be held, and
such special meeting shall have, for the purposes of these By-laws or otherwise,
all the force and effect of an annual meeting.
SECTION 2. Matters to be Considered at Annual Meeting. At an annual
meeting of shareholders, only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly brought before the
annual meeting (a) by, or at the direction of, a majority of the Board of
Directors (unless at the time of such action there is an Interested Shareholder,
in which case the affirmative vote of a majority of the Continuing Directors
then in office shall also be required) or (b) by any shareholder of the
Corporation who complies with the notice procedures set forth in this Section 2.
For a proposal to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than 50 days nor more than 150 days prior to the scheduled
annual meeting, regardless of any postponements, deferrals or adjournments of
that meeting to a later date; provided, however, that if less than 70 days'
notice or prior public disclosure of the date of the scheduled annual meeting is
given or made, notice by the shareholder to be timely must be so delivered or
received not later than the close of business on the 15th day following the day
on which such notice of the date of the scheduled annual meeting was mailed. A
shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the proposal desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the Corporation's stock transfer books, of the shareholder
proposing such business and of the beneficial owners (if any) of the stock
registered in such shareholder's name and the name and address of other
shareholders known by such shareholder to be supporting such proposal, (c) the
class and number of shares of the Corporation's capital stock
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which are beneficially owned by the shareholder and beneficial owners (if any)
on the date of such shareholder's notice and by any other shareholders known by
such shareholder to be supporting such proposal on the date of such
shareholder's notice, and (d) any financial interest of the shareholder in such
proposal.
If the Board of Directors determines that any shareholder proposal was
not timely made in accordance with the terms of this Section 2, the Board of
Directors may determine that such shareholder proposal will not be acted upon at
the annual meeting. If the Board of Directors, or a designated committee
thereof, determines that the information provided in a shareholder's notice does
not satisfy the informational requirements of this section in any material
respect, the Secretary of the Corporation shall promptly notify such shareholder
of the deficiency in the notice. The shareholder shall have an opportunity to
cure the deficiency by providing additional information to the Secretary within
such period of time, not to exceed 5 days from the date such deficiency notice
is given to the shareholder, as the Board of Directors or such committee shall
reasonably determine. If the deficiency is not cured within such period, or if
the Board of Directors or such committee determines that the additional
information provided by the shareholder, together with the information
previously provided, does not satisfy the requirements of this Section 2 in any
material respect, then the Board of Directors may determine that such
shareholder proposal will not be acted upon at the annual meeting. If there is
an Interested Shareholder, any determination to be made by the Board of
Directors or a designated committee thereof pursuant to the provisions of this
Section 2 shall also require the concurrence of a majority of the Continuing
Directors then in office. The Secretary of the Corporation shall notify a
shareholder in writing whether his proposal has been made in accordance with the
time and informational requirements of this Section.
Notwithstanding the procedure set forth in the preceding paragraph, if
neither the Board of Directors nor such committee makes a determination as to
the validity of any shareholder proposal, the presiding officer of the annual
meeting shall determine and declare at the annual meeting whether the
shareholder proposal was made in accordance with the terms of this Section 2. If
the presiding officer determines that a shareholder proposal was made in
accordance with the terms of this Section 2, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting with respect to any
such proposal. If the presiding officer determines that a shareholder proposal
was not made in accordance with the terms of this Section 2, he shall so declare
at the annual meeting and any such proposal shall not be acted upon at the
annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, Directors and
committees of the Board of Directors, but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed and
received as herein provided.
SECTION 3. Special Meetings. Special meetings of the shareholders of
the Corporation may be called only in the manner provided in the Restated
Certificate of Incorporation.
SECTION 4. Matters to be Considered at Special Meetings. Only those
matters set forth in the call of the special meeting may be considered or acted
upon at such special meeting, unless otherwise provided by law.
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SECTION 5. Notice of Meetings; Adjournments. A written notice of all
annual meetings of shareholders stating the hour, date and place of such annual
meetings shall be given by the Secretary or an Assistant Secretary (or other
person authorized by these By-laws or by law) not less than 10 days nor more
than 60 days before the meeting, to each shareholder entitled to vote thereat or
to each shareholder who, under the Restated Certificate of Incorporation or
under these By-laws, is entitled to such notice, by delivering such notice to
him or by mailing it, postage prepaid, addressed to such shareholder at the
address of such shareholder as it appears on the Corporation's stock transfer
books. Such notice shall be deemed to be delivered when hand delivered to such
address or deposited in the mail so addressed, with postage prepaid.
Notice of all special meetings of shareholders shall be given in the
same manner as provided for annual meetings of the shareholders, except that the
written notice of all special meetings shall state the purpose or purposes for
which the meeting has been called.
Notice of an annual or special meeting of shareholders need not be
given to a shareholder if a written waiver of notice is executed before or after
such meeting by such shareholder or such shareholder's authorized attorney, if
communication with such shareholder is unlawful, or if such shareholder attends
such meetings unless such attendance was for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting was not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of shareholders
need be specified in any written waiver of notice.
When any annual or special meeting of shareholders is adjourned to
another hour, date or place, notice need not be given of the adjourned meeting
other than an announcement at the meeting at which the adjournment is taken of
the hour, date and place to which the meeting is adjourned; provided, however,
that if the adjournment is for more than 30 days, or if after the adjournment a
new record date is fixed for the adjourned meeting, notice of the adjourned
meeting shall be given as in the case of the original meeting to each
shareholder of record entitled to vote thereat.
SECTION 6. Quorum. The holders of a majority in interest of all stock
issued, outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at any annual or special meeting of shareholders; but
if less than a quorum is present at a meeting, a majority in interest of the
shareholders present or the presiding officer may adjourn the meeting from time
to time, and the meeting may be held as adjourned without further notice, except
as provided in Section 5 of this Article I. At such adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed. The shareholders present at a
duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
SECTION 7. Voting and Proxies. Shareholders shall have one vote for
each share of stock entitled to vote owned by them of record according to the
books of the Corporation, unless otherwise provided by law or by the Restated
Certificate of Incorporation. Shareholders may vote either in person or by
written proxy, but no proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period. Proxies shall be filed
with the Secretary of the meeting before being voted. Except as otherwise
limited therein, proxies shall entitle the persons
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authorized thereby to vote at any adjournment of such meeting, but they shall
not be valid after final adjournment of such meeting. A proxy with respect to
stock held in the name of two or more persons shall be valid if executed by or
on behalf of any one of them unless at or prior to the exercise of the proxy the
Corporation receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a shareholder shall
be deemed valid unless challenged at or prior to its exercise, and the burden of
proving invalidity shall rest on the challenger.
SECTION 8. Rights of the Series 1997-A Convertible Preferred
Shareholders -
(a) Voting - The holders of shares of Series 1997-A
Convertible Preferred Stock have the right to vote on all matters in which the
holders of Common Stock are entitled to vote, including but not limited to the
ability to notice special meetings and to determine the subject matter thereof,
on an "as converted" basis with holders of shares of Common Stock, as though
part of the same class as holders of Common Stock, with such number of shares of
Common Stock deemed held of record by holders of shares of Series 1997-A
Convertible Preferred Stock on any Record Date as would be the number of shares
of Common Stock into which the shares of Series 1997-A Convertible Preferred
Stock held by such holder would be entitled to be converted on such Record Date.
Notwithstanding the foregoing, as set forth in the Certificate of Designation
with respect to the Series 1997-A Convertible Preferred Stock, with respect to
votes as to directors, merger or consolidation, the issuance of any shares of
Series 1997-A Convertible Preferred Stock, the exchange or conversion of any
shares of Series 1997-A Convertible Preferred Stock or the amendment, alteration
or repeal of any provision of the Corporation Charter, the Certificate of
Designation providing for the preferences and rights of the holders of shares of
Series 1997-A Convertible Preferred Stock, the Agreement of Limited Partnership
of the Operating Partnership, or any organizational document of any Subsidiary,
in such a manner as would affect adversely the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of the
Series 1997-A Convertible Preferred Stock, the holders of Series 1997-A
Convertible Preferred Stock must approve such action as a class by an
affirmative vote of not less than a majority of the outstanding shares of Series
1997-A Convertible Preferred Stock.
(b) Notices - The holders of shares of Series 1997-A
Convertible Preferred Stock will receive all notice of meetings of the holders
of shares of Common Stock, and all other notices and correspondence to the
holders of shares of Common Stock provided by the Corporation, and will be
entitled to take such actions, and have such rights, as are set forth in the
Certificate of Designation or are otherwise available to the holders of shares
of Common Stock in the Charter and in the Bylaws of the Corporation as are in
effect on the execution date, in each case with the same effect as would be
taken by holders of Series 1997-A Convertible Preferred Stock if deemed to be
holders of such number of shares of Common Stock as determined as aforesaid.
(c) Resolutions - The Resolutions of the Board of Directors
relating to the issuance of the 2,737,000 shares of Series 1997-A Convertible
Preferred Stock are hereby adopted in the form attached.
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SECTION 9. Action at Meeting. When a quorum is present, any matter
before any annual or special meeting of shareholders shall be decided by vote of
the holders of a majority of the shares of stock voting on such matter, except
where a larger vote is required by law, by the Restated Certificate of
Incorporation or by these By-laws. Any election by shareholders shall be
determined by a plurality of the votes cast, except where a larger vote is
required by law, by the Restated Certificate of Incorporation or by these
By-laws. The Corporation shall not directly or indirectly vote any shares of its
own stock except as to shares which it holds in a fiduciary capacity or except
as otherwise permitted by law. An abstention shall not be deemed a vote cast.
SECTION 10. No Action by Consent. Any action required or permitted to
be taken by the shareholders of the Corporation must be effected at a duly
constituted annual or special meeting of such holders and may not be effected by
any consent in writing by such shareholders.
SECTION 11. Stockholder Lists. The Secretary or an Assistant Secretary
(or the Corporation's transfer agent or other person authorized by these By-laws
or by law) shall prepare and make, at least 10 days before every annual or
special meeting of shareholders, a complete list of the shareholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each shareholder and the number of shares registered in the name of each
shareholder. Such list shall be open to the examination of any shareholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
shareholder who is present.
SECTION 12. Presiding Officer. The presiding officer at all annual or
special meetings of shareholders shall have the power, among other things, to
adjourn such meeting at any time and from time to time, subject to Sections 5
and 6 of this Article I. The order of business and all other matters of
procedure at any meeting of the shareholders shall be determined by the
presiding officer.
ARTICLE II
DIRECTORS
SECTION 1. Powers. All the power of the Corporation shall be exercised
by or under the direction of the Board of Directors except as otherwise provided
by the Restated Certificate of Incorporation or required by law.
SECTION 2. Number, Terms and Independent Directors.
(a) Except as otherwise fixed pursuant to the provisions of the
Restated Certificate of Incorporation relating to the rights of the holders of
any class or series of stock having a preference over the common stock as to
dividends or upon liquidation to elect additional Directors, the number of
Directors of the Corporation shall be fixed by resolution duly adopted from time
to time by the Board of Directors; provided, however, that if at the time of
such action there is an Interested
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Shareholder, such action shall also require a majority vote of the Continuing
Directors then in office. The Directors, other than those who may be elected by
the holders of any class or series of stock having a preference over the common
stock as to dividends or upon liquidation, shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible as determined by the Board of Directors, with one
class to be elected annually.
(b) The initial Directors of the Corporation shall hold office as
follows: the first class of Directors shall hold office initially for a term
expiring at the annual meeting of shareholders to be held in 1991, the second
class of Directors shall hold office initially for a term expiring at the annual
meeting of shareholders to be held in 1992, and the third class of Directors
shall hold office initially for a term expiring at the annual meeting of
shareholders to be held in 1993, with the members of each class to hold office
until their respective successors are elected and qualified. Directors elected
at each annual meeting of the shareholders of the Corporation shall hold office
for a term expiring at the annual meeting of shareholders held in the third year
following the year of their election and until their respective successors are
elected and qualified.
The holders of shares of Series 1997-A Convertible Preferred Stock,
voting as a separate class, shall be entitled at all times to elect one director
(as defined in the Certificate of Designation, the "Series 1997-A Preferred
Director") to the Board of Directors (the "Board") of the Company. In the event
that the Series 1997-A Preferred Director is unable to attend any meeting of the
Board for any reason, then such Series 1997-A Preferred Director may designate,
in writing, one person (the "Observer") who shall have the right to attend, but
not vote at, such meeting. The Observer shall not be deemed to be a member of
the Board and shall have none of the rights, duties, privileges or powers of a
member of the Board including, without limitation, the right to notice of or to
vote at meetings of the Board, and shall not be counted as a member of the Board
for the purpose of determining whether a quorum is present at any meeting of the
Board.
(c) At least a majority of the entire Board and a majority of the Audit
Committee of the Board shall be Independent Directors. Independent Directors are
those Directors of the Corporation who are not Affiliates or employees of the
Corporation or the Corporation's Advisor, and: (i) have no material business
relationship with the Corporation or its Advisor, (ii) perform no other services
for the Corporation, other than as Directors, and (iii) do not directly or
indirectly (including through a member of his immediate family) own any interest
in the Corporation's Advisor. In addition, an Independent Director may not serve
as a director for more than two other investment programs sponsored by The Krupp
Corporation or its Affiliates. For purposes of this Section 2(c), a material
business relationship shall mean a business relationship which results in
remuneration to an Independent Director in excess of $50,000. An "Affiliate"
shall mean any person directly or indirectly controlling, controlled by or under
common control with another person. The "Advisor" shall mean the person(s) or
entity responsible for directing or performing the day-to-day business affairs
of the Corporation, including a person or entity to which the Adviser
subcontracts substantially all such functions. The Independent Directors shall
supervise the relationship of the Corporation to the Advisor.
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SECTION 3. Director Nominations. Nomination of candidates for election
as Directors of the Corporation at any annual meeting of shareholders may be
made (a) by, or at the direction of, a majority of the Board of Directors
(unless at the time of such action there is an Interested Shareholder, in which
case the affirmative vote of a majority of the Continuing Directors shall also
be required) provided that, a person meeting the requirements of an Independent
Director, as that term is defined in Section 2(c) of this Article II, shall be
nominated by, or at the direction of, the Board of Directors as necessary in
order to maintain a majority of Independent Directors on the Board of Directors,
or (b) by any shareholder entitled to vote at such annual meeting. Only persons
nominated in accordance with the procedures set forth in this Section 3 shall be
eligible for election as Directors at an annual meeting of shareholders.
Nominations, other than those made by, or at the direction of, the
Board of Directors (and by the Continuing Directors, if required), shall be made
pursuant to timely notice in writing to the Secretary of the Corporation as set
forth in this Section 3. To be timely, a shareholder's notice shall be delivered
to, or mailed and received at, the principal executive office of the Corporation
not less than 60 days nor more than 150 days prior to the date of the scheduled
annual meeting, regardless of postponements, deferrals, or adjournments of that
meeting to a later date; provided, however, that if less than 70 days' notice or
prior public disclosure of the date of the scheduled annual meeting is given or
made, notice by the shareholder to be timely must be so delivered or received
not later than the close of business on the 10th day following the earlier of
(a) the day on which such notice of the date of the scheduled annual meeting was
mailed or (b) the day on which such public disclosure was made. Such
shareholder's notice shall set forth (a) as to each person whom the shareholder
proposes to nominate for election or re-election as a Director (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Corporation's capital stock which are beneficially owned by such person on
the date of such shareholder notice, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies with
respect to nominees for election as directors, pursuant to Regulation 14A
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended (or any subsequent provisions replacing such
Act or the rules and regulations promulgated thereunder); and (b) as to the
shareholder giving the notice (i) the name and address, as they appear on the
Corporation's stock transfer books, of such shareholder and of the beneficial
owners (if any) of the stock registered in such shareholder's name and the name
and address of other shareholders known by such shareholder to be supporting
such nominees, and (ii) the class and number of shares of the Corporation's
capital stock which are beneficially owned by such shareholder and beneficial
owners (if any) on the date of such shareholder notice and by any other
shareholders known by such shareholder to be supporting such nominees on the
date of such shareholder notice. At the request of the Board of Directors, any
person nominated by, or at the direction of, the Board of Directors for election
as a Director at an annual meeting shall furnish to the Secretary of the
Corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee.
No person shall be elected by the shareholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3. Election of Directors at the annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting. If written ballots are to be used, ballots bearing the
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names of all the persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set forth in this Section 3
shall be provided for use at the annual meeting.
The Board of Directors may reject any nomination by a shareholder not
timely made in accordance with the requirements of this Section 3. If the Board
of Directors, or a designated committee thereof, determines that the information
provided in a shareholder's notice does not satisfy the informational
requirements of this Section 3 in any material respect, the Secretary of the
Corporation shall promptly notify such shareholder of the deficiency in the
notice. The shareholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed 5 days from the date such deficiency notice is given to the
shareholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board of
Directors or such committee reasonably determines that the additional
information provided by the shareholder, together with the information
previously provided does not satisfy the requirements of this Section 3 in any
material respect, then the Board of Directors may reject such shareholder's
nomination. The Secretary of the Corporation shall notify a shareholder in
writing whether his nomination has been made in accordance with the time and
informational requirements of this Section 3.
Notwithstanding the procedure set forth in the preceding paragraph, if
neither the Board of Directors nor such committee makes a determination as to
the validity of any nominations by a shareholder, the presiding officer of the
annual meeting shall determine and declare at the annual meeting whether a
nomination was made in accordance with the terms of this Section 3. If the
presiding officer determines that a nomination was made in accordance with the
terms of this Section 3, he shall so declare at the annual meeting and ballots
shall be provided for use at the meeting with respect to such nominee. If the
presiding officer determines that a nomination was not made in accordance with
the terms of this Section 3, he shall so declare at the annual meeting and such
nomination shall be disregarded. If there is an Interested Shareholder, any
determinations to be made by the Board of Directors or a designated committee
thereof pursuant to the provisions of this Section 3 shall also require the
concurrence of a majority of the Continuing Directors then in office.
SECTION 4. Qualification. No Director need be a shareholder of the
Corporation. Unless waived by a vote of the Board of Directors, no individual
may serve as a Director of the Corporation if he has reached the age of 72 years
at the time of election.
SECTION 5. Vacancies. Any vacancy occurring on the Board of Directors,
including any vacancy created by reason of an increase in the number of
Directors, may be filled in the manner provided in the Restated Certificate of
Incorporation.
SECTION 6. Removal. Any Director may be removed from office in the
manner provided in the Restated Certificate of Incorporation.
SECTION 7. Resignation. A Director may resign at any time by giving
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
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SECTION 8. Regular Meetings. The regular annual meeting of the Board of
Directors shall be held, without other notice than this By-law, on the same date
and at the same place as the annual meeting of shareholders following the close
of such meeting of shareholders. Other regular meetings of the Board of
Directors may be held at such hour, date and place as the Board of Directors may
by resolution from time to time determine without other notice than such
resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
may be called, orally or in writing, by or at the request of a majority of the
Directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of
all special meetings of the Board of Directors shall be given to each Director
by the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person or by telephone
or by telegram sent to his business or home address at least 24 hours in advance
of the meeting, or by written notice mailed to his business or home address at
least 48 hours in advance of the meeting. Such notice shall be deemed to be
delivered when hand delivered to such address, read to such Director by
telephone, deposited in the mail so addressed, with postage thereon prepaid if
mailed, or when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for more than 30 days, notice of the adjourned meeting shall be given
as in the case of an original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for 30 days or less
or of the business to be transacted at such meeting, other than an announcement
at the meeting at which such adjournment is taken of the hour, date and place to
which the meeting is adjourned.
A written waiver of notice executed before or after a meeting by a
Director and filed with the records of the meeting shall be deemed to be
equivalent to notice of the meeting. The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because such meeting is not lawfully
called or convened. Except as otherwise required by law, by the Certificate of
Incorporation or by these By-laws, neither the business to be transacted at, nor
the purpose of, any meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a
majority of the Directors then in office shall constitute a quorum for the
transaction of business, but if less than a quorum is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice, except as provided
in Section 10 of this Article II. Any business which might have been transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
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SECTION 12. Action at Meeting. At any meeting of the Board of Directors
at which a quorum is present, a majority of the Directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Restated Certificate of Incorporation or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 14. Manner of Participation. Members of the Board of Directors
or of committees elected by the Board pursuant to Section 15 of this Article II
may participate in meetings of the Board or of such committees by means of
conference telephone or similar communications equipment by means of which all
Directors participating in the meeting can hear each other, and participation in
a meeting in accordance herewith shall constitute presence in person at such
meeting for purposes of these By-laws.
SECTION 15. Committees. The Board of Directors, by the affirmative vote
of a majority of the Directors then in office, may elect from its number
Directors to serve on one or more committees, including an Audit Committee, and
may delegate thereto some or all of its powers except those which by law, by the
Restated Certificate of Incorporation or by these By-laws, may not be delegated.
Except as the Board of Directors may otherwise determine, any such committee may
make rules for conduct of its business, but unless otherwise provided by the
Board of Directors or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-laws for the Board of
Directors. All members of such committees shall hold such offices at the
pleasure of the Board of Directors, except that members of the Audit Committee
shall be Independent Directors and shall serve on such Audit Committee as long
as they are Directors of the Corporation. The Board of Directors may abolish any
such committee, other than the Audit Committee, at any time. Any committee to
which the Board of Directors delegates any of its powers or duties shall keep
records of its meetings and shall report its action to the Board of Directors.
The Board of Directors shall have power to rescind any action of any committee,
other than the Audit Committee, but no such rescission shall have retroactive
effect. With approval of the Board of Directors, the Chief Executive Officer may
appoint such other committees consisting of such Directors as the Chief
Executive Officer shall select. Any recommendations of such committees appointed
by the Chief Executive Officer shall be submitted to the Board of Directors.
The Series 1997-A Preferred Director shall sit as he may request on
each committee of the Board or on any other group so acting, whether or not
formally constituted as a committee of the Board; provided, however, that the
Series 1997-A Preferred Director shall not have the right to request to sit on
the Executive Committee. The Executive Committee shall report to the full Board
on any matters exceeding $50,000,000.
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SECTION 16. Compensation of Directors. Directors shall receive such
compensation for their services as shall be determined by a majority of the
Board of Directors, provided that Directors who are serving the Corporation as
officers or employees and who receive compensation for their services as such
shall not receive any salary or other compensation for their services as
Directors of the Corporation.
ARTICLE III
OFFICERS
SECTION 1. Enumeration. The officers of the Corporation shall consist
of a President, a Chief Executive Officer, a Treasurer, a Secretary and such
other officers, including without limitation a Chairman of the Board, one or
more Vice Presidents (including Executive Vice Presidents or Senior Vice
Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant
Secretaries, as the Board of Directors may determine,
SECTION 2. Election and Appointment. At the regular annual meeting of
the Board following the annual meeting of shareholders, the Board of Directors
shall elect the President, the Chief Executive Officer, the Treasurer and the
Secretary. Other officers may be appointed by the Board of Directors at such
regular annual meeting of the Board of Directors or at any other regular or
special meeting or appointed by the Chief Executive Officer.
SECTION 3. Qualification. No officer need be a shareholder or a
Director; provided, however, that the Chief Executive Officer shall be a
Director. Any person may occupy more than one office of the Corporation at any
time. Any officer may be required by the Board of Directors to give bond, at the
Corporation's expense, for the faithful performance of his duties in such amount
and with such sureties as the Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Restated
Certificate of Incorporation or by these By-laws, each of the officers of the
Corporation shall hold office until the regular annual meeting of the Board of
Directors following the next annual meeting of shareholders and until his
successor is elected and qualified or until his earlier resignation or removal.
Election or appointment of an officer, employee or agent shall not of itself
create contract rights. The Board of Directors may, however, authorize the
Corporation to enter into an employment contract with any officer in accordance
with law, but no such contract right shall impair the right of the Board of
Directors to remove any officer at any time in accordance with Section 6 of this
Article III.
SECTION 5. Resignation. Any officer may resign by delivering his
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the Directors then in office; provided, however, that if at the
time of such removal there is an Interested Shareholder,
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the affirmative vote of a majority of the Continuing Directors then in office
shall also be required, and, provided further that, if an officer is to be
removed for cause, he may only be removed after reasonable notice and an
opportunity to be heard by the Board of Directors.
SECTION 7. Absence or Disability. In the event of the absence or
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 9. Chief Executive Officer. The President shall be the Chief
Executive Officer, unless the Board of Directors shall designate another officer
to be the Chief Executive Officer, The Chief Executive Officer shall, subject to
the direction of the Board of Directors, have general supervision and control of
the Corporation's business and shall preside, when present, at all meetings of
the shareholders.
SECTION 10. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors. If a Chairman of the Board is
absent, the President shall preside at meetings of the Board of Directors. If
the Chairman of the Board is not the Chief Executive Officer and in the absence
of a Chief Executive Officer, the Chairman of the Board shall preside, when
present, at all meetings of the shareholders. The Chairman of the Board shall
have such other powers and shall perform such other duties as the Board of
Directors may from time to time designate. If the Chairman of the Board is not
the Chief Executive Officer, he shall also have such powers and perform such
duties as the Chief Executive Officer may from time to time designate.
SECTION 11. President. In the absence of the Chairman of the Board, the
President shall preside, when present, at all meetings of the Board of
Directors. If the President is not the Chief Executive Officer or Chairman of
the Board and in the absence of such persons, the President shall preside, when
present, at all meetings of the shareholders. If the President is not the Chief
Executive Officer, he shall have such powers and perform such duties as the
Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
President (including any Executive Vice President or Senior Vice President) and
Assistant Vice President shall have such powers and shall perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 13. Chief Financial Officer and Assistant Treasurers. The
Treasurer shall, subject to the direction of the Board of Directors and except
as the Board of Directors or the Chief Executive officer may otherwise provide,
have general charge of the financial affairs of the Corporation and shall cause
to be kept accurate books of account. He shall have custody of all funds,
securities, and valuable documents of the Corporation. He shall have such other
duties and powers as may be designated from time to time by the Board of
Directors or the Chief Executive Officer. The office of the Chief Financial
Officer shall be deemed to be the office of the Treasurer of the Corporation
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whenever the signature of the Treasurer is required on any document or
instrument, by the laws of the United States or any state, or elsewhere in the
By-laws, and the Chief Financial Officer shall have authority to affix his
signature in such capacity.
The office of the Vice President of Finance and Accounting shall be
deemed an Assistant Treasurer of the Corporation whenever the signature of an
Assistant Treasurer is required on any document or instrument, by the laws of
the United States or any state, or elsewhere in these Bylaws, and the Vice
President of Finance and Accounting shall have authority to affix his signature
in such capacity. Any Assistant Treasurer shall have such powers and perform
such duties as the Board of Directors or the Chief Executive Officer may from
time to time designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
record all the proceedings of the meetings of the shareholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his absence from any such meeting, a temporary secretary chosen at the meeting
shall record the proceedings thereof. The Secretary shall have charge of the
stock ledger (which may, however, be kept by any transfer or other agent of the
Corporation). He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix it to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
that of an Assistant Secretary. He shall have such other duties and powers as
may be designated from time to time by the Board of Directors or the Chief
Executive Officer. In the absence of the Secretary, any Assistant Secretary may
perform his duties and responsibilities.
Any Assistant Secretary shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to
such limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Certificates of Stock. Unless otherwise provided by the
Board of Directors, each shareholder shall be entitled to a certificate of the
capital stock of the Corporation in such form as may from time to time be
prescribed by the Board of Directors. Such certificate shall bear the seal of
the Corporation, if one has been adopted, and shall be signed by the Chairman of
the Board of Directors, President or a Vice President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary. The seal of the
Corporation, if one has been adopted, and any and all signatures on the
certificate may be a facsimile, including those of any transfer agent or
registrar. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on such certificate shall have ceased
to be such officer, transfer agent or registrar
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before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the time
of its issue. Every certificate for shares of stock which are subject to any
restriction on transfer and every certificate issued when the Corporation is
authorized to issue more than one class or series of stock shall contain such
legend with respect thereto as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and
unless otherwise provided by the Board of Directors, shares of stock may be
transferred only on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate therefor properly endorsed
or accompanied by a written assignment or power of attorney properly executed,
with transfer stamps (if necessary) affixed, and with such proof of the
authenticity of signature as the Corporation or its transfer agent may
reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law,
by the Restated Certificate of Incorporation or by these By-laws, the
Corporation shall be entitled to treat the record holder of stock as shown on
its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect thereto, regardless of any
transfer, pledge or other disposition of such stock, until the shares have been
transferred on the books of the Corporation in accordance with the requirements
of these By-laws.
It shall be the duty of each shareholder to notify the Corporation of
his post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine the
shareholders entitled to receive notice of or to vote at any meeting of
shareholders or any adjournments thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than 60 days nor less than 10
days before the date of such meeting, nor more than 60 days prior to any other
action. In such case, only shareholders of record on such record date shall be
so entitled, notwithstanding any transfer of stock on the stock transfer books
of the Corporation after the record date.
If no record date is fixed: (a) the record date for determining
shareholders entitled to receive notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (b) the record
date for determining shareholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof upon such terms as the Corporation or its transfer
agent may prescribe.
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ARTICLE V
INDEMNIFICATION
SECTION 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (hereinafter a "Proceeding"), by reason of the fact
that he or she is or was (a) a Director of the Corporation, (b) an officer of
the Corporation elected or appointed by the shareholders or the Board of
Directors, or (c) serving, at the request of the Corporation as evidenced by a
vote of the Board of Directors prior to the occurrence of the event to which the
indemnification relates, as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (such persons
described in (a), (b) and (c) are sometimes hereinafter referred to as an
"Indemnitee"), whether the basis of such Proceeding is alleged action in an
official capacity as such a Director or officer of the Corporation or as such
other director, officer, employee or agent or in any other capacity while
serving as such a Director or officer of the Corporation or as such other
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including, but not limited
to, attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such Indemnitee
in connection therewith and such indemnification shall continue as to an
Indemnitee who has ceased to be such a director, officer, employee or agent and
shall inure to the benefit of the Indemnitee's heirs, executors and
administrators; provided, however, that, except as provided in Section 3 of this
Article V with respect to Proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such Indemnitee in connection with a Proceeding
(or part thereof) initiated by such Indemnitee only if such Proceeding (or part
thereof) was authorized or ratified by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article V shall be a
contract right and shall include the right to be paid by the Corporation the
expenses incurred in defending any Proceeding in advance of its final
disposition (hereinafter an "Advancement of Expenses"); provided, however, that,
if the Delaware General Corporation Law requires, an Advancement of Expenses
incurred by an Indemnitee in his or her capacity as a Director or officer of the
Corporation (but not in any other capacity in which service was or is rendered
by such Indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "Undertaking"), by or on behalf of such Indemnitee,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal (hereinafter a
"Final Adjudication") that such Indemnitee is not entitled to be indemnified for
such expenses under this Article V or otherwise.
SECTION 2. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and to an Advancement of Expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article V.
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SECTION 3. Right of Indemnitee to Bring Suit. If a claim under this
Article V is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for an Advancement of Expenses, in which case the applicable period shall
be twenty days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If the Indemnitee is
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Indemnitee shall also be entitled to be paid the expense of
prosecuting or defending such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
Indemnitee to enforce a right to an Advancement of Expenses), it shall be a
defense that the Indemnitee has not met the applicable standard of conduct set
forth in the Delaware General Corporation Law. In addition, in any suit by the
Corporation to recover an Advancement of Expenses pursuant to the terms of an
Undertaking, the Corporation shall be entitled to recover such expenses upon a
Final Adjudication that the Indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or shareholders) to have made a determination prior to the commencement of such
suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or
shareholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to
enforce a right to indemnification or to an Advancement of Expenses hereunder,
or by the Corporation to recover an Advancement of Expenses pursuant to the
terms of an Undertaking, the burden of proving that the Indemnitee is not
entitled to be indemnified, or to such Advancement of Expenses, under this
Article V or otherwise shall be on the Corporation.
SECTION 4. Non Exclusivity of Rights. The rights to indemnification and
to Advancement of Expenses conferred in this Article V shall not be exclusive of
any other right which any person may have or hereafter acquire under these
By-laws, the Restated Certificate of Incorporation or any statute, agreement,
vote of shareholders or disinterested directors or otherwise.
SECTION 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, officer, employee or agent of the
Corporation or any director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end on
December 31 of each year.
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SECTION 2. Seal. The Board of Directors shall have power to adopt and
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without Director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors may authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors
otherwise provides, the Chairman of the Board, if one is elected, the President
or the Treasurer may waive notice of and act on behalf of this Corporation, or
appoint another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitutions at
any meeting of shareholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Registered Agent. The Board of Directors may appoint a
registered agent upon whom legal process may be served in any action or
proceeding against the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
Restated Certificate of Incorporation, By-laws and records of all meetings of
the incorporators, shareholders and the Board of Directors and the stock
transfer books, which shall contain the names of all shareholders, their record
addresses and the amount of stock held by each, may be kept outside the State of
Delaware and shall be kept at the principal office of the Corporation, at the
office of its counsel or at an office of its transfer agent or at such other
place or places as may be designated from time to time by the Board of
Directors.
SECTION 7. Definitions. As used in these By-laws, the terms "Interested
Shareholder" and "Continuing Director" shall have the same respective meanings
assigned to them in the Restated Certificate of Incorporation. The term
"Independent Director" shall have the meaning given in Section 5 of Article VIII
of the Restated Certificate of Incorporation. Any determination of beneficial
ownership of securities under these By-laws shall be made in the manner
specified in the Restated Certificate of Incorporation. For purposes herein, the
term "Interested Shareholder" shall not include holders of shares of Series
1997-A Convertible Preferred Stock.
SECTION 8. Restated Certificate of Incorporation. All references in
these By-laws to the Restated Certificate of Incorporation shall be deemed to
refer to the Restated Certificate of Incorporation of the Corporation, as
amended and in effect from time to time.
SECTION 9. Amendments. These By-laws may be altered, amended or
repealed, or new By-laws may be adopted, by the Board of Directors or the
shareholders in the manner provided in the Restated Certificate of Incorporation
of the Corporation; provided, however, with respect to Article I, Section 8,
Article II, Section 2(b) and Section 15, Article VI, Section 7 or Section 9, or
any other provisions of these By-laws pertaining to the holders of shares of
Series 1997-A Convertible Preferred Stock, the rights of the holders of shares
of Series 1997-A Convertible Preferred Stock shall not be altered, amended or
repealed, and new By-laws that alter, amend or repeal the rights of the holders
of Series 1997-A Convertible Preferred Stock shall not be adopted without the
affirmative vote of the holders of not less than a majority of the outstanding
shares of Series 1997-A Convertible Preferred Stock.
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RESOLUTIONS
(Attached Pursuant To Article I, Section 8(c))
RESOLVED: That the Exchange and Amendment Agreement, dated as of
September 30, 1997 (the "Exchange Agreement"), by and among the Corporation and
Westbrook Berkshire Holdings, L.L.C., (the "Buyer"), Westbrook Real Estate Fund
II, L.P. and Morgan Stanley Asset Management, Inc., be, and it hereby is,
approved.
RESOLVED: That the Board of Directors hereby approves and adopts the
Certificate of Designation, Preferences and Rights of the Series 1997-A
Convertible Preferred Stock (the "Series 1997-A Preferred Stock") in the form
submitted to this meeting (the "Certificate of Designation") and the resolution
of the Board of Directors set forth herein, and authorizes the Chairman of the
Board, the President and the Chief Executive Officer of the Corporation (the
"Authorized Officers") to execute and cause such Certificate of Designation to
be filed with and in the Office of the Secretary of State of the State of
Delaware in accordance with the requirements of Section 151 of the Delaware
General Corporation Law.
RESOLVED: That the form of specimen stock certificate presented to this
meeting representing shares of Series 1997-A Preferred Stock be, and hereby is.
adopted and approved.
RESOLVED: That following the filing of the Certificate of Designation,
and as provided for in the Exchange Agreement, the Authorized Officers of the
Corporation are authorized to issue 2,737,000 shares of Series 1997-A Preferred
Stock in exchange (the "Exchange") for the 2,737,000 shares of Series A
Convertible Preferred Stock authorized pursuant to the Certificate of
Designation filed with and in the Office of the Secretary of State of the State
of Delaware on September 25, 1997 and issued in accordance with the Stock
Purchase Agreement dated as of September 19, 1997 among the Corporation and the
Buyer, and the Authorized Officers are hereby authorized to take all such
actions as are necessary to effect and carry out the Exchange.
RESOLVED: That the Board of Directors hereby authorizes and approves
the issuance, from time to time, of up to, and hereby irrevocably reserves for
issuance, 5,643,420 shares (the "Conversion Shares") of the Corporation's common
stock, par value $.01 per share ("Common Stock"), including the 506,497 shares
of Common Stock currently held in the Corporation's treasury, upon conversion of
shares of the Series 1997-A Preferred Stock, such number of Conversion Shares to
be adjusted as appropriate from time to time to account for stock splits, stock
dividends and other similar transactions and for changes in the conversion price
per share of the Series 1997-A Preferred Stock.
RESOLVED: That the officers of this Corporation be, and they hereby
are, severally authorized and directed in the name and on behalf of the
Corporation to take any and all actions and to execute such applications,
instruments or other agreements or documents which they may deem necessary or
desirable to amend or refile, as may be required by the New York Stock Exchange,
Inc. ("NYSE"), the NYSE supplemental listing application for the shares of
Common Stock to be issued upon conversion of the Series 1997-A Preferred Stock
to reflect the Exchange, the taking of any such action or the execution of such
applications, instruments or other agreements or documents to be conclusive
evidence of the authorization and approval thereof by the Board of Directors of
this Corporation.
RESOLVED: That the Conversion Shares issued by the Corporation upon
conversion of shares of Preferred Stock in accordance with the terms of the
Series 1997-A Preferred Stock shall be fully paid and nonassessable upon
delivery thereof to the respective holder of Series 1997- A Preferred Stock
against receipt by the Corporation of the certificates representing the shares
of Series 1997-A Preferred Stock being converted, and of the value of the
consideration so received by the Corporation, an amount equal to $.01 per share
shall, for accounting purposes, be allocated to the Common Stock account and the
balance to the Additional Paid-In Capital account.
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RESOLVED: That the Board of Directors hereby confirms that the Board of
Directors has determined that the restrictions on business combinations provided
for in Section 203 do not apply to the Exchange or the issuance of the shares of
Series 1997-A Preferred Stock in connection therewith or the other transactions
provided for in the Exchange Agreement.
RESOLVED: That the Bylaws of the Corporation be and hereby are amended
in the form submitted to this meeting and as attached to the Exchange Agreement
as Exhibit C so as to reflect the rights of the holders of the Series 1997-A
Preferred Stock set forth in the Stock Purchase Agreement; and that, upon
completion of the Exchange, the amendments to the Bylaws of the Corporation
relating to the Series A Preferred Stock adopted on September 24, 1997 be, and
they hereby are, deleted.
RESOLVED: That upon completion of the Exchange, the Series 1997-A
Preferred Stock delivered to the Buyer in the Exchange shall be retired and
canceled, and the resolutions set forth in the Certificate of Elimination in the
form presented to this meeting be, and they hereby are, adopted and approved,
and the Authorized Officers are authorized and directed to execute such
certificate and cause it to be filed with and in the Office of the Secretary of
State of the State of Delaware.
RESOLVED: That the Corporation hereby elects to be governed by
paragraph (2) of subsection (c) of Section 141 of the Delaware General
Corporation Law with respect to the powers and authority of the Board of
Directors that may be delegated to the committee of the Board of Directors.
RESOLVED: That the Executive Committee is hereby authorized to approve
and authorize on behalf of the Corporation any and all such actions as it
determines to be necessary or desirable in connection with the transactions
contemplated by the Exchange Agreement including, without limitation, approving
changes to the terms of the Series 1997-A Preferred Stock as set forth in the
Certificate of Designation.
-19-
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Historical Notes re BRI By-Laws
The By-laws were adopted by the Incorporator on April 25, 1990 within the
context of the Certificate of Incorporation filed with the Delaware Secretary of
State on April 26, 1990. They were ratified and approved by the Written Consent
of the Directors dated April 30, 1990. Subsequently the By-laws were restated in
their entirety on November 1, 1990.
- --------------------
On February 4, 1993 the Directors amended Article I, Section 8 (now Article I,
Section 9) by adding the last sentence thereto with respect to abstentions.
On August 15, 1994 the Directors amended Article IV, Section 1 by restating the
third full sentence of said section with respect to facsimile signatures.
On February 28, 1996 the Directors amended Article III, Section 3 by changing
the reference in the first sentence thereof from "President" to "Chief Executive
Officer."
On February 28, 1996 the Directors amended Article III, Section 13 by replacing
the word "Treasurer" with the words "Chief Financial Officer" in the section
heading and by adding the last sentence of the first paragraph of said section.
On May 13, 1997 the Directors further amended Article III, Section 13 by adding
the first sentence of the second paragraph of said section with respect to the
office of Vice President of Finance and Accounting.
-20-
<PAGE>
On September 18, 1997 the Directors authorized and approved certain amendments
with respect to the establishment and issuance of a new class and series of
stock. Those amendments were subsequently repealed in their entirety on October
9, 1997 in connection with the exchange of such class and series of stock for a
new class and series of stock.
On October 9, 1997 the Directors authorized and approved the following
amendments reflecting the establishment and issuance of a new class and series
of stock:
(1) Article I was amended by the insertion of a new Section 8 with
respect to the rights of Series A Convertible Preferred
Shareholders. Former Sections 8 through 11 were renumbered 9
through 12.
(2) Article II, Section 2(b) was amended by adding the second full
paragraph thereto with respect to the rights of the Series A
Convertible Preferred Shareholders as a class to elect one
director.
(3) Article II, Section 15 was amended by adding the second full
paragraph there with respect to the Series A Preferred Director.
(4) Article VI, Section 7 was amended by adding the last sentence
thereof.
(5) Article VI, Section 9 was amended by adding to the end thereof
the clause "; provided, however . . . 51% of the outstanding
shares of Series A Convertible Preferred Stock."
-21-
BERKSHIRE REALTY COMPANY, INC.
CERTIFICATE OF DESIGNATION
Designating 2,737,000 shares of Preferred Stock
as 2,737,000 shares of
Series 1997-A CONVERTIBLE PREFERRED STOCK
(par value $0.01 per share)
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Berkshire Realty Company, Inc., a corporation organized and existing
under the laws of Delaware (the "Corporation"), does hereby certify that:
Pursuant to the authority contained in Article IV of the Restated
Certificate of Incorporation of the Corporation, as amended (the "Charter"), and
in accordance with the provisions of Section 151 of the General Corporation Law
of the State of Delaware (the "DGCL"), the Board of Directors of the Corporation
duly adopted the following resolution creating a series of the Preferred Stock,
par value $.01 (the "Preferred Stock"), designated as Series 1997-A Convertible
Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred
Stock, par value $.01, of the Company be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
Section 1. Designation, Amount and Price.
Of the 60,000,000 authorized shares of Preferred Stock,
2,737,000 shares are designated Series 1997-A Convertible Preferred Stock (the
"Series 1997-A Convertible Preferred Stock").
Section 2. Dividends and Distributions.
(a) Holders of shares of Series 1997-A Convertible Preferred
Stock will be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the payment of dividends,
cumulative quarterly cash dividends (rounded up to the nearest whole cent) equal
to the greater of (i) 2.25% of $25.00 per share (such $25.00, the "Stated
Value"), and (ii) the per share Common Stock Dividend Amount, payable in each
case in arrears on February 15, May 15, August 15 and November 15 of each year,
commencing on the first such day after the issuance of a share of Series 1997-A
Convertible Preferred Stock (each a "Dividend Payment Date"). The "Common Stock
Dividend Amount" applicable as of any Dividend Payment Date shall mean the
amount which is the product of (i) the dollar amount of the dividend paid per
share of Common Stock on the dividend payment date with respect to the shares of
Common Stock (other than a distribution payable solely in shares of Common
Stock) which occurs on such Dividend Payment Date or, if no such dividend
payment date occurs on such Dividend Payment Date, the dividend payment date
with respect to the shares of Common Stock next preceding such Dividend Payment
Date and (ii) the number of shares of Common Stock into which each share of
Series 1997-A Convertible Preferred Stock is entitled to be converted, at the
Conversion Price then in effect and otherwise as set forth in this Certificate
of Designation, as of the record date established for such Dividend Payment Date
(determined, for purposes of this computation, to the fourth decimal place).
Such dividends will accrue daily on the basis of a 360-day year of twelve 30-day
months, and will, to the extent not paid in full on a Dividend Payment Date,
compound quarterly at a rate of 2.25% per quarter, whether or not the
Corporation has earnings or surplus. The dividend payable to a holder of a share
of Series 1997-A Convertible Preferred Stock on the first Dividend Payment Date
after the share is issued will be the accrued dividend calculated from the day
the share is issued to such
<PAGE>
Dividend Payment Date. If any Dividend Payment Date is not a Business Day, the
dividend due on that Dividend Payment Date will be paid on the Business Day
immediately succeeding that Dividend Payment Date. Each Dividend Payment Date
will be on a date which is the date fixed for payment of dividends with respect
to the shares of Common Stock or is not more than five Business Days after the
date fixed for payment of dividends with respect to the shares of Common Stock.
As used with regard to the Series 1997-A Convertible Preferred Stock, the term
"Business Day" means a day on which both state and federally chartered banks in
New York, New York are required to be open for general banking business, and all
accrued and compounded dividends together with all accrued but not yet due
dividends (whether or not declared or authorized) are referred to as "Accrued
Dividends."
(b) Each dividend will be payable to holders of record of the
Series 1997-A Convertible Preferred Stock on a date (a "Record Date") selected
by the Board of Directors which is not less than 10 nor more than 45 days before
the Dividend Payment Date on which the dividend is to be paid. No Record Date
will precede the close of business on the date the Record Date is fixed.
(c) Unless and until all Accrued Dividends on the Series
1997-A Convertible Preferred Stock under Section 2(a) through the last preceding
Dividend Payment Date have been paid, the Corporation may not (i) declare or pay
any dividend, make any distribution (other than a distribution payable solely in
shares of Common Stock), or set aside any funds or assets for payment or
distribution with regard to any Junior Shares (as herein defined), (ii) redeem
or purchase (directly or through the Operating Partnership or Subsidiaries), or
set aside any funds or other assets for the redemption or purchase of, any
Junior Shares or (iii) authorize, take or cause or permit to be taken any action
of the general partner of the Operating Partnership, that will result in (A) the
declaration or payment by the Operating Partnership (defined below) of any
distribution to its partners (other than distributions made concurrently with
distributions payable to the Corporation in respect of its partnership interest
that will be used by the Corporation to fund the payment of dividends on the
Series 1997-A Convertible Preferred Stock (such distributions to the Corporation
being referred to as "Authorized LP Distributions")), or set aside any funds or
assets for payment of any distributions to its partners (other than those made
concurrently with Authorized LP Distributions) or (B) the redemption or purchase
(directly or through the Operating Partnership or Subsidiaries), or the setting
aside of any funds or other assets for the redemption or purchase of, any
partnership interests in the Operating Partnership, except for conversions of
partnership interests in the Operating Partnership in the ordinary course into
shares of Common Stock. As used with regard to the Series 1997-A Convertible
Preferred Stock, the term "Junior Shares" means all shares of Common Stock and
all shares of any other class or series of stock of the Corporation to which the
shares of Series 1997-A Convertible Preferred Stock are prior in rank with
regard to payment of dividends or payments upon the liquidation, dissolution or
winding-up of the Corporation; the term "Operating Partnership" means BRI OP
Limited Partnership, a Delaware limited partnership, or any successor thereto;
and the term "Subsidiary" means any Person in which the Company directly or
indirectly owns any equity interest. As used herein, "Person" shall mean an
individual, partnership, corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association, joint venture, nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government or other entity of whatever nature.
(d) While any shares of Series 1997-A Convertible Preferred
Stock are outstanding, the Corporation may not pay any dividend, or set aside
any funds for the payment of a dividend, with regard to any shares of any class
or series of stock of the Corporation which ranks on a parity with Series 1997-A
Convertible Preferred Stock as to payment of dividends unless at least a
proportionate payment is made with regard to all Accrued Dividends on the Series
A Convertible Preferred Stock (except, as to any shares of the Series 1997-A
Convertible Preferred Stock as to which a notice of conversion has been
furnished by the holder thereof, at the effective time of conversion). A payment
of dividends with regard to the Series 1997-A Convertible Preferred Stock will
be proportionate to a payment of a dividend with regard to another class or
series of stock if the dividend per share of Series 1997-A Convertible Preferred
Stock is the same percentage of the Accrued Dividends (except as aforesaid) with
regard to a share of Series 1997-A Convertible Preferred Stock that the dividend
paid with regard to a share of stock of the other class or series is of the
Accrued Dividends (except as aforesaid) with regard to a share of stock of that
other class or series.
(e) Any dividend paid with regard to shares of Series 1997-A
Convertible Preferred Stock will be paid equally with regard to each outstanding
share of Series 1997-A Convertible Preferred Stock, except to the extent that
2
<PAGE>
shares of Series 1997-A Convertible Preferred Stock are outstanding for
differing amounts of time during the relevant dividend period.
Section 3. Voting Rights.
The voting rights of the holders of shares of Series 1997-A
Convertible Preferred Stock will be only the following:
(a) The holders of shares of Series 1997-A Convertible
Preferred Stock will have the right to vote on all matters, including without
limitation, transfers, mergers or consolidations or recapitalizations of the
nature described in sections 4(a)(i), $(a)(ii) and 4(a)(iii) of this Certificate
of Designation on which the holders of Common Stock are entitled to vote on an
"as converted" basis with holders of shares of the Common Stock, as though part
of the same class as holders of Common Stock, with such number of shares of
Common Stock deemed held of record by holders of shares of Series 1997-A
Convertible Preferred Stock on any Record Date as would be the number of shares
of Common Stock into which the shares of Series 1997-A Convertible Preferred
Stock held by such holder would be entitled to be converted on such Record Date.
The holders of shares of Series 1997-A Convertible Preferred Stock shall receive
all notices of meetings of the holders of shares of Common Stock, and all other
notices and correspondence to the holders of shares of Common Stock provided by
the Corporation, and shall be entitled to take such actions, and shall have such
rights, as are set forth in this Certificate of Designation or are otherwise
available to the holders of shares of Common Stock in the Charter and in the
By-laws of the Corporation as are in effect on the date hereof, in each case
with the same effect as would be taken by holders of Series 1997-A Convertible
Preferred Stock if deemed to be holders of such number of shares of Common Stock
as determined as aforesaid.
(b) While any shares of Series 1997-A Convertible Preferred
Stock are outstanding, the Corporation will not, directly or indirectly,
including through a merger or consolidation with any other corporation or
otherwise, without approval of holders of at least a majority of the outstanding
shares of Series 1997-A Convertible Preferred Stock, voting separately as a
class, (i) issue any shares of Series 1997-A Convertible Preferred Stock except
pursuant to that certain Stock Purchase Agreement dated as of September 19,
1997, by and among the Corporation, Westbrook Berkshire Holdings, L.L.C., and
Westbrook Real Estate Fund II, L.P., or increase the number of authorized shares
of Series 1997-A Convertible Preferred Stock; (ii) combine, split or reclassify
the outstanding shares of Series 1997-A Convertible Preferred Stock into a
smaller or larger number of shares; (iii) exchange or convert any shares of
Series 1997-A Convertible Preferred Stock for other securities or the right to
receive cash, or propose or require an exchange or conversion other than as
provided in this Certificate of Designation, or reclassify any shares of Series
1997-A Convertible Preferred Stock, or to authorize, create, classify,
reclassify or issue any class or series of stock ranking prior to or on a parity
with the Series 1997-A Convertible Preferred Stock either as to dividends or
upon liquidation, dissolution or winding-up of the Corporation or as to the
rights of the Series 1997-A Convertible Preferred Stock set forth in this
Section 3; (iv) amend, alter or repeal, or permit to be amended, altered or
repealed, the following provisions of the By-laws of the Corporation: Article I,
Section 8, Article II, Section 2 and Article VI, Section 7 or 9 or (v) amend,
alter or repeal, or permit to be amended, altered or repealed, any of the
provisions of the Charter, this Certificate of Designation, the By-laws of the
Corporation, the agreement of limited partnership of the Operating Partnership,
or any organizational document of any Subsidiary, in such a manner as would
affect adversely the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of (A) the Series 1997-A
Convertible Preferred Stock (including, without limitation, taking any such
action the result of which could be to alter the manner or rate of exchange of
partnership interests in the Operating Partnership for securities of the
Corporation as in effect on the date hereof) or, (B) in the case of a proposed
amendment to the agreement of limited partnership of the Operating Partnership,
or any organizational document of any Subsidiary, in such a manner as would
affect adversely the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions, and
qualifications of the holders of shares of the Series 1997-A Convertible
Preferred Stock or the Common Stock and the shares of Series 1997-A Convertible
Preferred Stock, considered as a whole.
(c) Until March 19, 1999, and for so long thereafter as there
shall be outstanding a number of shares of Series 1997-A Convertible Preferred
Stock not less than 29% of the shares of Series 1997-A Convertible Preferred
Stock issued by the Corporation to Westbrook Berkshire Holdings, L.L.C., the
Corporation will not, directly or indirectly, including through a merger or
consolidation with any other corporation or otherwise, without the approval
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<PAGE>
of the holders of not less than a majority of the outstanding shares of the
Series 1997-A Convertible Preferred Stock, voting separately as a class,
propose, authorize, take, or cause to be taken or allow to occur any of the
following actions: (i) the Transfer (as defined below) of the record or
beneficial ownership of any interest in Berkshire Apartments, Inc., the Transfer
by Berkshire Apartments, Inc. to a third party of the right to exercise all or a
portion of its rights as the general partner of the Operating Partnership, or
the Transfer in a single transaction or series of transactions of the assets of
the Corporation, the Operating Partnership and the Subsidiaries, considered as a
whole, including for such purpose any Person (except that, with respect to any
such Person in which the Corporation or the Operating Partnership has a direct
or indirect minority interest such that a sale, transfer or assignment is not
within the Corporation's or Operating Partnership's control, and is not
otherwise a part of the transaction or series of transactions otherwise
occurring, this provision shall not apply) owned directly or indirectly by the
Corporation to the extent of the Corporation's attributed interest in such other
Person, having a fair market value (based on the value of the total
consideration of each such transaction, including, without limitation, any debt
assumed by any purchaser in connection therewith) in excess of 10% of the
Corporation Market Capitalization within any 90-day period or 20% of the
Corporation Market Capitalization within any 360-day period, (ii) the
Corporation's termination of the election, or the taking of any action by the
Corporation which would cause termination other than by election, of the
Corporation as a real estate investment trust under the Internal Revenue Code of
1986, as amended, (iii) any alteration in the Corporation's or the Operating
Partnership's business, or the business of the Corporation, the Operating
Partnership and the Subsidiaries, considered as a whole, such that real estate
assets owned directly or indirectly by the Corporation are, on a square foot
basis, less than 90% invested in multifamily residential properties; or (iv) the
Transfer on or before September 19, 1998, of more than 30% of the Common Stock
or units of the Operating Partnership held directly or indirectly, of record or
beneficially, by any of Douglas Krupp or David Marshall, as of the date hereof,
by any of such Persons. There shall be excluded from the transactions requiring
approval of not less than a majority of the outstanding shares of Series 1997-A
Convertible Preferred Stock, as set forth in clause (i) of this Section 3(c),
the (a) public market trading of shares of Common Stock in unsolicited
transactions, (b) sale of Common Stock or other securities of the Corporation in
any underwritten, widely distributed offering and (c) a transaction which is of
the nature described in and subject to Section 4(a)(i), 4(a)(ii) and 4(a)(iii)
of this Certificate of Designation. There shall be excluded from the
transactions requiring approval of not less than a majority of the outstanding
shares of Series 1997-A Convertible Preferred Stock, as set forth in clause (iv)
of this Section 3(c), any Transfer, as to any said Person, which occurs solely
and directly as a result of the death or proceedings in divorce of such Person.
As used herein, "Corporation Market Capitalization" is the total market
capitalization of the Corporation determined by reference to (determined based
upon the Current Market Price, as defined in Section 5(e)(viii) of this
Certificate of Designation) (i) outstanding (assuming for this purpose the
exercise of all then outstanding warrants or other rights to acquire Common
Stock, and the conversion of all other Common Stock equivalents not otherwise
referenced below) shares of Common Stock, (ii) outstanding shares of Series
1997-A Convertible Preferred Stock (determined as the quotient of (x) the
product of (A) the Current Market Price of a share of Common Stock and (B) the
aggregate Stated Value and Accrued Dividends of all outstanding shares of Series
1997-A Convertible Preferred Stock, and (y) the Conversion Price then in
effect), and (iii) all partnership and other interests in the Operating
Partnership and the other Subsidiaries held by Persons (other than the Company
and the Subsidiaries) (assuming for this purpose the exchange or conversion of
all such third-Person partnership and other interests in the Operating
Partnership or other Subsidiaries for shares of Common Stock), plus total
consolidated and unconsolidated debt of the Corporation, the Operating
Partnership and the other Subsidiaries, but excluding (i) all nonrecourse
consolidated debt in excess of the Corporation's proportionate share of such
debt and (ii) all nonrecourse unconsolidated debt of partnerships of which the
Corporation is directly or indirectly a limited partner. As used herein,
"Transfer" means any sale, transfer by operation of law or otherwise,
assignment, disposition or arrangement, whether voluntary or involuntary, which
has the effect, directly or indirectly, of altering the holding of or causing or
permitting another Person to succeed to, any voting control or economic
interest, whether beneficial or of record or both, including any arrangement for
collateral purposes only, or which could, with the passage of time or the
occurrence of any event, or both, have such effect.
(d) The holders of shares of Series 1997-A Convertible
Preferred Stock, voting as a separate class, shall be entitled at all times and
at any time to elect one director (the "Series 1997-A Preferred Director") to
the Board of Directors of the Corporation (the "Board"); provided, however, that
the size of the Board shall not be increased above nine at any time unless
Westbrook Real Estate Fund II, L.P. shall be entitled to elect or appoint that
number of directors to such expanded Board that will permit ERISA counsel to
Westbrook Real Estate Fund II, L.P. to
4
<PAGE>
confirm that Westbrook Berkshire Holdings, L.L.C.'s investment in the Series
1997-A Convertible Preferred Stock will continue to qualify as a "venture
capital investment" under the plan asset rules and regulations promulgated under
and the provisions of the Employee Retirement Income Security Act of 1974, as
amended, or any successor thereto. The Series 1997-A Preferred Director, who has
been elected by the Board and agreed to serve until his successor is elected and
qualified, is Paul D. Kazilionis, who shall be considered a "third class"
director in accordance with Article II, Section 2(b) of the Bylaws of the
Corporation (as amended to the date hereof), and who shall sit as he may request
on each committee of the Board (other than the executive committee of the Board)
or on any other group so acting, whether or not formally constituted as a
committee of the Board. In the event that the Series 1997-A Preferred Director
is unable to attend any meeting of the Board for any reason, then such Series
1997-A Preferred Director may designate, in writing, one person (the "Observer")
who shall have the right to attend, but not vote at, such meeting. The Observer
shall not be deemed to be a member of the Board of Directors and shall have none
of the rights, duties, privileges or powers of a member of the Board of
Directors, including, without limitation, the right to notice of or to vote at
meetings of the Board of Directors, and shall not be counted as a member of the
Board of Directors for the purpose of determining whether a quorum is present at
any meeting of the Board of Directors. The Series 1997-A Preferred Director from
time to time sitting as a member of the Board may be removed by the holders of
record of not less than a majority of the outstanding shares of Series 1997-A
Convertible Preferred Stock and, if so removed, a successor individual to serve
as the Series 1997-A Preferred Director may be appointed by the holders of
record of not less than a majority of the outstanding shares of Series 1997-A
Convertible Preferred Stock. At any annual meeting of the holders of Common
Stock at which "third class" directors are to be elected, the incumbent Series
1997-A Preferred Director shall be nominated and, upon the affirmative vote of
not less than a majority of the holders of shares of Series 1997-A Convertible
Preferred Stock, shall be elected to serve as the Series A Preferred Director.
Upon the occurrence of a "Preferred Default" (defined below), (i) the number of
members of the entire Board (as if there were no vacancies or unfilled
newly-created directorships thereon) shall be automatically increased such that
the holders of the Series 1997-A Convertible Preferred Stock shall be entitled
to elect, when considered with the Series 1997-A Preferred Director, a number of
directors of the Corporation equivalent to the smallest number representing a
majority of the number of members of the entire Board as if there were no
vacancies or unfilled newly created directorships on such Board, and (ii) the
holders of shares of Series 1997-A Convertible Preferred Stock, voting as a
separate class, shall be entitled, at each annual meeting of stockholders of the
Corporation and at each special meeting of stockholders of the Corporation
called for the election of directors by the holders of Series 1997-A Convertible
Preferred Stock, to elect a number of directors of the Corporation equivalent to
the smallest number representing a majority of the number of members of the
entire Board as if there were no vacancies or unfilled newly created
directorships on such Board. As used herein, "Preferred Default" shall mean a
failure by the Corporation on any four consecutive Dividend Payment Dates to pay
in full the dividends due and payable on such dates such that there are Accrued
Dividends (whether or not declared) with respect to such four consecutive
Dividend Payment Dates. Whenever the holders of shares of Series 1997-A
Convertible Preferred Stock have the right under this Section 3(d) to elect a
director or directors, but have not done so, the Secretary of the Corporation
will, upon the written request of the holders of record of at least 25% of the
outstanding shares of Series 1997-A Convertible Preferred Stock, call a special
meeting of the holders of Series 1997-A Convertible Preferred Stock for the
purpose of removing and/or electing a director or directors, as the case may be.
The meeting will be held at the earliest practicable date upon the notice
required for annual meetings of the shareholders of the Corporation (or such
shorter notice as is stipulated in the written requests for such meeting or is
otherwise agreed in writing by the holders of record of the outstanding shares
of Series 1997-A Convertible Preferred Stock before or within 10 days after the
meeting) at the place specified in the request for a meeting, or if there is
none, at a place in New York, New York, designated by the Secretary of the
Corporation. If the meeting has not been called within 2 days after delivery of
the written request to the Secretary of the Corporation, or within 4 days after
the request is mailed by registered mail, addressed to the Secretary of the
Corporation at the Corporation's principal office, the holders of record of at
least 25% of the outstanding shares of Series 1997-A Convertible Preferred Stock
may designate in writing one holder to call and appoint an individual to chair
(who need not be an officer or member of the Board) the meeting at the expense
of the Corporation, and the meeting may be called by that person upon the notice
required for annual meetings (or such shorter notice as aforesaid). Any holder
of shares of Series 1997-A Convertible Preferred Stock or its representative
will have access to the stock ledger of the Corporation relating to the Series
1997-A Convertible Preferred Stock for the purpose of causing a meeting of
shareholders to be called in accordance with this Section 3(d). Except as
otherwise provided above in this Section 3(d), a director elected in accordance
with this Section
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3(d) will serve until the next annual meeting of the shareholders of the
Corporation and until his or her successor is elected and qualified by the
holders of Series 1997-A Convertible Preferred Stock.
Section 4. Change of Control; Liquidation.
(a) Upon (i) the Transfer in a single transaction, or series
of transactions, of all or substantially all of the assets of the Corporation,
the Operating Partnership and the Subsidiaries, considered as a whole, including
for such purpose the assets of any Subsidiary (except that with respect to any
such Subsidiary in which the Corporation or the Operating Partnership has a
direct or indirect minority interest such that a sale, transfer or assignment is
not within the Corporation's or Operating Partnership's control, and is not a
part of, or occurring in connection with, a transaction or series of
transactions covered hereby, this provision shall not apply), (ii) the merger or
consolidation of the Corporation or the Operating Partnership with any other
Person (other than a merger of the Corporation with or into a wholly-owned
Subsidiary of the Corporation in which the Corporation Market Capitalization is
unchanged), (iii) any recapitalization of the Corporation, the Operating
Partnership and the Subsidiaries, considered as a whole, in a single transaction
or a series of transactions, in an amount or amounts which aggregate 50% or more
of Corporation Market Capitalization or (iv) a Change of Control (as defined
herein), the holders of the Series 1997-A Convertible Preferred Stock, may at
their option receive, and, if so electing by written notice to the Corporation
to such effect, will be entitled to receive, out of the assets of the
Corporation available for distribution to its stockholders, whether from
capital, surplus or earnings, before any distributions made to holders of any
Junior Shares, an amount per share (the "Change of Control Preference") equal to
the product of (A) 115% and (B) the sum of (1) Stated Value plus (2) the per
share amount of Accrued Dividends with regard to the Series 1997-A Convertible
Preferred Stock to the date of final distribution (whether or not declared). For
the purposes of this Section 4(a), Corporation Market Capitalization shall be
calculated on the date of the first of any transactions in a series for purposes
of determining the percentage thereof represented by all transactions in such
series. There shall be excluded from transactions as a result of which the
holders of Series 1997-A Convertible Preferred Stock are entitled to elect and
receive the Change of Control Preference (i) the public market trading of shares
of Common Stock in unsolicited transactions, and (ii) the sale of Common Stock
or other securities of the Corporation in underwritten, widely distributed
offerings. The Corporation shall provide proper notice to each holder of record
of shares of Series 1997-A Convertible Preferred Stock of any event of the
nature set forth in clauses (i) to (iv) of this Section 4(a).
(b) In the event of a voluntary or an involuntary liquidation,
dissolution or winding-up of the Corporation (including, without limitation, the
Plan of Liquidation (as defined in the Certificate of Amendment of the
Corporation dated December 7, 1990, included in the Charter), the holders of the
Series 1997-A Convertible Preferred Stock, may at their option receive, and, if
so electing by written notice to the Corporation to such effect, shall be
entitled to receive, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distributions made to holders of any Junior Shares, an amount per
share as set forth in this Section 4(b) as a liquidation preference (the
"Liquidation Preference") in the manner and as provided in Section 4(a), except
that the Liquidation Preference shall be at an amount per share equal to the
Liquidation Percentage (as defined and established below) multiplied by the sum
of (i) Stated Value plus (ii) the per share amount of Accrued Dividends with
respect to the Series 1997-A Convertible Preferred Stock to the date of final
distribution (whether or not declared). As used herein, the "Liquidation
Percentage" shall for the periods specified mean the percentage specified as set
forth in the following table:
6
<PAGE>
<TABLE>
<CAPTION>
The effective date of the plan of liquidation, dissolution or
winding-up, in terms of the anniversary of the date of the initial Liquidation
issuance of shares of Series 1997-A Convertible Preferred Stock Percentage
- ------------------------------------------------------------------ -----------
<S> <C>
Before the 5th anniversary 115%
After the 5th but before the 6th anniversary 110%
After the 6th but before the 7th anniversary 105%
After the 7th anniversary 100%
</TABLE>
Notwithstanding the foregoing, upon the liquidation, dissolution or winding-up
of the Corporation solely and directly as a result of the adoption and
implementation of the Plan of Liquidation (as defined in the Certificate of
Amendment of the Corporation dated December 7, 1990, included in the Charter),
holders of shares of Series 1997-A Convertible Preferred Stock which vote in
favor of the adoption of the Plan of Liquidation shall be entitled to receive
the Liquidation Percentage measured as if such Plan of Liquidation was adopted
after the seventh anniversary of the initial issuance of Series 1997-A
Convertible Preferred Stock, regardless of the date on which such Plan of
Liquidation was actually adopted.
(c) Holders of Series 1997-A Convertible Preferred Stock may
further elect, when delivering the written notice to the Corporation with
respect to the election under Section 4(a) or Section 4(b), in lieu of receiving
the Change of Control Preference or the Liquidation Preference, as the case may
be, to receive Common Stock on conversion of Series 1997-A Convertible Preferred
Stock, without regard to the time restriction on conversion established in the
first sentence of Section 5(a) of this Certificate of Designation, in the manner
and as provided in Section 5 of this Certificate of Designation.
(d) If, upon any liquidation, dissolution or winding-up of the
Corporation, the assets of the Corporation, or proceeds of those assets,
available for distribution to the holders of Series 1997-A Convertible Preferred
Stock and of shares of all other classes or series which are on a parity as to
distributions on liquidation with the Series 1997-A Convertible Preferred Stock
are not sufficient to pay in full the Change of Control Preference or the
Liquidation Preference, as the case may be, to the holders of the Series 1997-A
Convertible Preferred Stock who have not elected to convert such stock pursuant
to Section 4(c) and any liquidation preference of all other classes or series
which are on a parity as to distributions on liquidation with the Series 1997-A
Convertible Preferred Stock, then the assets, or the proceeds of those assets,
which are available for distribution to such holders of shares of Series 1997-A
Convertible Preferred Stock and of the shares of all other classes or series
which are on a parity as to distributions on liquidation with such Series 1997-A
Convertible Preferred Stock will be distributed to the holders of the Series
1997-A Convertible Preferred Stock and of the shares of all other classes or
series which are on a parity as to distributions on liquidation with the Series
1997-A Convertible Preferred Stock ratably in accordance with the respective
amounts of the liquidation preferences of the shares held by each of them. After
payment of the full amount of the Change of Control Preference or the
Liquidation Preference, as the case may be, such holders of shares of Series
1997-A Convertible Preferred Stock will not be entitled to any further
distribution of assets of the Corporation.
As used herein, a "Change of Control" of the Corporation or
the Operating Partnership shall be deemed to have occurred if any of the
following occur (or, in the case of any proposal, if any of the following could
occur as a result thereof): (i) the Corporation takes or fails to take any
action such that it ceases to be required to file reports under Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor to that Section; (ii) any "person" (as defined in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of either (A) 20% or more
of the outstanding shares of Common Stock, or (B) 20% (by right to vote or grant
or withhold any approval) of the outstanding securities of any other class or
classes which individually or together have the power to elect a majority of the
members of the Board; (iii) the Board determines to recommend, or fails to
determine to recommend, the acceptance of any proposal set forth in a tender
offer statement or proxy statement filed by any person with the Securities and
Exchange Commission which indicates the intention on the part of that person to
7
<PAGE>
acquire, or acceptance of which would otherwise have the effect of that person
acquiring, either (A) 20% or more of the outstanding shares of the Common Stock,
or (B) 20% (by right to vote or grant or withhold any approval) of the
outstanding securities of any other class or classes which individually or
together have the power to elect a majority of the members of the Board; (iv)
other than as a result of the death or disability of one or more of the
directors within a three-month period, and other than by reason of the holders
of Series 1997-A Convertible Preferred Stock exercising voting rights as set
forth in Section 3(d) of the Certificate of Designation, a majority of the
members of the Board for any period of three consecutive months are not persons
who (A) had been directors of the Corporation for at least the preceding 24
consecutive months or (B) when they initially were elected to the Board, (x)
were nominated (if they were elected by the stockholders) or elected (if they
were elected by the directors) with the affirmative concurrence of 66-2/3% of
the directors who were Continuing Directors at the time of the nomination or
election by the Board and (y) were not elected as a result of an actual or
threatened solicitation of proxies or consents by a person other than the Board
or an agreement intended to avoid or settle such a proxy solicitation (the
directors described in clauses (A) and (B) of this subsection (iv) being
"Continuing Directors"); (v) the Corporation or a Subsidiary of the Corporation
ceases to be the sole General Partner of the Operating Partnership or grants or
sells to any person, or consents to any amendment to the agreement of limited
partnership of the Operating Partnership, or the organizational documents of the
other Subsidiaries, which has the effect of transferring, the power to control
or direct the actions of the Operating Partnership or such other Subsidiaries as
if such person (A) is a general partner of the Operating Partnership or (B) is a
limited partner of the Operating Partnership with consent or approval rights
greater than the consent or approval rights held by the limited partners of the
Operating Partnership on the date hereof; or (vi) the Operating Partnership is a
party to any entity conversion or any merger or consolidation in which the
Operating Partnership is not surviving entity in such merger or consolidation or
in which the effect is of the nature set forth in the next preceding clause (v).
Section 5. Conversion Into Common Stock.
(a) Optional Conversion. (i) On and after September 19, 1998,
or earlier than September 19, 1998 as provided in Section 4(c), each holder of
shares of Series 1997-A Convertible Preferred Stock will have the right, at the
holder's option, exercised by notice to such effect (the "Notice of Election to
Convert"), to convert all or any of the shares of Series 1997-A Convertible
Preferred Stock held of record by the holder into shares of Common Stock, such
that each share of Series 1997-A Convertible Preferred Stock will be entitled to
be converted into (A) a number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100th of a share) equal
to Stated Value plus the amount, if any, of the per share amount of Accrued
Dividends as of the effective time of the conversion, divided by the Conversion
Price, as defined below, then in effect, or (B) such other securities or assets
as the holder is entitled to receive in accordance with Section 5(e).
(ii) The holder of each share of Series 1997-A
Convertible Preferred Stock to be converted must surrender the certificate
representing that share to the conversion agent for the Series 1997-A
Convertible Preferred Stock appointed by the Corporation (which may be the
Corporation itself), with the Notice of Election to Convert on the back of that
certificate duly completed and signed, at the principal office of the conversion
agent. If the shares issuable on conversion are to be issued in a name other
than the name in which the Series A Convertible Preferred Stock is registered,
each share surrendered for conversion must be accompanied by an instrument of
transfer, in form reasonably satisfactory to the Corporation, duly executed by
the holder or the holder's duly authorized attorney and by funds in an amount
sufficient to pay any transfer or similar tax which is required to be paid in
connection with the transfer or evidence that such tax has been paid or is not
payable.
(b) Mandatory Conversion. Subject to Section 7 of this
Certificate of Designation, if, after the fifth anniversary of the date of the
first issuance of shares of Series 1997-A Convertible Preferred Stock, the
closing price of the Common Stock on each of at least 20 Trading Days (as
defined herein) (including the Trading Day immediately before both the Notice of
Mandatory Conversion and the Mandatory Conversion Date referred to below) of the
preceding period of 30 consecutive Trading Days immediately prior to the Notice
of Mandatory Conversion and the Mandatory Conversion Date shall be greater than
the Conversion Price in effect on each of such 20 Trading Days, the Corporation
shall have the right, subject to the rights of the holders under Section 3(d), 4
and 7 of this Certificate of Designation, to convert at any time and from time
to time not less than 500,000 of the outstanding shares of Series 1997-A
Convertible Preferred Stock into a number of shares of Common Stock (calculated
8
<PAGE>
as to each conversion to the nearest 1/100th of a share) equal to the product of
(i) the number of shares of Series 1997-A Convertible Preferred Stock to be
converted multiplied by (ii) the Stated Value plus the amount, if any, of the
per share amount of Accrued Dividends, with regard to the Series 1997-A
Convertible Preferred Stock to the date of conversion (whether or not declared),
divided by the Conversion Price then in effect, such that each share of Series
1997-A Convertible Preferred Stock is valued as set forth in clause (ii) in
consideration for Common Stock issued in conversion priced at the Conversion
Price calculated in accordance with Section 5(e) of this Certificate of
Designation. In order to elect to effect the mandatory conversion of Series
1997-A Convertible Preferred Stock, subject to the requirement as to closing
price preceding the Mandatory Conversion Date, set forth above, the Corporation
shall issue a notice as to the date of the intended conversion and number of
shares of Series 1997-A Convertible Preferred Stock which are to be converted
into shares of Common Stock (the "Notice of Mandatory Conversion") to all
holders of outstanding shares of Series A Convertible Preferred Stock on a date
(the "Mandatory Conversion Notice Date") at least 90 but not more than 120 days
prior to the conversion date specified in the Notice of Mandatory Conversion
(the "Mandatory Conversion Date"), which Notice of Mandatory Conversion
specifies a record date (the "Mandatory Conversion Record Date") selected by the
Board of Directors which is not less than 20 more than 45 days before the
Mandatory Conversion Date on which the conversion is to occur. If the number of
shares of Series 1997-A Convertible Preferred Stock to be converted into shares
of Common Stock on a Mandatory Conversion Date is less than all of the
outstanding shares of Series 1997-A Convertible Preferred Stock, then the number
of shares of each holder of Series A Convertible Preferred Stock, as held of
record by each such holder on the Mandatory Conversion Record Date, which will
be converted into shares of Common Stock will be that number of shares of Series
1997-A Convertible Preferred Stock rounded to the nearest ten shares, which is
equal to the proportion of all outstanding shares of Series 1997-A Convertible
Preferred Stock on such Mandatory Conversion Record Date held of record by such
holder of Series 1997-A Convertible Preferred Stock to the total number of such
shares outstanding. Such number of shares of each holder of Series 1997-A
Convertible Preferred Stock which are to be converted, if less than all
outstanding shares of Series 1997-A Convertible Preferred Stock are included in
the Notice of Mandatory Conversion, will be set forth (with the computation used
in making such determination as to each holder of Series 1997-A Convertible
Preferred Stock) in the Notice of Mandatory Conversion. If the Corporation gives
a Notice of Mandatory Conversion, then, provided that the computation set forth
in the Notice of Mandatory Conversion is not clearly erroneous, the number of
the outstanding shares of Series 1997-A Convertible Preferred Stock which are
the subject of such Notice of Mandatory Conversion will be automatically
converted into shares of Common Stock at the close of business on the Mandatory
Conversion Date regardless of whether the holders of such shares of Series
1997-A Convertible Preferred Stock actually surrender the certificates
representing their shares of Series 1997-A Convertible Preferred Stock for
conversion. At the close of business on the Mandatory Conversion Date, (i) the
certificates representing the shares of Series 1997-A Convertible Preferred
Stock will cease to represent anything other than the shares of Common Stock
into which the shares of the Series 1997-A Convertible Preferred Stock were
automatically converted and the shares of Series 1997-A Convertible Preferred
Stock which were not automatically converted and (ii) the Corporation shall, at
its option (the exercise of which will be described in the Notice of Mandatory
Conversion), either (A) deliver certificates representing the shares of Common
Stock to which the holders of the Series 1997-A Convertible Preferred Stock are
entitled without requiring the surrender of the certificates which formerly
represented shares of Series 1997-A Convertible Preferred Stock, or (B) deliver
certificates representing (1) the shares of Common Stock to which the holders of
Series 1997-A Convertible Preferred Stock are entitled and (2) the shares of
Series 1997-A Convertible Preferred Stock continued to be held by the holders of
Series 1997-A after giving effect to such conversion, when the holder surrenders
the certificates representing Series 1997-A Convertible Preferred Stock issued
before the Mandatory Conversion Date and complies with the other requirements of
subparagraph 5(a)(ii) (excluding the completion of the Notice of Election to
Convert).
(c) Conversion Procedures. (i) The effective time of the
conversion under Section 5(a) shall be immediately prior to the close of
business on the day when all the conditions in Section 5(a)(ii) have been
satisfied. The effective time of the conversion under Section 5(b) shall,
subject to the rights of holders under Sections 3(d), 4 and 7, be the close of
business on the Mandatory Conversion Date.
(ii) If shares are surrendered between the close of
business on a dividend payment Record Date and the opening of business on the
corresponding Dividend Payment Date ("Ex Record Date Shares"), the dividend with
respect to those shares will be payable on the Dividend Payment Date to the
holder of record of the Ex Record Date Shares on the dividend payment Record
Date notwithstanding the surrender of the Ex Record
9
<PAGE>
Date Shares for conversion after the dividend payment Record Date and prior to
the Dividend Payment Date. The Corporation will make no payment or adjustment
for Accrued Dividends on Ex Record Date Shares, whether or not in arrears, or
for dividends on the shares of Common Stock issued upon conversion of the Ex
Record Date Shares, other than to make payment to the holder of record thereof
on the Record Date. The provisions of this Section 5(c)(ii) shall not limit the
obligation of the Corporation to issue shares of Common Stock in conversion of
shares of Series 1997-A Convertible Preferred Stock, including Ex Record Date
Shares, at Stated Value plus Accrued Dividends (whether or not declared), as
elsewhere provided in this Certificate of Designation.
(iii) Except as otherwise permitted in clause (ii)(B) of
the last sentence of Section 5(b), as promptly as practicable after the
effective time for conversion of shares of Series 1997-A Convertible Preferred
Stock, the Corporation will issue and will deliver to the holder at the office
of the holder set forth in the Notice of Election to Convert, or on the holder's
written order, a certificate or certificates representing the number of full
shares of Common Stock issued upon the conversion of the shares of Series 1997-A
Convertible Preferred Stock. Any fractional interest in respect of a share of
Common Stock arising upon a conversion will be settled as provided in Section
5(d).
(iv) Each conversion will be deemed to have been
effected at the effective time provided in Section 5(c)(i), and the person in
whose name a certificate for shares of Common Stock is (or, in the case of a
conversion of less than all shares of Series 1997-A Convertible Preferred Stock
pursuant to Section 5(b), in whose name certificates for shares of Common Stock
and Series 1997-A Convertible Preferred Stock are) to be issued upon a
conversion will be deemed to have become the holder of record of the shares of
Common Stock represented by that certificate at such effective time. All shares
of Common Stock delivered upon conversion of Series 1997-A Convertible Preferred
Stock will upon delivery be duly and validly issued and fully paid and
nonassessable, free of all liens and charges and not subject to any preemptive
rights except such preemptive rights as may exist pursuant to the Stock Purchase
Agreement dated as of September 19, 1997, among the Company and Westbrook
Berkshire Holdings, L.L.C., and its affiliates. The shares of Series 1997-A
Convertible Preferred Stock so converted will no longer be deemed to be
outstanding and all rights of the holder with respect to those shares will
immediately terminate, except the right to receive the shares of Common Stock,
the shares of Series 1997-A Convertible Preferred Stock not converted on a
Mandatory Conversion Date, and, if applicable, other securities, cash or other
assets to be issued or distributed as a result of the conversion.
(d) Fractional Shares. No fractional shares of Common Stock
will be issued upon conversion of shares of Series 1997-A Convertible Preferred
Stock. Any fractional interest in a share of Common Stock resulting from
conversion of shares of Series 1997-A Convertible Preferred Stock will be paid
in cash (computed to the nearest cent) based on the Current Market Price (as
herein defined) of the Common Stock on the Trading Date next preceding the date
of conversion. If more than one share of Series 1997-A Convertible Preferred
Stock is surrendered for conversion at substantially the same time by the same
holder, the number of full shares of Common Stock issuable upon the conversion
will be computed on the basis of all the shares of Series 1997-A Convertible
Preferred Stock surrendered at that time by that holder.
(e) Conversion Price. The "Conversion Price" per share of
Series 1997-A Convertible Preferred Stock will initially be a price (the
"Initial Conversion Price") equal to $12.125, unless adjusted pursuant to
Section 5(e)(xi), and will be further adjusted as follows from time to time,
subject to Section 5(e)(ix), if any of the events described below occurs:
(i) If the Corporation (A) pays a dividend or makes a
distribution on its Common Stock in shares of its Common Stock or (B)
subdivides, splits or reclassifies its outstanding Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to that event
will be reduced so that the holder of a share of Series 1997-A Convertible
Preferred Stock surrendered for conversion after that event will receive the
number of shares of Common Stock which the holder would have received if the
share of Series 1997-A Convertible Preferred Stock had been converted
immediately before the happening of the event (or, if there is more than one
such event, if the share of Series 1997-A Convertible Preferred Stock had been
converted immediately before the first of those events and the holder had
retained all the Common Stock or other securities or assets received after the
conversion). If the Corporation combines its outstanding Common Stock into a
smaller number of shares, the
10
<PAGE>
Conversion Price in effect immediately prior to that event will be increased so
that the holder of a share of Series 1997-A Convertible Preferred Stock
surrendered for conversion after that event will receive the number of shares of
Common Stock which the holder would have received if the shares of Series 1997-A
Convertible Preferred Stock had been converted immediately before the happening
of the event (or, if there is more than one such event, if the share of Series
1997-A Convertible Preferred Stock had been converted immediately before the
first of those events and the holder had retained all the Common Stock or other
securities or assets received after the conversion). An adjustment made pursuant
to this Section 5(e)(i) will become effective immediately after the Record Date
in the case of a dividend or distribution, and will become effective immediately
after the effective date in the case of a subdivision, split, reclassification
or combination. If such dividend or distribution is declared but is not paid or
made, the Conversion Price then in effect will be appropriately readjusted.
However, a readjustment of the Conversion Price will not affect any conversion
which takes place before the readjustment.
(ii) If the Corporation issues rights or warrants to
the holders of its Common Stock as a class entitling them to subscribe for or
purchase Common Stock at a price per share less than the Conversion Price then
in effect at the Record Date for the determination of stockholders entitled to
receive the rights or warrants minus $0.125, the Conversion Price in effect
immediately before the issuance of the rights or warrants will be reduced in
accordance with the equation set forth on Exhibit A hereto, which is hereby
incorporated by reference herein. The adjustment provided for in this Section
5(e)(ii) will be made successively whenever any rights or warrants are issued,
and will become effective immediately after each Record Date. In determining
whether any rights or warrants entitle the holders of the Common Stock to
subscribe for or purchase shares of Common Stock at less than the Conversion
Price then in effect minus $0.125 and in determining the aggregate sale price of
the shares of Common Stock issuable on the exercise of rights or warrants and
any consideration to be received by the Corporation for the exercise of such
rights or warrants, there will be taken into account any consideration received
by the Corporation for the rights or warrants, with the value of that
consideration, if other than cash, to be determined by the Board of Directors of
the Corporation (whose determination, if made in good faith, will be
conclusive). If any rights or warrants which lead to an adjustment of the
Conversion Price expire or terminate without having been exercised, the
Conversion Price then in effect will be appropriately readjusted. However, a
readjustment of the Conversion Price will not affect any conversion which takes
place before the readjustment.
(iii) If the Corporation distributes to the holders of
its Common Stock as a class any shares of stock of the Corporation (other than
Common Stock) or evidences of indebtedness or assets (other than cash dividends
or distributions) or rights or warrants (other than those referred to in Section
5(e)(ii)) to subscribe for or purchase any of its securities, then, in each such
case, the Conversion Price will be reduced so that it will equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the Record Date for the distribution by a fraction of which the numerator is the
Current Market Price of the Common Stock on the Record Date for the distribution
less the then fair market value (as determined by the Board of Directors, whose
determination, if made in good faith, will be conclusive) of the stock,
evidences of indebtedness, assets, rights or warrants which are distributed with
respect to one share of Common Stock, and of which the denominator is the
Current Market Price of the Common Stock on that Record Date. Each adjustment
will become effective immediately after the Record Date for the determination of
the stockholders entitled to receive the distribution. If any distribution is
declared but not made, or if any rights or warrants expire or terminate without
having been exercised, effective immediately after the decision is made not to
make the distribution or the rights or warrants expire or terminate, the
Conversion Price then in effect will be appropriately readjusted. However, a
readjustment will not affect any conversion which takes place before the
readjustment.
(iv) If the Corporation issues or sells (or the
Operating Partnership issues or sells) any equity or debt securities which are
convertible, directly or indirectly, into or exchangeable for shares of Common
Stock ("Convertible Securities") or any rights, options (other than the issuance
or exercise after the date hereof of stock options covering no more than
1,100,000 shares of Common Stock, subject to appropriate adjustment to the
extent that the Corporation (A) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock, (B) subdivides its outstanding
Common Stock into a greater number of shares or (C) combines its outstanding
Common Stock into a smaller number of shares, issued to employees or directors
of the Corporation or its Subsidiaries under the Corporation's existing employee
stock incentive plans) or warrants (except the issuance after the date hereof of
shares of Common Stock pursuant to the warrants to purchase not more than
11
<PAGE>
2,664,629 shares of Common Stock at a price per share of $11.79 outstanding on
the date hereof issued by the Corporation pursuant to that certain settlement
effective September 6, 1994) to purchase Common Stock at conversion, exchange or
exercise price per share which is less than the Conversion Price then in effect
minus $0.125, unless the provisions of Section 5(e)(ii) or (iii) are applicable,
the Corporation will be deemed to have issued or sold, on the date on which the
Convertible Securities, rights, options or warrants are issued, the maximum
number of shares of Common Stock into or for which the Convertible Securities
may then be converted or exchanged or which are then issuable upon the exercise
of the rights, options or warrants immediately prior to the close of business on
the date on which the Convertible Securities, rights, options or warrants are
issued, and the Conversion Price shall be adjusted downward as if it were an
event covered by Section 5(e)(v). However, no further adjustment of the
Conversion Price will be made as a result of the actual issuance of shares of
Common Stock upon conversion, exchange or exercise of the Convertible
Securities, rights, options or warrants. If any Convertible Securities, rights,
options or warrants to which this Section applies are redeemed, retired or
otherwise extinguished or expire without any shares of Common Stock having been
issued upon conversion, exchange or exercise thereof, effective immediately
after the Convertible Securities, rights, options or warrants expire, the
Conversion Price then in effect will be readjusted to what it would have been if
those Convertible Securities, rights, options or warrants had not been issued.
However, a readjustment will not affect any conversion which takes place before
the readjustment. For the purposes of this Section 5(e)(iv), (x) the price of
shares of Common Stock issued or sold upon conversion or exchange of Convertible
Securities or upon exercise of rights, options or warrants will be (A) the
consideration paid to the Corporation for the Convertible Securities, rights,
options or warrants, plus (B) the consideration paid to the Corporation upon
conversion, exchange or exercise of the Convertible Securities, rights, options
or warrants, with the value of the consideration, if other than cash, to be
determined by the Board of Directors of the Corporation (whose determination, if
made in good faith, will be conclusive) and (y) any change in the conversion or
exchange price of Convertible Securities or the exercise price of rights,
options or warrants will be treated as an extinguishment, when the change
becomes effective, of the Convertible Securities, rights, options or warrants
which had the old conversion, exchange or exercise price and an immediate
issuance of new Convertible Securities, rights, options or warrants with the new
conversion, exchange or exercise price.
(v) If the Corporation issues or sells any Common Stock
(other than (X) on conversion or exchange of Convertible Securities, (Y)
exercise of rights, options or warrants to which Section 5(e)(ii), (iii) or (iv)
applies, or (Z) not more than $150,000,000 in gross offering proceeds of Common
Stock in an underwritten, widely distributed offering at a price per share to
the public of not less than $11.3125 on or before November 30, 1997) for a
consideration per share less than the Conversion Price then in effect minus
$0.125, (or for a consideration per share of less than $11.3125 in the case of
an issuance referred to in clause (Z) of the parenthetical in this paragraph
(e)(v)) on the date of the issuance or sale (or on exercise of options or
warrants, for less than the Conversion Price then in effect minus $0.125 on the
date the options or warrants are issued), upon consummation of the issuance or
sale, the Conversion Price in effect immediately prior to the issuance or sale
will be reduced in accordance with the equation set forth on Exhibit A hereto,
which is hereby incorporated by reference herein.
(vi) If there is a reclassification or change of
outstanding shares of Common Stock (other than a change in par value, or as a
result of a subdivision or combination or as a result of the Corporation's
open-market purchases of Common Stock pursuant to its Dividend Reinvestment
Plan), or a merger or consolidation of the Corporation with any other entity
that results in a reclassification, change, conversion, exchange or cancellation
of outstanding shares of Common Stock, or a sale or transfer of all or
substantially all of the assets of the Corporation, upon any subsequent
conversion of Series 1997-A Convertible Preferred Stock, each holder of the
Series 1997-A Convertible Preferred Stock will be entitled to receive the kind
and amount of securities, cash and other property which the holder would have
received if the holder had converted the shares of Series 1997-A Convertible
Preferred Stock into Common Stock immediately before the first of those events
and had retained all the securities, cash and other assets received as a result
of all those events. In the event that a transaction may be viewed as causing
this Section 5(e)(vi) to be applicable and 5(e)(iii) is also applicable, then
Section 5(e)(iii) will be applied and this Section 5(e)(vi) will not be applied.
(vii) From and after a Charter Breach (as defined below),
the Conversion Price from time to time in effect as provided elsewhere in this
Section 5(e) shall at all times be 50% of the amount elsewhere so determined
such that holders of shares of Series 1997-A Convertible Preferred Stock shall
receive, on conversion, two
12
<PAGE>
times the number of shares of Common Stock to which they would be entitled in
the absence of the occurrence of a Charter Breach and the application of this
Section 5(e)(vii). A "Charter Breach" shall mean a failure by the Corporation to
observe and comply with Sections 3, 4 and 7 of this Certificate of Designation
or any successor provisions contained in any amendment to or restatement of the
Charter.
(viii) For the purpose of any computation under this
Section 5(e), the "Current Market Price" of the Common Stock on any date will be
the average of the last reported sale prices per share of the Common Stock on
each of the twenty consecutive Trading Days (as defined below) preceding the
date of the computation. The last reported sale price of the Common Stock on
each day will be (A) the last reported sale price of the Common Stock on the
principal stock exchange on which the Common Stock is listed, or (B) if the
Common Stock is not listed on a stock exchange, the last reported sale price of
the Common Stock on the principal automated securities price quotation system on
which sale prices of the Common Stock are reported, or (C) if the Common Stock
is not listed on a stock exchange and sale prices of the Common Stock are not
reported on an automated quotation system, the mean of the high bid and low
asked price quotations for the Common Stock as reported by National Quotation
Bureau Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the ten preceding
Trading Days. If the Common Stock is not traded or quoted as described in any of
clause (A), (B) or (C), the Current Market Price of the Common Stock on a day
will be the fair market value of the Common Stock on that day as determined by a
member firm of The New York Stock Exchange, Inc., selected by the Board of
Directors. As used with regard to the Series 1997-A Convertible Preferred Stock,
the term "Trading Day" means (A) if the Common Stock is listed on at least one
stock exchange, a day on which there is trading on the principal stock exchange
on which the Common Stock is listed, (B) if the Common Stock is not listed on a
stock exchange, but sale prices of the Common Stock are reported on an automated
quotation system, a day on which trading is reported on the principal automated
quotation system on which sales of the Common Stock are reported, or (C) if the
Common Stock is not listed on a stock exchange and sale prices of the Common
Stock are not reported on an automated quotation system, a day on which
quotations are reported by National Quotation Bureau Incorporated.
(ix) No adjustment in the Conversion Price will be
required unless the adjustment would require a change of at least 1% in the
Conversion Price; provided, however, that any adjustments which are not made
because of this Section 5(e)(ix) will be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 5 will be made
to the nearest cent or to the nearest one hundredth of a share, as the case may
be.
(x) If any one of the events in Sections 5(e)(i)
through 5(e)(vii) occurs, then the Corporation will mail to the holders of
record of the Series 1997-A Convertible Preferred Stock, at least 15 days before
the applicable date specified below, a notice stating the applicable one of (i)
the date on which a record is to be taken for the purpose of the dividend,
distribution or grant of rights or warrants, or, if no record is to be taken,
the date as of which the holders of Common Stock of record who will be entitled
to the dividend, distribution or rights or warrants will be determined, (ii) the
date on which it is expected the Convertible Securities will be issued or the
date on which the change in the conversion, exchange or exercise price of the
Convertible Securities, rights, options or warrants will be effective, (iii) the
date on which the Corporation anticipates selling Common Stock for less than the
Conversion Price on the date of the sale (except that no notice need be given of
the anticipated date of sale of Common Stock upon exercise of options or
warrants which have been described in a notice to the holders of record of
Series 1997-A Convertible Preferred Stock given at least 15 days before the
options or warrants are exercised), or (iv) the date on which the
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding-up is expected to become effective, and the
date as of which it is expected that holders of record of Common Stock will be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon the reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to
give any such notice or any defect in the notice will not affect the legality or
validity of the reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding-up. Whenever the Conversion Price
is adjusted, the Corporation will promptly send each holder of record of shares
of Series 1997-A Convertible Preferred Stock a notice of the adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date on
which the adjustment becomes effective and containing a brief description of the
events which caused the adjustment.
13
<PAGE>
(xi) In the event (i) the last reported sale price per
share of Common Stock is less than $11.3125 on any day during the three full
Trading Day period (the "First Measurement Period) after the Corporation is
required or elects to restate, amend or alter or to issue a public announcement
restating, amending or altering any of its financial statements (or parts
thereof) and (ii) during the 30 full Trading Day period (the "Second Measurement
Period") after the end of the First Measurement Period, the last reported sale
price per share of Common Stock is not equal to or greater than $11.3125 for any
two full Trading Days within the Second Measurement Period, then the Initial
Conversion Price per share of Series 1997-A Convertible Preferred Stock will be
equal to the product of (i) the average of the last reported sale price per
share of Common Stock for each of the last 10 full Trading Days of the Second
Measurement Period and (ii) 107%, but in no event shall such Initial Conversion
Price exceed $12.125. If the Initial Conversion Price is to be adjusted as set
forth herein and, during the time from the initial issuance of Series 1997-A
Convertible Preferred Stock to the last day of the Second Measurement Period
there shall have occurred an adjustment to the Conversion Price as otherwise set
forth in this Section 5(e), such other adjustment or adjustments shall be
redetermined as if the Initial Conversion Price determined in accordance with
this Section 5(e)(xi) had been in effect on the date of the initial issuance of
Series 1997-A Convertible Preferred Stock.
(f) (i) The Corporation will at all times reserve and keep
available, free from preemptive rights, out of the authorized but unissued
shares of Common Stock, for the purpose of effecting conversion of the Series
1997-A Convertible Preferred Stock, the maximum number of shares of Common Stock
which the Corporation would be required to deliver upon the conversion of all
the outstanding shares of Series 1997-A Convertible Preferred Stock. For the
purposes of this Section 5(f)(i), the number of shares of Common Stock which the
Corporation would be required to deliver upon the conversion of all the
outstanding shares of Series 1997-A Convertible Preferred Stock will be computed
as if at the time of the computation all the outstanding shares of Series 1997-A
Convertible Preferred Stock were held by a single holder.
(ii) Before taking any action would cause an adjustment
reducing the Conversion Price below the then par value (if any) of the shares of
Common Stock deliverable upon conversion of the Series 1997-A Convertible
Preferred Stock, the Corporation will take all corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common Stock
at the adjusted Conversion Price.
(iii) The Corporation will seek to list the shares of
Common Stock required to be delivered upon conversion of the Series 1997-A
Convertible Preferred Stock, prior to the delivery, upon each national
securities exchange, if any, upon which the outstanding shares of Common Stock
are listed at the time of delivery.
(g) The Corporation will pay any documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversion of Series 1997-A Convertible Preferred Stock;
provided, however, that the Corporation will not be required to pay any tax
which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the holder of
record of Series 1997-A Convertible Preferred Stock to be converted and no such
issue or delivery will be made unless and until the person requesting the issue
or delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that the tax has been paid
or is not payable.
Section 6. Status.
Shares of Series 1997-A Convertible Preferred Stock converted
pursuant to the terms hereof or otherwise acquired by the Corporation shall
automatically be retired upon such conversion or other acquisition, as the case
may be, shall not be reissued as shares of Series 1997-A Convertible Preferred
Stock and shall be restored to the status of authorized but unissued shares of
Preferred Stock, undesignated as to series.
Section 7. Redemption after Notice of Mandatory Conversion.
(a) Notwithstanding anything to the contrary contained in
Section 5, each holder of Series 1997-A Convertible Preferred Stock will have
the right, exercised at any time after the Mandatory Conversion Notice
14
<PAGE>
Date but prior to the Mandatory Conversion Date, to require the Corporation to
redeem any or all of the number of shares of Series 1997-A Convertible Preferred
Stock specified in the Notice of Mandatory Conversion that are owned of record
by the holder (the number of shares as to which each holder elects redemption
under this clause (a) being referred to as the "Identified Redemption Shares"),
at a redemption price per share (the "Redemption Price") equal to 110%
multiplied by the sum of (i) Stated Value plus (ii) the per share amount of the
sum of all Accrued Dividends with regard to the Series 1997-A Convertible
Preferred Stock (whether or not declared) through the Redemption Date, as herein
defined.
(b) In order to exercise a right to require the Corporation to
redeem a holder's Series 1997-A Convertible Preferred Stock, the holder must
deliver a request for redemption with respect to the Identified Redemption
Shares, accompanied by the certificates representing the shares to be redeemed,
to the Corporation at any time prior to the Mandatory Conversion Date. If a
request for redemption is given with regard to shares of Series 1997-A
Convertible Preferred Stock, promptly (but in no event more than five Business
Days) after the request for redemption is given to the Corporation, the
Corporation will pay the holder cash equal to the Redemption Price of the
shares. The date of such payment is referred to herein as the "Redemption Date."
(c) (i) If a request for redemption accompanied by the
certificates representing the shares to be redeemed is delivered to the
Corporation, on the Redemption Date dividends will cease to accrue with
regard to the shares of Series 1997-A Convertible Preferred Stock to be
redeemed, and at the close of business on that date the holders of
those shares will cease to be stockholders with respect to those
shares, will have no interest in or claims against the Corporation by
virtue of such shares (other than as described in clause (ii) below)
and will have no voting or other rights with respect to such shares.
(ii) The dividend with respect to a share of Series 1997-A
Convertible Preferred Stock which is the subject of a request for
redemption delivered on a day which falls between the close of
business on a dividend payment Record Date and the opening of business
on the corresponding Dividend Payment Date will be payable on the
Dividend Payment Date to the holder of record of the share of Series
1997-A Convertible Preferred Stock on the dividend payment Record Date
notwithstanding the redemption of the share of Series 1997-A
Convertible Preferred Stock after the dividend payment Record Date and
prior to the Dividend Payment Date.
(d) Notwithstanding the foregoing provisions of this Section
7, the Corporation may, on notice provided to each holder of Series 1997-A
Convertible Preferred Stock which has delivered to the Corporation a request for
redemption, not more than two Business Days after the delivery to the
Corporation of such request for redemption, elect as to all but not less than
all the Identified Redemption Shares of such holder so noticed for redemption
pursuant to this Section 7, to deliver such number of shares of Common Stock on
the Mandatory Conversion Date as shall equal the quotient of (i) the product of
(A) 104%, (B) the Redemption Price, and (C) the number of the Identified
Redemption Shares, divided by (ii) the Current Market Price computed two Trading
Days prior to the Redemption Date.
Section 8. REIT Declassification.
(a) In the event that the Corporation should not qualify as a
real estate investment trust within the meaning of Section 856 of the Internal
Revenue Code of 1986, as amended (a "REIT Declassification"), each holder of
Series 1997-A Convertible Preferred Stock shall, subject to the requirements of
this Section 8, have the right to require the Corporation to redeem any or all
of the shares of Series 1997-A Convertible Preferred Stock owned of record by
such holder, at a redemption price (the "Declassification Redemption Price") per
share equal to the product of (i) 115% and (ii) the sum of (A) Stated Value plus
(B) the per share amount of Accrued Dividends with regard to the Series 1997-A
Convertible Preferred Stock to the date of final distribution (whether or not
distributed). The Corporation shall immediately notify (the "Declassification
Notice") each holder of Series 1997-A Convertible Preferred Stock in writing of
any REIT Declassification or any proposed REIT Declassification, and each holder
of Series 1997-A Convertible Preferred Stock shall within ninety (90) days after
receipt from the Corporation of the Declassification Notice notify the
Corporation of its election pursuant to this Section 8(a).
15
<PAGE>
(b) Each holder of Series 1997-A Convertible Preferred Stock
may exercise its rights under Section 8(a) hereof by notifying the Corporation
in writing of its election and surrendering the Series 1997-A Convertible
Preferred Stock. If a request for redemption is given with respect to a REIT
Declassification, promptly (but in no event more than five Business Days) after
the request for redemption is given to the Corporation, the Corporation will pay
the holder cash equal to the Declassification Redemption Price of the shares.
The date of such payment is referred to herein as the "Declassification
Redemption Date."
(c) (i) If a request for redemption accompanied by the
certificates representing the shares to be redeemed under this Section 8 is
delivered to the Corporation, on the Declassification Redemption Date dividends
will cease to accrue with regard to the shares of Series 1997-A Convertible
Preferred Stock to be redeemed, and at the close of business on that date the
holders of those shares will cease to be stockholders with respect to those
shares, will have no interest in or claims against the Corporation by virtue of
such shares (other than as described in clause (ii) below) and will have no
voting or other rights with respect to such shares.
(ii) The dividend with respect to a share of Series 1997-A
Convertible Preferred Stock which is the subject of a request for redemption
under this Section 8 delivered on a day which falls between the close of
business on a dividend payment Record Date and the opening of business on the
corresponding Dividend Payment Date will be payable on the Dividend Payment Date
to the holder of record of the share of Series 1997-A Convertible Preferred
Stock on the dividend payment Record Date notwithstanding the redemption of the
share of Series 1997-A Convertible Preferred Stock under this Section 8 after
the dividend payment Record Date and prior to the Dividend Payment Date.
Section 9. Ranking. The shares of Series 1997-A Convertible Preferred
Stock will, with respect to the payment of dividends, the right to redemption in
accordance with Section 7, the right to receive the Change of Control
Preference, the right to receive the Liquidation Preference, and any other
distribution of assets on liquidation, dissolution or winding-up of the
Corporation, rank prior to any other series of Preferred Stock, prior to Common
Stock and prior to any other class or series of capital stock of the
Corporation.
Section 10. Miscellaneous.
(a) Except as otherwise expressly provided to this Certificate
of Designation, whenever a notice or other communication is required or
permitted to be given to holders of shares of Series 1997-A Convertible
Preferred Stock, the notice or other communication will be deemed properly given
if deposited in the United States mail, postage prepaid, addressed to the
persons shown on the books of the Corporation as the holders of the shares of
Series 1997-A Convertible Preferred Stock at the addresses as they appear on the
books of the Corporation, as of the Record Date or dates determined in
accordance with applicable law and with the Charter and Bylaws, as in effect
from time to time, with a copy sent to Westbrook Berkshire Holdings, L.L.C., c/o
Westbrook Partners, L.L.C., at 599 Lexington Avenue, Suite 3800, New York, New
York 10022 and at 13155 Noel Road, LB 54, Suite 2300, Dallas, Texas 75240, in
each case by documented overnight delivery service or, to the extent receipt is
confirmed, telecopy, telefax or other electronic transmission service.
(b) Shares of Series 1997-A Convertible Preferred Stock will
not have any designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends and other distributions,
qualifications or terms and conditions of redemption, other than those
specifically set forth herein, in the Charter, and as may be provided under
applicable law insofar as any such provision does not conflict with the terms
hereof.
(c) The headings of the various subdivisions herein are for
convenience only and will not affect the meaning or interpretation of any of the
provisions herein.
(d) Notwithstanding Section 3 hereof, the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and conditions of
redemption of the Series 1997-A Convertible Preferred Stock may be waived, and
any of such provisions of the Series
16
<PAGE>
A Convertible Preferred Stock may be amended, only with the approval of holders
of at least a majority of the outstanding shares of Series 1997-A Convertible
Preferred Stock, voting separately as a class.
(e) Notwithstanding anything to the contrary contained in
Section 2, 3, 4, 5 7, 8 or 10(d) hereof, each holder of record of Series 1997-A
Convertible Preferred Stock hereby agrees (subject to relinquishment by
Westbrook Real Estate Fund II, L.P. as permitted below) that, in determining
whether any holder of Series 1997-A Convertible Preferred Stock has (i) voted to
remove or elect any director of the Corporation under Section 3, (ii) approved
any action by the Corporation under Section 3, (iii) elected the Change of
Control Preference, or the Liquidation Preference, as the case may be, or shares
of Common Stock in lieu of either thereof under Section 4, (iv) elected to cause
the conversion of such holder's Series 1997-A Convertible Preferred Stock into
Common Stock or other assets under Section 5, (v) elected to receive the
Redemption Price under Section 7 after receiving a Notice of Mandatory
Conversion, (vi) elected to receive the Declassification Redemption Price under
Section 8 or (vi) received any notice of the Corporation required or permitted
by this Certificate of Designation, Westbrook Real Estate Fund II, L.P. shall
have the right to grant or deny such approvals, make or decline any such
elections or receive any such notices with regard to all shares of the Series
1997-A Convertible Preferred Stock held of record by such holder, and a notice
received by Westbrook Real Estate Fund II, L.P. and a document executed by
Westbrook Real Estate Fund II, L.P. calling a meeting of shareholders,
exercising the right to take action by written consent without a meeting,
exercising voting rights either together with holders of shares of Common Stock
or separately as a class, including without limitation the granting or denying
of approval to any action by the Corporation, or electing or removing any
director, or electing or declining to the Corporation to effect the conversion
as to any shares of Series 1997-A Convertible Preferred Stock, or electing or
declining to the Corporation to effect the redemption as to any shares of Series
1997-A Convertible Preferred Stock, shall determine the matter for such holders
as Westbrook Real Estate Fund II, L.P. may indicate. Upon written notice by
Westbrook Real Estate Fund II, L.P. to the Corporation, Westbrook Real Estate
Fund II, L.P. may relinquish such rights and powers over any or all shares of
Series 1997-A Convertible Preferred Stock. The foregoing may, but need not, be
evidenced by execution by each holder of Series A Convertible Preferred Stock,
other than Westbrook Real Estate Fund II, L.P., of a proxy in favor of Westbrook
Real Estate Fund II, L.P.
Section 11. Severability of Provisions.
Whenever possible, each provision hereof shall be interpreted
in a manner as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or otherwise adversely affecting the remaining
provisions hereof. If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of time were extended
or shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
17
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its President and attested by its Secretary this
30th day of September, 1997.
BERKSHIRE REALTY COMPANY, INC.
By: David F. Marshall
---------------------------------------
David F. Marshall
President
Attest:
Scott D. Spelfogel
- ---------------------------------
Name: Scott D. Spelfogel
---------------------------
Title: Secretary
18
<PAGE>
Exhibit A
---------
OBJECTIVE: To keep the Preferred Stockholders' relative ownership of shares
constant (as compared to transaction consummated at the Effective
Conversion Price), upon issuance of a "New Dilutive Security" (see
definition below), the then-applicable Conversion Price of the
Preferred Stock will be adjusted as follows:
PRIOR ANTI-DILUTION ADJUSTED
CONVERSION PRICE ADJUSTMENT FORMULA CONVERSION PRICE
- ---------------- ------------------- ----------------
(A+B+C)+EX
X x ------------------- = X^
(A+B+C^)+EX^
[ARROW UP] ...must be solved for per
calculation included in example
below.
DEFINITIONS:
- ------------
<TABLE>
<S> <C> <C>
"New Dilutive Security" - A Common stock or common stock equivalent issuance at a price below FX
X - Conversion Price of Preferred Stock prior to issuance of "New Dilutive Security."
X^ - Conversion Price of Preferred Stock adjusted for issuance of "New Dilutive Security."
FX - Effective Conversion Price of Preferred Stock prior to issuance of "New Dilutive Security."
FX^ - Effective Conversion Price of Preferred Stock adjusted for issuance of "New Dilutive Security"
A - The number of fully diluted common shares outstanding
B - Shares of Common Stock issuable upon conversion of all convertible Operating Partnership Units
outstanding prior to issuance of New Dilutive Security.
C - Shares of Common Stock issuable upon conversion of all Preferred Stock, assuming the prior
Conversion Price, (or X).
C^ - Shares of Common Stock issuable upon conversion of all outstanding Preferred Stock, assuming the
adjusted Conversion Price for the New Dilutive Security issuance (or X^).
EX - "New Dilutive Security" equivalent common shares, assuming prior Effective Conversion price, (FX)
EX^ - "New Dilutive Security" equivalent common shares, based on actual conversion of security.
</TABLE>
<PAGE>
Exhibit A (continued)
---------------------
Example
- -------
Assume a 10,000,000 share common stock issuance of $10/share (the "New Dilutive
Security") following an investment of $70,000,000 of Preferred Stock at a
$12.125 Conversion Price ($11.995 Effective Conversion Price):
Assumptions
- -----------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding Common Stock 25,480,851 Gross Proceeds - New Issue 100,000,000
OP Units Outstanding 6,527,022 New Shares Issued 10,000,000
Pref. Stock Equivalent Common Stock 5,773,196 New Share Issue Price $10.00
Preferred Conversion Price $12.125 Effective Pref. Conversion Price $11.995
- -------------------------------------------------------------------------------------------------
</TABLE>
Prior to solving for C^, the following table must be created:
<TABLE>
<CAPTION>
Post-New Dilutive Post-New Dilutive
Security Issuance Security Issuance
Pre-New Dilutive Issued at $10 per Issued at Effective
Security Issuance Share and Unadjusted Conversion Price
---------------------- ------------------------- ------------------------
Share Capitalization of Corporation # of Shares % # of Shares % # of Shares %
- --------------------------------------- ----------- ------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Common Stock Equivalent Shares (A) 25,480,851 67.44% 25,480,851 53.33% 25,480,851 55.25%
Convertible OP Units Outstanding (B) 6,527,022 17.28% 6,527,022 13.66% 6,527,022 14.15%
-------
Pref. Stock Equivalent Common Stock (C) 5,773,196 15.28% 5,773,196 12.08% 5,773,196 12.52%
-------
New Dilutive Security Shares (EX^/EX) - 0.00% 10,000,000 20.93% 8,336,745 18.08%
---------- ------- ---------- ------- ---------- -------
Total 37,781,069 100.00% 47,781,069 100.00% 46,117,814 100.00%
</TABLE>
C^ is the number of shares of Common stock into which the shares of Preferred
stock must convert in order to maintain the Preferred Stockholder's ownership
percentage at 12.5% (i.e. as if the issuance were done at the effective
conversion price prior to the issuances)
<TABLE>
<S> <C>
Share Capitalization, post New Dilutive Security Issuance as issued
at $10 per share and unadjusted 47,781,069
Less Preferred Stock Equivalent Common Stock (5,773,196)
----------
Non-Preferred Share Capitalization 42,007,873
Ownership of Preferred Shareholders if New Security Issued at Effective Conversion Price 12.52%
Remaining Shareholders Ownership Interest 87.48%
Total Shares Grossed up to Maintain Preferred Ownership Percentage at 12.52% 48,019,076
Preferred Stock Ownership Percentage 12.52%
----------
Number of Shares Preferred must convert into in order to keep Ownersip Percentage at 12.52% 6,011,203
==========
</TABLE>
<PAGE>
Exhibit A (continued)
---------------------
<TABLE>
<CAPTION>
Prior Conversion Adjusted Conversion
Price Price
- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
$12.125 X ((A+B+C) + (dilutive issue proceeds / $12.125)) = X^
----------------------------------------------
((A+B+C^) + (dilutive issue proceeds / $10.00))
$12.125 X (37,781,069 + 8,336,745) = X^
-------------------------
(38,019,076 + 10,000,000)
$12.125 X 46,117,814 = 96.04% = $11.6449
----------
48,019,076
Preferred Equivalent Common Stock at New Conversion Price = 70,000,000 = 6,011,203
----------
11.645
</TABLE>
Checking the Calculation
- ------------------------
<TABLE>
<CAPTION>
Share Capitalization of Corporation Shares %
- ----------------------------------- ---------- -------
<S> <C> <C>
Common Stock Equivalent Shares (A) 25,480,851 53.06%
Convertible OP Units Outstanding (B) 6,527,022 13.59%
--------
Preferred Stock Equivalent Common Stock (C^/C) 6,011,203 12.52%
--------
New Dilutive Security Shares (EX^/EX) 10,000,000 20.83%
---------- -------
TOTAL 48,019,076 100.00%
</TABLE>
DEVELOPMENT ACQUISITION AGREEMENT
THIS DEVELOPMENT ACQUISITION AGREEMENT (this "Agreement") is made and
entered into this ________ day of ____________________, 1997, by and among
QUESTAR PROPERTIES, INC. (the "Developer"), Stephen M. Gorn, John B. Colvin and
BRI OP LIMITED PARTNERSHIP, a limited partnership ("BRI OP").
BACKGROUND
Developer is a Maryland corporation engaged in the business of land
development and the construction of multifamily apartment projects. Stephen M.
Gorn and John B. Colvin are principal shareholders of the Developer.
BRI OP is a Delaware limited partnership engaged in the ownership and
operation of multifamily apartment projects. Berkshire Realty Company, Inc.
("Berkshire"), a publicly traded real estate investment trust, is a limited
partner in BRI OP.
BRI OP desires to engage Developer to identify and acquire sites in the
Mid-Atlantic region of the United States for multifamily apartment projects and
to develop and construct multifamily apartment projects on the sites, and
Developer desires to accept such engagement.
NOW, THEREFORE, in consideration of the foregoing, and other good
and valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the Developer and BRI OP covenant and agree as follows:
1. Engagement of Developer. BRI OP hereby engages Developer and
Developer hereby accepts such engagement to be BRI OP's exclusive
developer/builder in connection with the identification, development and
acquisition of multifamily apartment development sites in the Mid-Atlantic
Region (i.e. Pennsylvania, Delaware, Maryland, Washington, D.C. and Virginia) of
the United States (each a "New Development Site") and the engineering, design
and construction of multifamily apartment projects of between 100 and 1,000
units (each a "New Development Project") on the New Development Sites.
1.1. BRI OP agrees, subject to the terms of this Agreement, that
its engagement of Developer shall be exclusive for the Term (as hereinafter
defined) of this Agreement and that, accordingly, during the Term of this
Agreement:
a. if BRI OP, Berkshire or any of its other affiliates is
presented by a third party with any site in the Mid-Atlantic Region for the
construction of a multifamily apartment project, BRI
<PAGE>
OP will advise Developer of such opportunity and allow Developer to negotiate
for the acquisition of the site as a New Development Site in accordance with
this Agreement;
b. except as provided in this Agreement, if BRI OP, Berkshire or
any of its other affiliates is or becomes the owner of any New Development Site
in the Mid-Atlantic Region for the construction of a Multifamily Apartment
Project, BRI OP will engage Developer to design and construct a Multifamily
Apartment Project on the New Development Site in accordance with this Agreement;
and
c. except as provided in this Agreement, BRI OP will not engage
any other person or entity to acquire, develop or construct New Development
Sites or New Development Projects in the Mid-Atlantic Region nor will it, on its
own behalf, or through Berkshire or any of its other affiliates, acquire,
develop or construct New Development Sites or New Development Projects in the
Mid-Atlantic Region.
1.2. Developer agrees that its engagement with BRI OP shall be
exclusive for the Term of this Agreement and that, accordingly, during the Term
of this Agreement:
a. Developer, on its own behalf and on behalf of all of its
affiliates (as defined in Section 7.11) shall acquire New Development Sites and
construct New Development Projects only in the Mid-Atlantic Region and neither
Developer, on its own behalf or on behalf of any other person or entity or of
any of its affiliates, shall acquire any New Development Site in any location in
the United States (other than the Mid-Atlantic Region) nor develop or construct
any New Development Project in any location in the United States (other than the
Mid-Atlantic Region);
b. except as provided in this Agreement, Developer and all of its
affiliates, shall acquire, develop and construct New Development Sites and New
Development Projects in the Mid-Atlantic Region solely for BRI OP, or its
affiliates and for no other person or party;
c. except as provided in this Agreement, neither Developer, on
its own behalf, nor any of its affiliates shall agree with any other person or
entity, other than BRI OP or its affiliates to acquire, develop or construct any
New Development Site or New Development Project in the Mid-Atlantic Region nor
will Developer, on its own behalf, nor will any affiliate of Developer, acquire,
develop or construct New Development Sites or New Development Projects for its
own account in the Mid-Atlantic Region.
d. Developer agrees that it will first present to BRI OP all
opportunities for New Development Sites of which Developer or any of its
affiliates (as defined in Section 7.11) becomes aware in accordance with the
provisions of Section 3 hereof prior to presenting such opportunities to any
other person or entity.
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1.3. Except as provided in this Agreement, Stephen M. Gorn and
John B. Colvin agree that during the Term of this Agreement, they will not,
directly or indirectly, as an individual, proprietor, partner stockholder,
officer, employee, director, joint venturer, investor, lender, consultant, or as
any other capacity whatsoever, acquire, develop or construct (or participate in
the formation of a business which does any of the same and/or assist any other
person in doing any of the same) any New Development Site or New Development
Project for any person or party, including themselves, other than BRI OP and its
affiliates except to the extent that the Developer is expressly permitted to do
so under the terms of this Agreement. The foregoing sentence shall not, however,
be construed to (a) prohibit Stephen M. Gorn and/or John B. Colvin from holding
an ownership interest in an entity, whether as a partner, stockholder, investor
or otherwise, in which he or they do not exercise or have the power to exercise
managerial control, do not own 50% or more of the economic interests in a
privately owned entity or 10% or more of the economic interests in a publicly
traded entity and for which they perform no services for which they are paid,
nor (b) apply to any of the properties that are the subject of the Related
Agreements or the subject of those certain Development Contribution Agreements
by and between affiliates of the Developer and BRI OP.
1.4. The provisions of this Section 1 shall not apply to the
acquisition, development or construction of sites for the development of
for-sale housing, including, but not limited to single family, townhouse and
garden condominium projects and such sites shall not be deemed "New Development
Sites".
2. Term.
2.1. The term of this Agreement (the "Term") shall commence on
that date on which closing occurs under those certain agreements by and among
Developer and/or its affiliates and/or entities in which affiliates of Developer
are partners and BRI OP and/or its affiliates, as identified on Exhibit A hereto
(the "Related Agreements"), and shall expire on the fifth anniversary of such
date (the "Termination Date"). Notwithstanding the foregoing, if, after the Term
of this Agreement commences, both of the Termination Events (as hereinafter
defined) occur, then either party, by written notice to the other party, may
terminate this Agreement, in which event (a) the Termination Date shall be
deemed to have occurred upon receipt of such notice by the other party and the
Term of this Agreement shall expire on such Termination Date, (b) neither party
hereto shall have any further rights or obligations hereunder (except as
otherwise provided in Section 2.3), and (c) the Employment Agreements between
BRI OP and Stephen M. Gorn and John B. Colvin and the Consulting Agreement
between BRI OP and Morton Gorn shall terminate. The Termination Events shall
consist of (1) closing occurring under both of the Development Contribution
Agreements between BRI OP and Ironhorse Associates, L.L.C. ("Ironhorse") or if
closing does not occur under one or both of such Development Contribution
Agreements, such Development Contribution Agreement(s) as to which closing does
not occur having terminated for any reason (other than a default by the party
giving notice of termination), and (2) pursuant to Section 3.2, BRI OP having
determined on a
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preliminary basis that the Threshold Conditions have not been satisfied with
respect to four consecutive New Development Sites presented by Developer.
2.2. If closing under such Related Agreements has not occurred by
October 31, 1997, (such date being subject to further extension by mutual
written agreement of both parties) then this Agreement shall automatically
terminate and neither party hereto shall have any further rights or obligations
hereunder.
2.3. Notwithstanding the occurrence of the Termination Date, (a)
this Agreement shall continue in effect as to any New Development Site acquired
by Developer or BRI OP prior to the Termination Date or placed under contract to
be acquired by Developer or BRI OP prior to the Termination Date, and (b)
termination upon the Termination Date however shall not affect the rights and
obligations of the parties hereto under any separate agreement including, but
not limited to, a Project Development Agreement (as hereinafter defined) or a
Tri Party Agreement (as hereinafter defined) hereafter entered into pursuant to
the provisions of this Agreement, which rights and obligations shall continue in
full force and effect.
3. Acquisition of New Development Sites.
3.1. BRI OP agrees to purchase on an annual basis from or through
Developer New Development Sites, to the extent available, which can accommodate
an aggregate minimum of 500 apartment units in New Development Projects which
satisfy the following conditions (the "Threshold Conditions"):
a. Each New Development Site shall have potential for development
of a New Development Project of no less than 100 and no more than 1,000
apartment units.
b. Each New Development Site shall be located in the Mid-Atlantic
Region.
c. Each New Development Site shall have potential for development
of a 100% market rental New Development Project, with no rent controls or rent
subsidies.
d. BRI OP shall have conducted and approved, in its reasonable
discretion, all due diligence inspections necessary to determine that an
adequate market for the New Development Project exists and that the proposed New
Development Project is appropriate for the market.
e. BRI OP shall have no obligation to purchase and/or develop a
New Development Site unless the development costs (i.e. (i) hard development
costs, (ii) soft development costs, including interest and third party
professional costs, (iii) Land Acquisition Costs (as hereinafter defined), and
(iv) a G.C. Development Fee of 7% of the costs listed in (i) through (iii)
payable to Developer) reasonably projected by Developer and reasonably agreed to
by BRI OP (the "Projected Total Development Cost") to develop the New
Development Project are equal or less
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than the Target Development Cost. The Target Development Cost is equal to
Stabilized NOI (as hereinafter defined) divided by the New Development Cap Rate
(as hereinafter defined).
(i) Stabilized NOI is the net operating income at 93% occupancy
reasonably projected by Developer for the New Development Project and reasonably
agreed to by BRI OP for the 12-month period of operations of the New Development
Project commencing on the first month after 90% of the units in the New
Development Project have been leased for a period of 3 months.
(ii) Operating expenses used in determining net operating income
shall consist of the following: the customary and reasonable operating expenses
of the Property, including, but not limited to, expenses for insurance, on-site
employees, utilities, lawn care, ordinary maintenance and repair, real estate
taxes, a management fee of 5%, advertising and leasing, interior painting and
redecorating, and general and administrative, but not including depreciation or
capital expenses.
(iii) The New Development Cap Rate is the greater of (x) 10.0% or
(y) the sum of the BRI OP Blended Cost of Capital (as hereinafter defined) plus
100 basis points.
(iv) The BRI OP Blended Cost of Capital is the sum of (x) the BRI
OP Equity Rate (as hereinafter defined) multiplied by 0.6, plus (y) the BRI OP
Debt Rate (as hereinafter defined) multiplied by 0.4.
(v) The BRI OP Equity Rate is calculated as follows: (x) the BRI
OP Budgeted FFO (i.e. funds from operations as determined in accordance with the
NAREIT standards), as established by BRI OP (for the calendar year in which the
development and construction of the New Development Site is to commence) divided
by (y) the share price of the Common Stock of Berkshire at the time of analysis
divided by (z) the BRI OP Offering Cost Percentage (as hereinafter defined).
(vi) The BRI OP Offering Cost Percentage is the quotient of the
total offering costs incurred by Berkshire in its 1997 public offering of Common
Stock divided by the total dollars raised by Berkshire in connection with the
public offering.
(vii) The BRI OP Debt Rate is the permanent debt rate available
at the time of the analysis to qualified borrowers for a mortgage loan by the
Federal National Mortgage Association under its Tier IV loan guidelines.
(viii) An example of the calculation of the BRI OP Blended Cost
of Capital is attached as Exhibit B.
3.2. Developer shall make a formal, preliminary presentation to
BRI OP of the proposed New Development Site. BRI OP shall determine, on a
preliminary basis, whether all
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Threshold Conditions have been satisfied within 15 days of formal preliminary
presentation by Developer. If BRI OP determines that the Threshold Conditions
are not satisfied, then notwithstanding the provisions of Section 1, Developer
shall be free to acquire the New Development Site and develop it free of all
exclusive and non-competition agreements contained in this Agreement and in any
of the Related Agreements or in any other documents executed in connection
therewith or pursuant thereto, including, but not limited to any Employment
Agreement or Consulting Agreement between BRI OP and any of Morton Gorn, Stephen
M. Gorn or John B. Colvin; provided, that if Developer so elects to acquire and
begins development of a multifamily apartment project on any such New
Development Site which BRI OP has not approved (a "Non-Approved New Development
Site"), for each Non-Approved New Development Site in number which Developer
acquires and begins development, notwithstanding the provisions of Section 1,
BRI OP shall be permitted to acquire and/or develop with other BRI OP personnel
or with any third party an equal number of multifamily apartment projects in the
Mid-Atlantic Region, free of all exclusive and non-competition agreements
contained in this Agreement and in any Related Agreement. If, based on the
preliminary presentation, BRI OP determines that the Threshold Conditions are
satisfied, then BRI OP shall proceed to acquire the New Development Site as
provided under Section 3.3. All determinations by BRI OP shall be made by
written notice to Developer, and the specific reasons for any determination
shall be set forth in the notice.
3.3. Each New Development Site to be acquired by BRI OP shall
either be owned by Developer (or an affiliate of Developer that is either a
general partnership, limited partnership, or limited liability company) or, at
the option of Developer, under a binding purchase agreement between Developer
and a third-party seller. Closing on the acquisition of the New Development Site
shall occur either (a) within 60 days after BRI OP determines, on a preliminary
basis, that the Threshold Conditions have been satisfied if Developer or an
affiliate of Developer owns the New Development Site or (b) if the New
Development Site is under a binding purchase agreement, then on the date
required for closing under the binding purchase agreement. At Closing, as
applicable, either Developer shall convey the New Development Site to BRI OP, or
at the option of BRI OP, assign all of the partnership interests or limited
liability company interests in the entity owning the New Development Site to BRI
OP. If Developer owns the New Development Site, the land purchase price payable
by BRI OP shall be equal to the total price paid by Developer (including all
closing costs) at the time it acquired the New Development Site (i.e., a sale
"at cost"). If the New Development Site is under a binding purchase agreement,
the Developer shall assign the existing purchase agreement and the third-party
seller shall convey the New Development Site directly to BRI OP, in which event
the land purchase price shall be equal to the price set forth in the existing
purchase agreement (in either case, the "Land Purchase Price"). In addition,
regardless of the method by which BRI OP acquires the New Development Site, at
Closing, BRI shall pay to Developer an acquisition fee equal to 7% of the Land
Purchase Price (the "Land Acquisition Fee"). Regardless of the method by which
BRI OP acquires the New Development Site, all closing costs not borne by a
third-party seller, including, but not limited to, title insurance premiums,
survey costs and all transfer recordation, documentary
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stamp and other taxes imposed on the conveyance, shall be paid by BRI OP. The
Land Purchase Price, such closing costs and the Land Acquisition Fee are
referred to collectively as the "Land Acquisition Costs."
4. Development and Construction.
4.1. Within 30 days after closing by BRI OP on the New
Development Site, Developer and BRI OP shall agree upon a projected timetable
and schedule of responsibilities for obtaining the information and performing
such studies and analyses as are necessary to determine, on a final basis,
whether the Threshold Conditions are satisfied.
4.2. Within 6 months after Closing by BRI OP on the New
Development Site, Developer shall make a formal, final presentation to BRI OP of
the New Development Project. BRI OP shall determine, on a final basis, whether
all Threshold Conditions for development of the New Development Project upon the
New Development Site are satisfied within 15 days of formal, final presentation
by Developer. At the time that BRI OP makes such decision, BRI OP shall elect
one of the following options to proceed after acquisition: (a) promptly begin
development of the New Development Site with Developer as provided in Section
4.3, or (b) if and only if, in BRI OP's reasonable judgment, the capital markets
do not currently make available sufficient capital for the New Development
Project, but the New Development Site represents an attractive site for future
development of a New Development Project when capital market conditions improve,
hold the New Development Site for future development in accordance with Section
5 below, or (c) if, based upon the final, formal presentation of Developer, BRI
OP has determined that the Threshold Conditions for development of the New
Development Site have not been met, hold and/or dispose of the New Development
Site in accordance with Section 5 below. Once a final determination is made to
proceed with development under Section 4.3, BRI OP shall be obligated to proceed
with the development and construction of the New Development Project unless, in
BRI OP's reasonable judgment, a material adverse change occurs in the capital
markets which makes the capital contemplated for the New Development Project
unavailable, in which case, BRI OP shall immediately notify Developer, and the
provisions of Section 5 below shall apply. All determinations by BRI OP shall be
made by written notice to Developer, and the specific reasons for any
determination shall be set forth in the notice.
4.3. If development of the New Development Site is to proceed,
then, within 30 days after the final determination that the Threshold Conditions
have been satisfied, BRI OP and Developer, or an affiliate of Developer
designated by Developer, shall enter into a development agreement for the
development of a New Development Project on the New Development Site acquired by
BRI OP (a "Project Development Agreement"). Under the terms of the Project
Development Agreement, the parties shall agree, among other terms:
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a. Developer shall be solely responsible to develop the New
Development Project, including without limitation, Developer shall (i) engage
the project architect and engineer to design the project, (ii) obtain all
governmental permits and approvals, (iii) engage and supervise all contractors
and suppliers (which may include affiliates of Developer), (iv) obtain the
construction loan financing, (v) clear, grade and develop the New Development
Site, and (vi) construct the New Development Project substantially in accordance
with the plans and specifications. Berkshire Property Management, at the sole
cost and expense of BRI OP shall be responsible for lease-up during and after
construction and property management of buildings following their completion and
as they are placed in service.
b. With respect to construction financing, BRI OP shall not have
any liability or obligation for payment or performance under the construction
loan; it being agreed that the Developer shall be the borrower under the
construction loan and Stephen M. Gorn and John B. Colvin shall provide all
recourse guaranties and/or credit enhancement if required by the construction
lender; however, BRI OP shall agree to grant an accommodation first mortgage of
the New Development Site to the construction lender to secure the construction
loan. In consideration thereof, Stephen M. Gorn and John B. Colvin
("Guarantors") shall provide BRI OP with a recourse indemnity which shall
provide that if the construction lender forecloses the mortgage due to a failure
of the Developer to perform its obligations under the Project Development
Agreement, then the Guarantors shall pay to BRI OP a sum equal to the Land
Acquisition Cost paid by BRI OP for the New Development Site. Until the Payment
Date, Developer shall be responsible to pay for all costs of construction (hard
and soft costs) and to satisfy all requirements of the construction lender
(whether monetary or otherwise).
c. On the Payment Date, the amount to be paid by BRI OP to
Developer for the New Development Project (the "Development Purchase Price")
shall be equal to the lesser of (i) the actual development costs (i.e. (x) hard
costs, (y) soft costs and (z) a G.C. Development Fee of 7% of the costs listed
in (a) and (b) above) or (ii) a guaranteed maximum price (as specified and
agreed to in the Project Development Agreement). All such sums shall be paid in
full on the Payment Date, without deduction, escrow or set off. On the Payment
Date, Developer shall be obligated to pay-off the construction loan in full and
to cause release of all deeds of trust, mortgages and other liens on the New
Development Project being held by the Lender.
d. The payment of the Development Purchase Price by BRI OP to the
Developer on the New Development Project shall occur (such date of payment being
called the "Payment Date") upon the first business day of the first month after
the last to occur of (a) the substantial completion of construction of the New
Development Project, excluding punch-list items not affecting occupancy
(provided Developer shall thereafter complete all punch-list items at no expense
to BRI OP) (the "Completion Date") as evidenced by satisfaction of each of the
following conditions (the "Closing Conditions"): (i) final certificates of
occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Developer or such affiliate of
Developer as Developer may designate to be the general contractor
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for construction of the Improvements ("Questar Builders") certifying that the
Improvements have been substantially completed in accordance with the plans and
specifications for the New Development Project, as such may be modified from
time to time by Developer, in accordance with the provisions of the Project
Development Agreement. The issuance of final lien waivers by Questar Builders
and subcontractors covering at least 95% of the construction cost shall be a
condition precedent to payment of the Development Purchase Price. If a dispute
shall exist as to whether substantial completion has occurred, the dispute shall
be promptly submitted to binding arbitration by a qualified third party mutually
acceptable to the parties or, if they are unable to agree upon a third party,
then by arbitrators appointed pursuant to the applicable rules of the American
Arbitration Association. The status of occupancy of the New Development Project
by rent-paying tenants and the rents generated by such occupancy by such
occupancy shall not be conditions to Closing.
e. The Developer or any affiliate of Developer that enters into a
Project Development Agreement shall also have the right to collaterally assign
its interests under a Project Development Agreement to a construction lender
providing construction financing to the Developer for the New Development
Project (the "Lender"). If Developer so assigns the Project Development
Agreement, then BRI OP agrees to enter into an agreement with the Lender (the
"Tri Party Agreement") providing that: (a) BRI OP agrees to provide the Lender
with reasonable notice and opportunity to cure any default by Developer
thereunder; (b) BRI OP agrees not to modify or amend the Project Development
Agreement without the prior written consent of Lender, (c) BRI OP, at the
written request of Lender upon a default under the loan, will pay the
Development Purchase Price or such lesser amount as is required to satisfy the
loan directly to Lender provided that all conditions to payment of the
Development Purchase Price provided in the Project Development Agreement have
been satisfied; (d) BRI OP will permit Lender to perform any obligations of
Developer thereunder and will agree to recognize Lender as the Developer
thereunder should Lender succeed to the interest of Developer, provided,
however, that, in such event, Lender's liability under the Project Development
Agreement shall be limited to its interest in the New Development Site; and
further provided that (e) BRI OP will have no liability for payment of the
Lender's loan or the performance of any obligations under any of the loan
documents other than the Tri-Party Agreement.
f. The parties shall negotiate in good faith to agree upon the
terms of the Project Development Agreement within the 30 day period after the
final determination that the Threshold Conditions have been satisfied as
provided in the introductory paragraph of this Section 4.3. If a dispute exists
as to the terms, the parties shall endeavor in good faith to resolve such
dispute within such 30 day period, but if the dispute cannot be resolved, then
such failure to agree shall be deemed a decision by BRI OP under Section 4.2(c)
that the Threshold Conditions have not been satisfied and the provisions of
Section 5 of this Agreement shall be applicable.
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5. BRI OP Hold. If BRI OP opts not to promptly develop the New
Development Project as provided in paragraph 4.2(b) or to hold and/or dispose of
the New Development Site as provided in paragraph 4.2.c., then the following
provisions shall apply:
5.1. BRI OP shall not be permitted to sell the New Development
Site to any third party (other than an affiliate) or to develop the New
Development Project with any third party developer or for its own account for a
period of 24 months after the closing by BRI OP on the acquisition of the New
Development Site (the "Exclusivity Period") without the prior consent of
Developer; provided, however, that if BRI OP elected to hold and/or dispose of
the New Development Site under paragraph 4.2.c. or if BRI OP is deemed to have
so elected under paragraph 4.3.f., then the Exclusivity Period shall be reduced
to 3 months. If the New Development Site is owned by or transferred or sold to
an affiliate of BRI OP, then the provisions of this Section 5 shall continue to
apply.
5.2. At the end of the Exclusivity Period, if BRI OP has not
subsequently determined that the Threshold Conditions are satisfied and
proceeded to commence development with Developer under the provisions of Section
4.3, Developer shall have 120 days from the later of (i) the end of the
Exclusivity Period, or (ii) the date on which Developer receives written notice
from BRI OP of the expiration date of the Exclusivity Period, within which to
elect, by written notice to BRI OP, to purchase the New Development Site from
BRI OP for a purchase price equal to the Land Acquisition Costs. If Developer
purchases the New Development Site, it shall not be subject to any of the
exclusivity or non-competition agreements contained in this Agreement, the
Related Agreements or in any other documents executed in connection therewith or
pursuant thereto, including, but not limited to, any Employment Agreement or
Consulting Agreement between BRI OP and any of Morton Gorn, Stephen M. Gorn or
John B. Colvin. All closing costs, including, but not limited to, all transfer,
recordation, documentary stamp and other taxes imposed on the conveyance shall
be paid by Developer. Closing on the acquisition of the New Development Site by
Developer shall occur within 90 days after Developer's written election. At
Closing, BRI OP shall convey good and marketable title to the New Development
Site to Developer or an affiliate of Developer. Developer may elect, in lieu of
a conveyance of the New Development Site to Developer, to require BRI OP to
convey to Developer good and marketable title to 100% of the partnership or
membership interests in the entity owning the New Development Site.
5.3. If Developer does not elect to purchase the New Development
Site, then, upon the expiration of the Developer's 120 day election period, (i)
BRI OP shall pay Developer an additional land acquisition fee (the "Second Land
Acquisition Fee") in the amount of 7% of the Land Price, (ii) Developer shall
have no further rights to acquire the New Development Site, and (iii) BRI OP
shall be free to either (a) continue to hold the New Development Site, (b) sell
the New Development Site to any third party or (c) decide in the future to
develop the New Development Site with Developer. If within three years
thereafter, Developer enters into a Project Development Agreement to develop the
New Development Site for BRI OP, then
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Developer shall give a credit to BRI OP against the Development Purchase Price
of the New Development Project equal to one-half of the Second Land Acquisition
Fee.
Section 6. Default. If either party defaults in performing any of
its obligations hereunder, then the other party shall be entitled to exercise
any or all remedies as may be available at law or in equity on account thereof,
including, but not limited to, an action for specific performance, an action for
injunctive relief or an action for money damages. In any litigation between the
parties, the prevailing party shall be entitled to reimbursement by the
non-prevailing party for all court costs and reasonable attorneys' fees. The
restrictions contained in Section 1.2 and 1.3 of this Agreement are necessary
for the protection of the business and goodwill of BRI OP and its affiliates and
are considered by the Developer and Messrs. Gorn and Colvin to be reasonable for
such purpose. The Developer and Messrs. Gorn and Colvin agree that any breach of
Section 1.2 or 1.3 of this Agreement is likely to cause BRI OP and its
affiliates substantial and irrevocable damage and therefore, in the event of any
such breach, the Developer and Messrs. Gorn and Colvin agree that BRI OP, in
addition to such other remedies which may be available, shall be entitled to
specific performance and other injunctive relief.
Section 7. Miscellaneous.
7.1. Assignment. Except as hereinafter provided, this Agreement
may not be assigned by either party hereto. BRI OP shall have the right to
designate an affiliate to accept title to a New Development Site, but shall
remain fully liable for the performance of all of its obligations hereunder
notwithstanding such designation. Developer may designate an affiliate of
Developer to acquire title to a New Development Site and/or to enter into a
Project Development Agreement, such designated affiliate alone being responsible
for the performance of all of the obligations hereunder with respect to the New
Development Site or for the performance of the obligations under the Project
Development Agreement.
7.2. 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, including, but not limited to, the agreements
contained in the letter of intent dated May 5, 1997, as amended to date, 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.
7.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Maryland. Developer and
BRI OP 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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7.4. 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.
7.5. 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.
7.6. Drafts. This Agreement shall not be binding or effective
until properly executed and delivered by both the Developer and BRI OP.
7.7. 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.
7.8. 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.
7.9. Publicity. In no event shall either the Developer or the BRI
OP 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 BRI OP or
Berkshire 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 the BRI OP or Berkshire
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 7.9 shall survive any closing on a
New Development Site or New Development Project.
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7.10. Force Majeure. Each party is excused from performing any
act required under this Agreement (except for payment of money) while delayed or
prevented by a cause not within its reasonable control, such as a strike,
lockout, or other labor dispute, insurrection, riot, mob violence, or other
civil commotion, sabotage, inability to obtain labor, material, equipment or
utility services in the open market, failure of transportation, water, sewer or
other utility or building permit moratorium, road construction moratorium, or
other governmental action (including enforcement of requirements of any adequate
public facilities ordinance) condemnation, adverse weather, fire or other
casualty event, or other act of God (each of which is called a "Force Majeure
Event"). Time periods and dates in this Agreement are extended to account for
the delay or prevention caused by the Force Majeure Event.
7.11. Affiliates. For purposes hereof, an "affiliate" of a party
shall be deemed to include any person or entity controlling, controlled by, or
under common control with such party. Berkshire shall be deemed an affiliate of
BRI OP, and Morton Gorn, Stephen M. Gorn and John B. Colvin and any entities
controlled by them shall be deemed affiliates of Developer.
7.12. Interpretation. If any restriction set forth in Sections
1.1, 1.2 or 1.3 is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted
to extend only over the maximum period of time, range of activities or
geographic area as to which it may be enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under their respective hands and seals as of the day and year first
above written.
WITNESS: DEVELOPER
________________________________ QUESTAR PROPERTIES, INC.
By:________________________________
Name:
Title:
--------------------------------
Stephen M. Gorn
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<PAGE>
--------------------------------
John B. Colvin
BRI OP LIMITED PARTNERSHIP
By: BRI OP Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- BRI OP -
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<PAGE>
EXHIBIT A
---------
- List of Related Agreements -
-15-
<PAGE>
EXHIBIT B
---------
- Example of BRI OP Blended Cost of Capital -
Blended Cost of Capital = (BRI OP Equity Rate x .6) + (BRI OP Debt Rate x .4)
BRI OP Equity Rate = BRI OP Budgeted FFO/ Share Price/ OP Offering Cost
Percentage
BRI OP Debt Rate = Permanent Debt Rate FNMA Tier IV Loan
If the following assumptions are used, then the calculation is as follows:
Budgeted FFO = $1.14
Share Price = $11.25
FNMA Tier IV = 7.5%
Offering Cost Percentage = 1-.07 = .93%
BRI OP Equity Rate = (1.14/11.25) / .93 = 10.896%
BRI OP Debt Rate = 7.5%
Blended Cost of Capital = (10.896% x .6) 6.537% + (7.5% x .4) 3.00% = 9.537%
-16-
DEVELOPMENT CONTRIBUTION AGREEMENT
(Avalon 1, 3, 4)
THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of the 25th day of August, 1997, by and between the individuals
and entities listed on Exhibit I attached hereto with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen
M. Gorn, individually, John B. Colvin, individually, 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.
BACKGROUND
WHEREAS, the Transferor Members are the legal and beneficial owners of
all of the membership interests, as set forth on Exhibit I, of Ironhorse
Associates, L.L.C., a Maryland limited liability company (the "Transferor
Company") pursuant to the Operating Agreement dated as of June 26, 1996, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Operating Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the
general partner and Berkshire Realty Company, Inc. ("BRI") is a special limited
partner of the BRI Partnership, pursuant to the Amended and Restated Agreement
of Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Company is the owner of the following:
a. that certain tract or parcel of land located in Baltimore
County, Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 258-unit apartment complex, commonly known as Avalon
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed, are under construction or are to be
constructed on the Land (collectively, the "Improvements") pursuant to certain
plans and specifications that have been approved by the Transferor Members and
BRI Partnership, as modified by certain change orders, a complete listing of
which (including the latest revision date and change orders) is attached hereto
as Schedule C (the "Plans and Specifications");
<PAGE>
c. all right, title and interest of the Transferor Company in
and to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway, street,
road, right-of-way or avenue, open or proposed, in, on, under, across, in front
of, abutting or adjoining the Land, and all right, title and interest of the
Transferor Company in and to any awards for damage thereto by reason of a change
of grade thereof;
d. the accessions, appurtenant rights, privileges,
appurtenances and all the estate and rights of the Transferor Company in and to
the Land and the Improvements, as applicable, or otherwise appertaining to any
of the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed
in Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Company and
located on or in or used solely in connection with the Land and Improvements
(collectively, the "Personal Property"); and
f. all of the Transferor Company's interest in any intangible
property now or hereafter, owned by the Transferor Company and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined (excepting (i) any cash and escrow deposits and
other current assets relating to periods prior to Closing and (ii) amounts, if
any, due to the Transferor Members pursuant to Section 12).
All of the items described in subparagraphs (a), (b), (c), (d), (e) and
(f) above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Members desire to contribute all of the
membership interests in the Transferor Company (collectively referred to as the
"Transferor Membership Interests") to the BRI Partnership, and the BRI
Partnership desires to admit the Transferor Members as limited partners in the
BRI Partnership and to accept such contribution from the Transferor Members; and
WHEREAS, in exchange for such contribution, the Transferor Members
desire to, at their election, either receive cash or BRI Partnership Units (as
hereinafter defined) in accordance with the terms of this Agreement and the BRI
Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Transferor Members
and the BRI Partnership hereby covenant and agree as follows:
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<PAGE>
SECTION 1
---------
CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE
------------------------------------------------------
1.01 The Transferor Members shall contribute to the BRI Partnership,
and the BRI Partnership shall accept from the Transferor Members, in exchange
for either cash or BRI Partnership Units, and upon the terms and conditions set
forth in this Agreement, all of the Transferor Members' membership interests in
the Transferor Company (the "Transferor Membership Interests"). The percentage
of interest that each of the Transferor Members owns in the Transferor Company
is listed on Exhibit I. At the Closing (as defined in Section 3.01), the
Transferor Members shall, respectively, contribute, assign, transfer and deliver
the Transferor Membership Interests to the BRI Partnership, or its designees as
provided in Section 18.01 hereof, by an Assignment and Assumption of Membership
Interest in the form of Exhibit III attached hereto (the "Transferor
Assignment"). Immediately thereafter, the Transferor Members and the BRI
Partnership, or its designees, shall execute and deliver an Amended and Restated
Operating Agreement in the form of Exhibit IV attached hereto (the "Amended
Transferor Operating Agreement") and an Amended and Restated Articles of
Organization in the form of Exhibit V attached hereto (the "Amended Transferor
Company Articles") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Members shall withdraw, as the members of
the Transferor Company and be released of all liability thereunder, and the
terms of the Transferor Company shall be amended in accordance with the Amended
Transferor Operating Agreement.
1.02 Property Title. On or before September 22, 1997, the Transferor
Members shall deliver to the BRI Partnership a copy of the Transferor Company's
existing title insurance commitment or policy (the "Commitment") and copies of
all instruments and plans mentioned therein as exceptions to good and marketable
fee simple title, as well as copies of any instruments referred to in such
instruments which affect the Property (all of such items are hereinafter
collectively referred to as the "Title Policy").
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Company on or before October 1, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Company of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". Any easements or other agreements reasonably required
for the development and construction of the Property and the Improvements now or
hereafter entered into by the Transferor Company; including an agreement for the
shared use and the sharing of the operating expenses of the common recreational
facilities located on the Property and an easement declaration creating
cross-easements for the roads, storm water management ponds and the sewage
pumping station on the Property, in form and content reasonably satisfactory to
the BRI Partnership, all of which are consistent with the Plans and
Specifications and, in the reasonable
-3-
<PAGE>
discretion of the BRI Partnership, do not materially interfere with the intended
use of the Property nor materially affect the value of the Property, shall also
constitute Permitted Exceptions.
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new
commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B
Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the
"Title Insurer"). The Updated Commitment shall insure fee simple title to the
Property in the sole name of the Transferor Company and shall be in the amount
of $25,862,791. The Updated Commitment shall provide for a title insurance
policy which shall contain coverage against all mechanics' liens, shall have
full survey coverage, shall have deleted therefrom all "printed standard
exceptions", shall have a 3.1 zoning endorsement, a comprehensive endorsement, a
non-imputation endorsement and such other endorsements as are reasonably
required by the BRI Partnership and are available under the law of the state in
which the Property is located. If any new exceptions to title appear in the
Updated Commitment that do not constitute Permitted Exceptions and that are
unacceptable to the BRI Partnership, in its reasonable discretion, the BRI
Partnership may notify the Transferor Company within thirty (30) days after the
Completion Date Notice.
If any exceptions in the Commitment or the Updated Commitment are
unacceptable to the BRI Partnership in accordance with the foregoing provisions,
and the BRI Partnership timely notifies the Transferor Company in writing of
such fact as above provided, the Transferor Company shall have thirty (30) days
from the date the Transferor Company receives notice of such unacceptable
exceptions, at the option of the Transferor Company, to remove or cure such
exceptions, provided further, the Transferor Company may, but shall not be
required to, make any monetary expenditures in connection with the removal or
cure of such exceptions. All mortgages and deeds of trust, mechanics liens, tax
liens, attachments and all other monetary liens against the Property (other than
the liens for real estate taxes and current water and sewer charges for the
fiscal year in which Closing occurs, which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Company at Closing. The
Transferor Company shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Company, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Company will attempt to cure such unacceptable exceptions.
If the Transferor Company fails or refuses to cure said unacceptable exceptions
within the time period above provided, on or before the earlier to occur of (A)
ten (10) days after the Transferor Company notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Company or
(ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Purchase Price (as defined in Section 2.01(a))
in an amount necessary to enable the BRI Partnership to remove all Monetary
Liens.
-4-
<PAGE>
1.03 Survey. On or before September 22, 1997, the Transferor Company
shall provide to the BRI Partnership a copy of its existing survey (the
"Survey") of the Land and any Improvements.
Should such Survey contain any encumbrances, encroachments or other
survey defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Company on or before
October 1, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Company of the unacceptable survey
matters as described above, the Survey shall be deemed accepted by the BRI
Partnership and the survey matters shown on the Survey shall be included within
the "Permitted Exceptions."
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at its sole cost and expense, shall obtain an updated
survey (the "Updated Survey") by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Updated Survey shall include (i) all
existing buildings, improvements, fences, encumbrances, encroachments,
conflicts, party walls, protrusions (including the location of all highways,
streets, roads, alleys and rights-of-way upon, under, across, abutting or
adjacent to the Land, or affecting the Land or the Improvements), and any
visible evidence of all water, sewer, gas, telephone and electric lines, (ii)
the exact area of the Land to the nearest hundredth of an acre, (iii) all
buildings set back and other restriction lines, (iv) property corners and
boundary lines of the Property (including the courses and distances of each of
said boundary lines), (v) the relation of the point of beginning of the
description of the Land to the monument from which it is fixed, (vi) recorded or
otherwise known easements (stating the recording book and page references in the
case of any such recorded easements), (vii) a metes and bounds written
description of the Land, and (viii) a notation of any discrepancies between the
Updated Survey and the recorded legal description. The BRI Partnership shall
provide a copy of the Updated Survey to the Transferor Company promptly after
its receipt thereof. If any new matters appear on the Updated Survey that do not
constitute Permitted Exceptions, do not simply reflect the construction of the
Improvements in locations that do not encroach upon property lines, setback
lines or easements, and are unacceptable to the BRI Partnership in its
reasonable discretion, the BRI Partnership may notify the Transferor Company
within forty (40) days after the Substantial Completion Date Notice.
If any survey matters are unacceptable to the BRI Partnership in
accordance with the foregoing provisions, and the BRI Partnership timely
notifies the Transferor Company in writing of such fact as above provided, the
Transferor Company shall have thirty (30) days from the date the Transferor
Company receives notice of such unacceptable survey matters, at the option of
the Transferor Company, to cure such unacceptable survey matters. The Transferor
Company shall be deemed to have refused to cure any unacceptable survey matters
unless the Transferor Company, within ten (10) days after receipt of notice from
the BRI Partnership, shall notify the BRI Partnership in writing that the
Transferor Company will attempt to cure such unacceptable survey matters. If the
Transferor Company fails or refuses to cure said unacceptable survey matters
within the time period provided, on or before the earlier to occur of (A) ten
(10) days
-5-
<PAGE>
after the Transferor Company notifies the BRI Partnership that it refuses to
cure such unacceptable survey matters, and (B) Closing Date, the BRI Partnership
may, in accordance with the provisions of Section 13 hereof, (i) terminate this
Agreement by giving written notice to the Transferor Company or (ii) waive such
survey matters and accept title subject thereto, in which event there shall be
no reduction in the Consideration Amount.
1.04 Construction and Inspection.
(a) Plans and Specifications. Prior to the date of this
Agreement, Transferor Company has delivered to BRI Partnership true, correct and
complete copies of the Plans and Specifications for the construction of the
Improvements as set forth on Schedule C attached hereto.
(b) Transferor Company to Construct Improvements. Transferor
Company shall, at Transferor Company's expense, obtain all permits and construct
the Improvements on the Land in accordance with the Plans and Specifications, as
the same may be modified by change order in accordance with this Agreement. All
work shall be done in a good and workmanlike manner using new, good quality
materials, free of all defects and in compliance with all Codes (as defined in
Section 5.21), permits, approvals, title restrictions and insurance
requirements. Transferor Company shall obtain builder's risk insurance on the
Improvements in the amount of the construction cost of those buildings from time
to time for which construction has commenced. Transferor Company shall deliver a
certificate of such insurance to BRI Partnership. Transferor Company shall
maintain such insurance in force and effect through the course of construction
and until Closing hereunder.
(c) Inspection of Construction; Correction of Defects. BRI
Partnership and its engineers, consultants and agents may inspect the
construction of the Improvements from time to time during the course of
construction upon reasonable notice to the Transferor Company. After receipt
from the Transferor Company of written notice that the requirements of Section
3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI
Partnership and its engineers, consultants and agents shall inspect the
construction of the Improvements upon reasonable notice to Transferor Company to
determine whether such construction is completed in accordance with the Plans
and Specifications. Within 30 days after the Inspection Notice, BRI Partnership
will give written notice to Transferor Company of any nonconformities with the
Plans and Specifications and defects or deficiencies in construction identified
by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership,
which disagreement shall be expressed by giving written notice to the BRI
Partnership stating the basis for said disagreements, within 10 days after such
BRI Partnership notice, Transferor Company, at Transferor Company's expense,
shall commence to correct, repair or replace any such nonconformities, defects
or deficiencies and shall diligently continue thereafter until completion of
such corrections, repairs or replacements, and, if such deficiencies are of such
a magnitude that Closing would not otherwise be required to occur under Section
3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies
are corrected. Any dispute shall be resolved by arbitration in accordance with
Section 3.02.
-6-
<PAGE>
(d) Change Orders. The Transferor Company shall not change or
modify the Plans and Specifications without prior written approval of the BRI
Partnership, such approval not to be unreasonably withheld, provided, however
that the following changes shall not require BRI Partnership's approval: (i)
changes required by the construction lender or governmental authorities, and
(ii) changes in the design of the Improvements resulting in a decrease or
increase in construction cost by less than $100,000 for an individual change and
less than $250,000 in the aggregate. The Transferor Company shall give written
notice to BRI Partnership of all proposed changes to the Plans and
Specifications by sending a complete copy of the change, together with copies of
any plans or drawings related thereto. BRI Partnership shall give its written
approval or disapproval within five (5) business days thereafter. If BRI
Partnership disapproves any such change, the Transferor Company shall not
implement same.
(e) Completion. The Transferor Company shall diligently
attempt to complete construction of the Improvements in accordance with the
Plans and Specifications, as modified in accordance with this Agreement, and in
compliance with all Codes (as defined in Section 5.21 hereof) by December 31,
2003 (the "Scheduled Completion Date"). For purposes of this Agreement, the
"Completion Date" shall be the date upon which all of the Closing Conditions
shall have been satisfied as set forth in Section 3.02.
(f) Force Majeure. In the event that the Transferor Company is
delayed in the commencement or completion of construction of the Improvements by
acts of God, war, civil commotion, fire, flood or other casualty, labor
difficulties, strikes, shortages of labor, materials or equipment, undue delay
in action by governmental authorities, governmental or utility company refusal
to issue building, construction, utility, occupancy or other permits or
approvals, water, sewer or other utility moratorium (including enforcement of
the requirements of any adequate public facilities ordinance) or other causes
beyond the Transferor Company's reasonable control (a "Force Majeure Event"),
the Scheduled Completion Date shall be extended for the period of delay, not to
exceed 12 months. If a Force Majeure Event continues in effect for a period in
excess of 12 months, during which construction is delayed, then the Transferor
Company may, by notice to BRI Partnership terminate this Agreement, in which
event the Deposit shall be returned to the BRI Partnership and neither party
shall have any further liability to the other hereunder. In addition,
simultaneously with closing under the Related Agreements, the Transferor Company
shall execute and deliver to BRI Partnership the Right of First Offer Agreement
attached hereto as Exhibit IX, which Right of First Offer Agreement shall
contain, among other provisions a Right of First Refusal which provides: (a)
that the BRI Partnership shall have a right of first refusal to purchase the
Property following the termination of this Agreement pursuant to this Section
1.04(f), (b) BRI Partnership shall have a period of 15 business days, following
receipt of a bona fide third party letter of intent to purchase the Property, to
agree to purchase the Property on the same terms and conditions as set forth in
the letter of intent, and (c) such Right of First Offer Agreement shall be
subordinate to any mortgage or deed of trust securing construction financing on
the Property.
-7-
<PAGE>
1.05 Environmental Due Diligence Inspection.
(a) On or before September 22, 1997, the Transferor Company
shall deliver to the BRI Partnership a copy of its environmental report for the
Property (the "Initial Environmental Report"). Should the BRI Partnership
decide, in its sole judgment, during the period up to and including October 1,
1997 (the "Due Diligence Period") that the Initial Environmental Report is
unsatisfactory, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so on or before the
last day of the Due Diligence Period, and upon the giving of such notice this
Agreement shall be of no further force or effect. Subject to the rights of the
tenants under the Leases, the BRI Partnership and their authorized agents and
representatives may, from time to time up to and including the period expiring
30 days after the Substantial Completion Date Notice during regular business
hours and on reasonable prior notice to the Transferor Company, inspect the
Property to determine the presence of any Hazardous Materials (as defined in
Section 5.20) and the compliance of the Property with Environmental Laws (as
defined in Section 5.20) and in connection therewith to conduct such tests and
observations and compile such information as the BRI Partnership, in its sole
discretion may deem appropriate (the "Environmental Inspection"). The BRI
Partnership shall provide a copy of any third party environmental reports
obtained by the BRI Partnership, without representation or warranty, and subject
to the limitations on use set forth therein, to the Transferor Company promptly
after its receipt thereof. No such inspection, however, shall constitute a
waiver or relinquishment on the part of the BRI Partnership of its right to rely
upon the covenants, representations, warranties or agreements made by the
Transferor Company in this Agreement. Should the BRI Partnership decide, in its
reasonable judgment, that there exists an environmental risk with respect to the
Property (excluding such items as asbestos roof shingles, asbestos floor tile
and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the
presence of usual and customary cleaning and maintenance supplies and similar
items that are typically handled through the adoption of appropriate operations
policies), during the period expiring 30 days after the Substantial Completion
Date Notice that based upon the results of the Environmental Inspection, it no
longer desires to proceed with the transactions contemplated hereby, the BRI
Partnership shall have the right to terminate this Agreement by giving written
notice of its election to do so to the Transferor Company on or before 30 days
after the Substantial Completion Date, and upon the giving of such notice this
Agreement shall be of no further force or effect. Notwithstanding the foregoing,
the BRI Partnership may not disapprove or object to any matter disclosed by the
Environmental Inspection that was disclosed in the Initial Environmental Report.
If the BRI Partnership shall fail to exercise such termination right within any
such period, the BRI Partnership shall be conclusively deemed to have waived any
right it may have had to terminate this Agreement pursuant to this Section 1.05.
The BRI Partnership shall pay when due all fees and expenses incurred in the
performance of the Environmental Inspection performed at its request.
(b) From and after the date of this Agreement, the Transferor
Company shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to
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<PAGE>
examine (including, without limitation, the right to audit) the Transferor
Company's books, financial records, Service Contracts, Leases and tenant files
pertaining to the operation of the Property prior to the Closing. The BRI
Partnership's agents and representatives shall be permitted access to such
records and files during regular business hours. To the extent that any of the
Transferor Company's financial records relating to the Property have been
audited, the Transferor Company agrees to deliver any reports relating to such
audits to the BRI Partnership. The Transferor Company shall provide the BRI
Partnership with such information as the Transferor Company may have with
respect to actual expenditures made for all repairs, maintenance, operation and
upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Company, all taxes and utility payments made prior
to the Closing and dates of construction, installation and major repairs to the
Property. All information obtained by the BRI Partnership or its agents and
representatives pursuant to this Section 1.05(b) shall be treated as
confidential, shall not be disclosed to others until and unless the Closing
occurs, and if such information is in written form, such information shall be
returned to the Transferor Company if the Closing does not occur.
(c) The BRI Partnership shall indemnify the Transferor Members
against and from all damage to the Property and/or claims of tenants or other
third parties resulting from any entry on the Property by the BRI Partnership or
any agent, contractor, consultant or other representative of the BRI
Partnership, or any tests or other activities conducted in or on the Property by
them, or any of them, together with all expenses incurred by the Transferor
Members by reason thereof including, without limitation, reasonable attorneys'
fees and disbursements: provided, however, that nothing contained herein is
intended to obligate the BRI Partnership to indemnify, pay or otherwise
reimburse the Transferor Members for any costs of remediation or clean-up,
fines, penalties, assessments or similar charges for any condition existing at
the Property solely by reason of the fact that the BRI Partnership or its
agents, contractors, consultants or other representatives discover the existence
of such condition during the course of conducting tests or other activities on
the Property. The provisions of this Section 1.05(c) shall survive the Closing
or any termination of this Agreement; provided, however, that no claim by the
Transferor Members under this Section 1.05(c) for damage to the Property shall
be made if (i) the Closing occurs or (ii) more than 90 days after the
termination of this Agreement if the Closing does not occur, except for damage
claims made by tenants as to which the time for asserting any such claim shall
be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Members by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Members hereunder.
1.06 Tax Treatment. The parties intend that, to the extent the
Transferor Members receive BRI Partnership Units as the consideration for the
contribution of the Transferor Membership Interests by the Transferor Members to
the BRI Partnership in accordance with Section 1.01 of this Agreement, such
contribution shall be treated for federal (and applicable state) income tax
purposes as a tax-free contribution to capital pursuant to Section 721 of the
Internal Revenue Code of 1986, as amended (the "Code") (and any analogous state
income tax
-9-
<PAGE>
provisions). The BRI Partnership and the Transferor Members agree to report such
transaction for federal and applicable state income tax purposes consistently
with the intent set forth in this Section 1.06.
SECTION 2
---------
CONSIDERATION
-------------
The consideration for the Membership Interests (the "Consideration
Amount"), subject to the adjustments contained in Section 12 of this Agreement,
shall be determined pursuant to the provisions of Section 2.04, and shall be
paid by the the BRI Partnership to the Transferor Members in the following
manner:
2.01 Deposit.
(a) Simultaneously with the execution of this Agreement, the
the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the
"Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check
(subject to collection) as a Deposit to be held in an interest-bearing escrow
account on account of the Consideration Amount. Said sum, together with any
interest earned thereon, is hereinafter called the "Deposit."
(b) At the Closing, the Deposit shall be returned by the
Escrow Agent to BRI Partnership.
2.02 Balance. At the Closing, the BRI Partnership shall deliver to the
Transferor Members the Base Consideration, plus, if then due, any Additional
Consideration Installments, subject to the adjustments described in Section 12
of this Agreement by federal wired funds. Prior to any delivery to the
Transferor Members of the Base Consideration, there shall be deducted from the
Base Consideration an amount equal to the sum required to pay off the
Construction Loan in full and to remove all other Monetary Liens and
simultaneously with the Closing, the BRI Partnership shall pay off the
Construction Loan. At the Transferor members' option, to be exercised
irrevocably by written notice to the BRI Partnership given at least 15 days
prior to the satisfaction of the Closing Conditions, all or a portion of the
Consideration Amount shall be delivered to the Transferor Members in the form of
BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise
such option, then the number of BRI Partnership Units, the rights and
limitations upon such units and the method by which the units are delivered to
the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b)
and (c) below. If the Transferor Members do not exercise the foregoing option in
a timely manner, all consideration payable under this Agreement shall be paid in
cash by federal wired funds and the following Sections of this Agreement shall
be, without further action by any party, null and void and without any further
force or effect upon the parties: 1.06, 2.02(a) through (c), 5.34, 6.03, 6.05,
6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii)
and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04.
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(a) The number of BRI Partnership Units to be issued to the
Transferor Members at Closing shall be that number determined by dividing the
portion of the Consideration Amount to be paid in BRI Partnership Units to each
Transferor Member by the value of one BRI Partnership Unit. The parties agree
that, for purposes of this Agreement, the value of each BRI Partnership Unit
shall be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the ten (10) business days prior to the day which
is five (5) business days before the Closing. If the calculation provided for
above results in a fraction of a BRI Partnership Unit to be delivered to a
Transferor Member, the number of BRI Partnership Units to be delivered shall be
rounded up or down to the nearest whole number of BRI Partnership Units.
Attached hereto as Exhibit I is a schedule (the "Transferor Allocation
Schedule") prepared by the Transferor Members setting forth (i) the name of each
Transferor Member, and (ii) the percentage interest of each Transferor Member,
together with an investor questionnaire in the form attached hereto as Exhibit 5
(the "BRI Questionnaire") for each Transferor Member. In the event that any
Transferor Member would be entitled to a fractional BRI Partnership Unit, the
number of BRI Partnership Units shall be rounded up or down, as the case may be,
to the nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Members all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Members
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Members as
a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Members in accordance with the election made by the Transferor
Members pursuant to Section 2.02. The BRI Partnership shall have no obligation
or liability with respect to the preparation or accuracy of the Transferor
Allocation Schedule.
(b) As used in this Agreement, a "BRI Partnership Unit" shall
mean a unit of limited partnership interest in the BRI Partnership as specified
in the BRI Partnership Agreement. At the time that any Transferor Member elects
to convert BRI Partnership Units to shares as provided in the BRI Partnership
Agreement, the holder of each BRI Partnership Unit shall have the right to have
the BRI Partnership Unit either (i) exchanged for one share of common stock of
BRI pursuant to the transfer provisions of the BRI Partnership Agreement, or
(ii) redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Member shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Members and Berkshire Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Members a certified copy of the
Registration Rights Agreement.
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(c) The Transferor Members, acknowledge and agree that after
the execution hereof, the price of the common stock of BRI may increase or
decrease in value as the result of market fluctuations, and that any such
fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in this Section, the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Members in the event of a
decrease or increase in the market value of the common stock of BRI.
2.03 Payment of Monies. Any monies payable under this Agreement, unless
otherwise specified in this Agreement, shall be paid by wire transfer.
2.04 Calculation of Consideration Amount. The Consideration Amount for
the Transferor Membership Interests shall consist of a base consideration amount
("Base Consideration") plus additional consideration installments ("Additional
Consideration Installments").
(a) The Base Consideration for the Transferor Membership
Interests shall be Twenty-Five Million, Eight Hundred Sixty-Two Thousand, Seven
Hundred Ninety-One Dollars ($25,862,791).
(b) In addition to the Base Consideration, the BRI Partnership
shall pay one or more additional consideration installments (the "Additional
Consideration Installments"), if any, on a quarterly basis with the first
payment, if then due, on the date of Closing and on the first day of each
quarter (defined as a period of three full calendar months, plus, for the first
quarter, any partial calendar month after the date of Closing) thereafter for a
total of 18 full calendar months after the Closing (the "Earn Out Period"). As
of the Closing and as of the first day of each quarter thereafter, Stabilized
NOI shall be determined as provided below, and each Additional Consideration
Installment, if any, will be equal to the Stabilized NOI divided by 10% (the
"Cap Rate") and then reduced by the Base Consideration and any prior Additional
Consideration Installments.
(c) Stabilized NOI shall be calculated for purposes of
determining the Additional Consideration Installments as follows: 12 times the
monthly actual income for the Property, (provided that if occupancy rates exceed
95%, then actual income shall be calculated as if the Property had an occupancy
rate of 95%) for the month preceding the payment date less Seven Hundred
Eighty-Eight Thousand, Four Hundred Forty Dollars ($788,440) (representing the
agreed-upon annual Projected Operating Expenses for the Property), provided
that, on the first anniversary of the date of Closing under this Agreement, the
Projected Operating Expenses shall be adjusted by the percentage change in the
CPI-U, U.S. Cities Average for the period from the date of Closing under this
Agreement until the anniversary date.
SECTION 3
---------
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THE CLOSING
-----------
3.01 Except as otherwise provided in this Agreement, the delivery of
all documents necessary for the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place in the offices of Hale and Dorr LLP
in Washington, D.C., or such other place as the Transferor Company and the BRI
Partnership shall mutually agree. The "Time of Closing" shall be on that date
specified in Section 3.02 at which all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Members of a so-called Gap Indemnity in the form of Exhibit VI with respect to
the gap in time period between policy issuance and recording, all as provided in
a letter of instruction executed by counsel for the BRI Partnership and counsel
for the Transferor Members. It is agreed that time is of the essence of this
Agreement.
3.02 Closing under this Agreement shall occur on the first business day
of the month after the Transferor Members have given to the BRI Partnership 60
days prior notice (the "Substantial Completion Date Notice") of the occurrence
of the last to occur of (a) the substantial completion of construction of the
Property excluding punch-list items not affecting occupancy (provided Transferor
Members shall thereafter complete all punch-list items at no expense to the BRI
Partnership within 30 days after Closing or within such additional time as may
be reasonably required) ("Completion Date") as evidenced by satisfaction of each
of the following conditions (the "Closing Conditions"): (i) final certificates
of occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Questar Builders, Inc. or such
affiliate of Transferor Members as Transferor Members may designate to be the
general contractor for construction of the Improvements ("Questar Builders")
certifying that the Improvements have been substantially completed in accordance
with the Plans and Specifications and all Codes, as such may be modified from
time to time by the Transferor Company in accordance with this Agreement, or (b)
the Stabilization Date. If a dispute shall exist as to whether substantial
completion has occurred, the dispute shall be promptly submitted to binding
arbitration by a qualified third party mutually acceptable to the parties or, if
they are unable to agree upon a third party, then by arbitrators appointed
pursuant to the applicable rules of the American Arbitration Association.
3.03 The Stabilization Date for the Property shall be as follows:
The first day of that month which first occurs after 90% of the apartment units
in the Property have been leased for a period of 3 months to Qualified Tenants.
3.04 "Qualified Tenants" are those tenants with annual income equal to
not less than 3 times the annual rent who are in occupancy and have commenced
the payment of rent.
SECTION 4
---------
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TRANSFEROR'S PRE-CLOSING DELIVERIES
-----------------------------------
At least thirty (30) days prior to the date of Closing, the Transferor
Company shall deliver or otherwise make available to the BRI Partnership the
following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Company shall provide the BRI Partnership with access on-site to the
originals of all Leases and related lease files.
4.02 Certificates of Occupancy and Permits. Original, final
certificates of occupancy for all buildings in the Property and copies of all
material building permits, zoning variances (if any), certificates of occupancy
(if any), subdivision plats, governmental permits, approvals, certificates and
other licenses lawfully required for the construction, use, occupancy and
operation of the Property.
4.03 Taxes. To the extent in the Transferor Company's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. A set of original Plans and
Specifications, and a copy of all guaranties and warranties made by any person
for the benefit of the Transferor Company with respect to all or any part of the
Property in connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for each completed year occurring at least 120 days
prior to Closing and each completed month of operation thereafter occurring at
least 75 days prior to Closing, and detailed operating statements for each
completed year occurring at least 120 days prior to Closing and each completed
month of operation thereafter occurring at least 75 days prior to Closing;
provided that all such statements and records shall be provided only for periods
after the Property was first leased and occupied by rent paying tenants.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related
documents and agreements in respect of all pending litigation, if any, relating
to the Property (excluding litigation commenced against tenants in the ordinary
course of business for evictions or collections).
4.07 Current Rent Roll. The "Rent Roll" which consists of a list of the
current rents now being collected on each of the apartment units in the
Improvements which includes:
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apartment number, unit status, tenant name, commencement and termination dates,
lease rent, deposits and details of any concessions, in the form attached hereto
as Schedule D.
4.08 Standard Form Lease. A copy of the standard form apartment lease
used in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water
and sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants).
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Company conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Company which shall be attached hereto as Schedule B.
SECTION 5
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A. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR COMPANY
-------------------------
The Transferor Company represents, warrants and covenants to the BRI
Partnership, as of the date hereof, as follows:
5.01 Organization and Standing of the Transferor Company. The
Transferor Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Transferor Company has all requisite power to own and operate the Property and
to carry on its business as presently being conducted and as proposed to be
conducted. The Transferor Company is duly qualified to do business in all
jurisdictions in which the failure to be so qualified would have a material
adverse effect on the Transferor Company's business (a "Material Adverse
Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Company is not in violation of any term
contained in the Transferor Operating Agreement, or to the Transferor Company's
knowledge in any other material instrument or contract to which the Transferor
Company is a party relating to the Property, and to the Transferor Company's
knowledge the Transferor Company is not in violation of any order, statute, rule
or regulation applicable to it, except for such violations which would not have
a
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Material Adverse Effect. Neither the execution, delivery and performance of this
Agreement by the Transferor Members, nor the contribution of the Transferor
Membership Interests by the Transferor Members hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Operating Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Company, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended
Transferor Company Articles to reflect the transactions contemplated hereby, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Members or the Transferor Company in connection
with the valid execution and delivery of this Agreement by the Transferor
Members and the performance of the Transferor Members' obligations hereunder.
5.04 Company Capitalization. The Transferor Operating Agreement (i) is
the only agreement among the members relating to the organization, operation, or
management of the Transferor Company, (ii) is in full force and effect and (iii)
has not been amended or modified. Exhibit I sets forth an accurate and complete
list of the names and residence addresses of all of the Transferor Members of
the Transferor Company, and the Transferor Members' respective membership
interests in the Transferor Company. Except as set forth on Exhibit I, no other
person or party owns any membership interest in the Transferor Company. No
Transferor Member is in default with respect to any capital contribution
required to be paid by him or it pursuant to the Transferor Operating Agreement.
A true, correct and complete copy of the Transferor Operating Agreement is
attached hereto as Exhibit II. The Transferor Company has no commitment to issue
any right to purchase or acquire or to issue or distribute to any of the
Transferor Members, any evidences of indebtedness or assets; and the Transferor
Company has no obligation, contingent or otherwise, to purchase, redeem or
otherwise acquire any interest in the Transferor Company or any interest therein
or to make any distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Company's knowledge, proceeding or
investigation pending or, to the Transferor Company's knowledge, any threat
thereof, against the Transferor Members, the Transferor Company or the Property
or any part thereof which questions the validity of this Agreement or the right
of the Transferor Members to enter into it, or which might result in or have,
either individually or in the aggregate, a material adverse effect on (i) the
business of the Transferor Company as such is presently contemplated; or (ii)
the rights represented by the Transferor Membership Interests. During the period
commencing on the date hereof and ending on the Closing Date, the Transferor
Company will promptly inform the BRI Partnership in writing of any material
action, suit, proceeding or investigation pending, or to the Transferor
Company's knowledge, threat thereof against the Transferor Members, the
Transferor Company or the Property or any part thereof.
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5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases to which the Transferor Company
is a party or to which any agent of the Transferor Company is a party on behalf
of the Transferor Company or has entered into on behalf of the Transferor
Company, relating to the Transferor Company or all or a portion of the Property
or otherwise affecting the Property, including without limitation, all material
management, maintenance, brokerage, supply and service contracts (collectively
"Service Contracts") and any material contract agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to or by the Transferor
Company. Except as noted on Schedule E, each Service Contract is cancelable on
thirty (30) days notice. Transferor Company has no knowledge of any material
breach or material default under any Service Contract. As of Closing, the
Transferor Company will have paid all amounts due under each Service Contract,
other than payments for which an adjustment shall be made pursuant to Section 12
hereof.
5.07 Financial Statements. Attached hereto as Schedule F are financial
statements of the Transferor Company, including balance sheets, statements of
operations and statements of partners' capital (collectively, the "Financial
Statements") for the fiscal year ended December 31, 1996 (the "Statement Date").
The Financial Statements fairly present the financial condition of the
Transferor Company as of the Statement Date in accordance with generally
accepted accounting principles consistently applied, and reflect all
liabilities, fixed, contingent or otherwise, required to be disclosed in such
Financial Statements in accordance with generally accepted accounting
principles.
5.08 Title to Properties and Assets. The Transferor Company is the sole
owner of the Property. Except as disclosed in Section 18.01, the Transferor
Company does not own, or otherwise hold any interest in, any material assets
other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Company or to be obtained
by the Transferor Company prior to Closing, no other material license, permit or
authorization is necessary to own and operate the Transferor Company's business
as such is presently conducted and neither the conduct of the Transferor
Company's business nor any material portion thereof is dependent on the issuance
or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the indebtedness for borrowed money
incurred or to be incurred to acquire and construct the Property (collectively,
the "Construction Loan"), the Transferor Company has no indebtedness for
borrowed money and the Transferor Company has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. No Transferor Member,
nor any affiliate of any Transferor Member nor any employee of the Transferor
Company is presently indebted to the Transferor Company for borrowed money and,
except for the Construction Loan, the Transferor Company is not presently
indebted for borrowed money to any of the foregoing
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persons. As of the Closing Date, the Transferor Company shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Company's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts. The Transferor Company has conducted its business only in the
ordinary course and, except for the Construction Loan, the Transferor Company
has not:
(a) created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in
excess of $10,000 (whether or not covered by insurance) to any assets or
properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete
list of all insurance policies of the Transferor Company (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Company has done nothing to reduce or impair the insurance afforded
by the Insurance Policies. To the Transferor Company's knowledge, there are no
material disputes with underwriters of any such Insurance Policies and there are
no pending or threatened terminations with respect to any of such policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Transferor
Company or for which the Transferor Company may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the Transferor Company. All taxes due
with respect to completed and settled examinations or concluded litigation have
been paid.
(b) The Transferor Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The Transferor Company does not know of (A) any audit or
investigation of the Transferor Company with respect to any liability for taxes
relating to the Transferor Company for which any Transferor Member may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Company.
5.13 Employees. The Transferor Company has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security
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taxes, unemployment insurance premiums or other similar employee benefits,
payments or obligations.
5.14 Retirement Obligations. The Transferor Company has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for those given to the holder of the
Construction Loan, as provided in the Construction Loan Documents, no person
holds a power of attorney from or agency agreement with the Transferor Company.
5.16 Bank Accounts. On or before Closing, the Transferor Company shall
have closed every bank account and safe deposit box of the Transferor Company
for which the Transferor Members or their representatives are signatories, and
no representative of the Transferor Members shall be a signatory on any other
account or safe deposit box of the Transferor Company or shall have the power to
borrow, discount debt obligations, cash or draw checks, or otherwise act on
behalf of the Transferor Company in any dealings with any banks or other
financial institutions.
5.17 Ownership. The Transferor Company has not received any written
notice challenging the validity of the Transferor Company's title to the
Property. The Transferor Company has not granted any rights, options, rights of
first refusal or entered into other agreements of any kind which are currently
in effect for the acquisition of the Property or any part thereof, except for
the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the Stabilization Date, there shall be no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll, to
be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and
correct in all material respects as of the Stabilization Date. Except as
otherwise specifically set forth in the Rent Roll or elsewhere in this
Agreement:
(a) to the Transferor Company's knowledge, the Leases are in
full force and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has
an option to purchase, right of first refusal, right of first offer or other
similar right in respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period
subsequent to the Closing Date other than for tenants who have executed a lease
prior to Closing but do not move in until after the Closing Date, which
commissions shall be paid by the Transferor Company;
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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 Company, except as
set forth on Schedule 5.18 hereof, no action or proceeding instituted against
the Transferor Company by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other
than those set forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in
advance under any lease of any unit in the Property other than as shown on the
Rent Roll;
(h) all brokerage commissions with respect to the Leases shall
have been paid in full by the Closing Date, except as provided in (c) above.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor Company,
no apartment unit is subject to any rent control law, ordinance or regulation.
5.20 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Company or any of the Transferor Members'
affiliates, with respect to the Property (collectively, the "Environmental
Reports"). The Transferor Company has heretofore either furnished to the BRI
Partnership or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in the
Environmental Reports and the reports to be obtained by the BRI Partnership in
accordance with Section 1.05 hereof (the "BRI Environmental Reports"), the
Transferor Company has not received any written notice from any governmental
entity or other person that the Property, or current or former operations on the
Property, are not or have not been in material compliance with any Environmental
Laws or that the Transferor Company has any material liability with respect
thereto. To the Transferor Company's knowledge, except as set forth in the
Environmental Reports or in the BRI Environmental Reports, there are no
underground tanks for Hazardous Materials, active or abandoned, at the Property
and no Hazardous Materials are present or have been released in a reportable
quantity, where such a quantity has been established by statute, ordinance,
rule, regulation or order, at, on or under the Property. To the Transferor
Company's knowledge, except as disclosed in the Environmental Reports or in the
BRI Environmental Reports, neither the Transferor Company nor the Property is in
violation in any material respect of any Environmental Laws and there is no
asbestos, PCB's or lead paint on the Property or any part
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thereof. For purposes of this Agreement, "Environmental Laws" shall
mean the Resource Conservation and Recovery Act (42 U.S.C. s. 6901 et seq.), as
amended by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. s. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. s. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. s. 2601 et seq.; the Clean Air Act (42
U.S.C. s. 9402 et seq.); the Clean Water Act (33 U.S.C. s. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. s. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. s. 651 et seq.); and all other
applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.21 Permits and Compliance with Laws. Upon completion of construction
of the Improvements, all approvals, consents, permits, licenses or certificates
of occupancy (whether governmental or otherwise) required for the use, operation
and occupancy of the Property shall have been granted to the Transferor Company
and shall be in full force and effect, and any fees and charges shall have been
fully paid. Upon completion of construction of the Improvements, the Property
shall be in compliance in all material respects with all zoning, building,
health, traffic, fire safety, flood control, handicap and other laws,
regulations and ordinances of all governmental authorities having jurisdiction
over the Property (collectively "Codes"). To the Transferor Members' knowledge,
no governmental authority has a current plan, including without limitation, a
condemnation, a widening change of grade or limitation on use of streets, a
special assessment or a change in zoning classification, that would adversely
affect the continued use and operation of the Property as currently used and
operated except as would not have a Material Adverse Effect. The parties agree
that all matters relating to compliance with Environmental Laws shall be covered
by Section 5.20 and not by this Section 5.21.
5.22 Utilities. Upon completion of construction of the Improvements,
all utilities and all public and quasi-public improvements upon or adjacent to
the Property (including, without limitation, all applicable electric lines,
sewer and water lines, and telephone lines) shall be installed, and shall comply
in all material respects with the requirements of the Plans and Specifications
and all applicable Codes, and all necessary easements, permits, licenses and
agreements in respect of any of the foregoing shall be installed and operating
and all installation and connection charges, to the extent due and payable,
shall have been paid for in full.
5.23 Assessments. Except as disclosed in the tax bills delivered to the
BRI Partnership pursuant to Section 4.03 hereof, to the knowledge of the
Transferor Company, no special assessments for public improvements have been
made against the Property which are unpaid, including, without limitation, those
for construction of sewer and water lines, streets, sidewalks and curbs.
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5.24 Pre-Closing Deliveries Accurate. All of the materials to be
delivered by the Transferor Company to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits when delivered, will be true,
accurate and complete in all material respects.
5.25 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the Transferor Company's knowledge,
threatened against the Transferor Company, nor are any of such proceedings,
against or by the Transferor Company, anticipated or contemplated by the
Transferor Company.
5.26 Liens. The Transferor Company agrees to keep the Property free
from mechanics and materialmen's liens or other liens or encumbrances occasioned
by the actions of the Transferor Company or its contractors or subcontractors
and agrees to indemnify and save BRI Partnership harmless from any such liens or
encumbrances and all attorneys' fees and other costs and expenses incurred by
reason thereof.
5.27 Essential Facilities. Except as set forth in Schedule 5.27, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.27, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.28 Legal Access. There is, or prior to Closing will be, direct legal
access from a public way to the Property. Upon completion of construction of the
Improvements, all necessary curb cuts, access permits and other governmental
approvals required to provide such access shall have been issued and shall be in
full force and effect.
5.29 Public Improvements. To the best knowledge of the Transferor
Company and except as shown on the Plans and Specifications, there are no
written or proposed plans to widen, modify, or realign any street or highway or
any existing or proposed eminent domain proceedings which would affect the
Property in any way that would have a Material Adverse Effect. To the best
knowledge of the Transferor Company, there are no presently planned public
improvements which would result in the creation of a special improvement or
similar lien upon the Property.
5.30 Condition of Improvements. The Property, including, without
limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical,
HVAC systems and equipment, plumbing, drainage and heating systems and other
mechanical systems, shall at the time of Closing be in good order and operating
condition, subject to normal wear and tear, and will be constructed
substantially in accordance with (i) the Plans and Specifications, (ii) all
applicable
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Codes, permits, approvals, title encumbrances and insurance requirements and
(iii) accepted standards of good materials and workmanship. As of the time of
Closing, there will be no physical or mechanical defects having a Material
Adverse Effect on the use or marketability of the Property and no condition
which impairs or could impair, the structure of the Property or renders it in
noncompliance with the requirements of this Agreement. No fire or other casualty
shall have occurred on any of the Property, the damage related to which has not
been repaired or restored to the condition the Property was in prior to such
fire or other casualty.
B. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR MEMBERS
-------------------------
Each of the Transferor Members on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof,
as follows:
5.31 Authorization. Such Transferor Member has full power and authority
to enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Members Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Member under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Members
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Member in accordance with their respective terms.
5.32 Additional Authorization. No approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Member of
the Transferor Membership Interests held by such Transferor Member and the
performance of such Transferor Member's obligations under this Agreement.
5.33 Membership Interest. Except as provided in this Agreement and the
Transferor Operating Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Membership Interests held by such Transferor Member is
authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor
Member owns and holds the Transferor Membership Interests set forth opposite its
name on Exhibit I beneficially and of record free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.33 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Membership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.33 shall survive the Closing indefinitely.
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<PAGE>
5.34 Investment Representations and Warranties. Each Transferor Member
for itself, severally and not jointly, represents, warrants, acknowledges and
agrees as follows:
(a) Such Transferor Member is acquiring the BRI Partnership
Units for investment only to be received by it for its own account and not with
any view to the sale or distribution of the same or any part thereof in
violation of the Securities Act of 1933, as amended (the "Act") and it will not
sell or otherwise dispose of such BRI Partnership Units except in compliance
with the registration requirements or exemption provisions of any applicable
securities laws and in accordance with the terms of the BRI Partnership
Agreement and the Registration Rights Agreement.
(b) Such Transferor Member understands that the BRI
Partnership Units to be issued to each Transferor Member will not be registered
under the Act, or the securities laws of any state ("Blue Sky Laws") by reason
of a specific exemption or exemptions from registration under the Act and
applicable Blue Sky Laws and that BRI's and the BRI Partnership's reliance on
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Transferor Member.
(c) Such Transferor Member acknowledges and agrees that, for
the reasons set forth in Sections 5.34(a) and (b) above, the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units) may not be offered, sold, transferred, pledged, or otherwise disposed of
by such Transferor Member except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-action letter issued by the Securities and Exchange Commission to the effect
that a proposed transfer of the BRI Partnership Units (or shares of common stock
issued upon exchange of the BRI Partnership Units) may be made without
registration under the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the
case may be, receiving an opinion of counsel knowledgeable in securities law
matters (and which opinion and counsel shall be reasonably acceptable to both
the BRI Partnership and BRI) to the effect that the proposed transfer is exempt
from the registration requirements of the Act and any applicable Blue Sky Laws,
and that, accordingly, such Transferor Member must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Member acknowledges, represents and agrees that (i) its economic
circumstances are such that it is able to bear all risks of the investment in
the BRI Partnership and BRI for an indefinite period of time, including the risk
of a complete loss of its investment in the BRI Partnership Units (or shares of
common stock issued upon exchange of the BRI Partnership Units), (ii) it has
knowledge and experience in financial and business matters sufficient to
evaluate the risks of investment in the BRI Partnership Units and BRI, and (iii)
it has consulted with its own separate counsel and tax advisor, to the extent
deemed necessary by it, as to all legal and taxation matters covered by this
Agreement and has not relied upon the BRI Partnership, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
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acquisition of the BRI Partnership Units. Such Transferor Member further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Member is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Act.
(e) Such Transferor Member understands that an investment in
the BRI Partnership and BRI involves substantial risks. Such Transferor Member
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Member acknowledges and agrees that:
(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.)
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<PAGE>
that the proposed transaction will be exempt
from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under
the Act as aforesaid, BRI reserves the right to place a stop
order against the transfer of the BRI Partnership Units, (and
any shares of common stock issued upon exchange of the BRI
Partnership Units) and to refuse to effect any transfers
thereof, in the absence of satisfying the conditions contained
in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such
Transferor Member's principal residence or principal place of business, and such
Transferor Member has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.34 shall survive the
Closing indefinitely.
5.35 Receipt of Documents. Such Transferor Member has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
---------
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
-------------------------------------------------
The BRI Partnership represents, and warrants and covenants to the
Transferor Members as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Members prior to the execution of this Agreement, is a true, correct and
complete copy of said BRI Partnership Agreement as amended to date. The BRI
Partnership Agreement, as so delivered or made available, has not been modified
and is in full force and effect in accordance with its terms as of the date
hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective
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<PAGE>
terms, subject only to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws for the relief of debtors theretofore or hereafter
enacted to the extent that the same may be constitutionally applied; and (iv)
assuming compliance with the terms of this Agreement and the BRI Partnership
Agreement by the parties hereto and thereto other than the BRI Partnership, the
execution and delivery by the BRI Partnership of the BRI Partnership Units, this
Agreement and all other documents and instruments contemplated hereby and the
performance by the BRI Partnership of its obligations hereunder and thereunder
do not and will not constitute a default under, or conflict with or violate, any
provision of the BRI Partnership Agreement or any other material agreement to
which the BRI Partnership is a party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to
the Transferor Company true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year ended adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the BRI Partnership in connection with the valid execution and
delivery of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is
the only agreement among the partners relating to the organization, operation,
or management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI
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<PAGE>
Partnership Units shall be vested in the Transferor Members free and clear of
any lien, claim, charge, pledge encumbrance, limitation, agreement or instrument
whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the BRI
Partnership or for which the BRI Partnership may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely field, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the BRI Partnership. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The BRI Partnership has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or
investigation of the BRI Partnership with respect to any liability for taxes
relating to the BRI Partnership for which any BRI Partner may be liable, or (B)
any threatened claims or assessments for taxes against or relating to the BRI
Partnership.
(d) The BRI Partnership has previously delivered to the
Transferor Company a true and complete copy of the BRI Partnership's Federal
Income Tax Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the BRI Partnership's knowledge,
threatened against the BRI Partnership, nor are any of such proceedings
anticipated or contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof, did
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December
31, 1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
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<PAGE>
6.10 Issuance of Units. The BRI Partnership Agreement provides, or
prior to Closing will provide, for the issuance of the BRI Partnership Units.
The BRI Partnership Units to be issued in connection with the transactions
herein contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Members, and on
the date of their issuance pursuant to the terms and conditions hereof will be
validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Company otherwise in writing) and represents that
there are no other documents known to the BRI Partnership which are required to
be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is
no material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI 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.
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<PAGE>
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
---------
INSURANCE AND CASUALTY
----------------------
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Company shall maintain its present insurance on the Property which insurance in
respect of fire and casualty shall be covered by a standard All-Risk Policy in
the amounts as currently insured. A certificate or certificates of such
insurance shall be provided to the BRI Partnership upon written request by the
BRI Partnership. Subject to the provisions of Section 7.02, the risk of loss in
and to the Property shall remain vested in the Transferor Members until the Time
of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty and
are not restored by the Transferor Company prior to the Time of Closing, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Members at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Membership Interests, and in such case, unless the Transferor
Members shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Members shall
pay over or assign to the BRI Partnership, on behalf of the Transferor Company,
all amounts received or due (plus an amount equal to any deductible under any
insurance policy covering the Property) from, and all claims against, any
insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00, or if any such damage or destruction
shall occur and be restored by the Transferor Company prior to the Time of
Closing, or if any eminent domain notice or proceeding is commenced which does
not affect any material
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<PAGE>
portion of the Property, the BRI Partnership shall proceed to accept the
contribution and transfer of the Transferor Membership Interests in accordance
with the provisions of clause (b) above.
SECTION 8
---------
VIOLATIONS OF LAW
-----------------
8.01 Responsibility for Violations. All notices of material violations
of laws, ordinances, regulations or insurance requirements ("Violations of
Law"), which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall be removed or complied with by the Transferor Company, at the
expense of the Transferor Company, prior to the Closing Date.
SECTION 9
---------
OBLIGATIONS PRIOR TO CLOSING
----------------------------
The Transferor Company covenants that between the date of this
Agreement and the Closing Date:
9.01 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall, if necessary, be repaired or
otherwise maintained in accordance with the Transferor Company's usual and
customary practice without regard to the Closing contemplated by this Agreement.
9.02 Service Contracts. The Transferor Company shall not enter into any
new service contract for the Property, without the prior written consent of the
BRI Partnership which consent shall not be unreasonably withheld or delayed,
provided no consent shall be required with respect to any of the foregoing so
long as such service contract is terminable without penalty by the then owner of
the Property upon not more than thirty (30) days' notice.
9.03 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.04 Tax Procedure. Except as to real property tax assessment appeal
proceedings now or hereafter filed by the Transferor Company to reduce real
property tax assessments, the Transferor Company shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Members and the BRI
Partnership, based upon the relative time periods
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before and after the Closing, or (ii) any fiscal year prior to the fiscal year
in which the Closing occurs shall be paid to the Transferor Members, in either
case after deducting the expenses of collection thereof, which obligation shall
survive the Closing.
9.05 Property Operating and Maintenance. The Transferor Company shall
lease, manage, maintain and operate the Improvements in the ordinary course of
business. Without limiting the generality of the foregoing, the Transferor
Company shall perform all ordinary maintenance and repair of the mechanical,
electrical and plumbing facilities and equipment within the Improvements so as
to keep such facilities in good operating condition and repair, taking into
account ordinary wear and tear; and to the extent any such facilities or
equipment have heretofore been serviced under a Service Contract, the Transferor
Company shall keep such Service Contracts in full force and effect up to
Closing. For purposes hereof, the parties agree that the Transferor Company has
retained or will retain the BRI Partnership or its affiliate (the "Management
Company") as the manager for the Property pursuant to the Management Agreement
attached hereto as Exhibit 7. The parties agree that the Management Agreement
shall remain in effect until the expiration of the Earn Out Period and, until
then, may not be modified, amended or terminated without the consent of both
parties. Notwithstanding that the BRI Partnership is or will become the owner of
the Management Company, until the expiration of the Earn Out Period, the
Transferor Members shall have control over the activities of the Management
Company and its personnel (including both on-site and managerial) with respect
to the Property, including but not limited to, appointment, hiring, firing,
supervision and compensation (both base and incentive, of personnel, operation,
marketing, promotions and advertising, hours of operation and all other
decisions as to the Property and its leasing and management; provided that such
control shall be exercised in a commercially reasonable manner as compared with
comparable properties in comparable locations. To facilitate this continued
control, BRI Partnership agrees that Patrick Connelly, currently a vice
president of The Questar Management Company, shall remain employed by the
Management Company until the expiration of the Earn Out Period, his principal
place of employment shall remain at the principal regional office of the
Transferor Company and he shall devote such efforts to the Property as the
Transferor Members shall require. Notwithstanding the foregoing, if the
employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then
the Transferor Members at their option, may elect (a) to terminate the
management agreement with BRI Partnership and either manage, lease and operate
the Property on their own behalf or retain such other persons or entities to do
so as they deem appropriate on substantially the same terms (including, but not
limited to, the same management fee) as are provided in the management agreement
with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their
full-time employee.
9.06 Lease Amendments. The Transferor Company shall not amend, alter,
modify or vary the terms and provisions of any of Leases except in the ordinary
course of business, without first obtaining the written consent of the BRI
Partnership, which consent shall not be unreasonably withheld or delayed.
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9.07 New Leases. From and after the date hereof, the Transferor Company
shall not make, execute nor permit any new Lease for any apartment in the
Property without first obtaining the written consent of the BRI Partnership,
unless such Lease (i) is on the form lease provided to the BRI Partnership, and
(ii) is with a Qualified Tenant.
9.08 Preservation of Partnership Business. On and after the date
hereof, except with the prior written consent of the BRI Partnership or as
otherwise provided in this Agreement, the Transferor Company shall not cause,
acquiesce in, or agree to:
(a) a material amendment, modification, termination or
cancellation of the Transferor Operating Agreement without the prior written
consent of the BRI Partnership, which shall not be unreasonably withheld or
delayed, provided that such amendment modification, termination or cancellation
does not adversely affect the BRI Partnership's rights under this Agreement;
(b) any willful action by the Transferor Company which would
render any of representations and warranties contained in Section 5 hereof
untrue in any respect at and as of the Closing Date with the same effect as
though such representations and warranties had been made at and as of the
Closing Date;
and, except with the prior written consent of the BRI Partnership, the
Transferor Company shall not cause, acquiesce in or agree to any action allowing
the Transferor Company taking or agreeing to take any of the following actions:
(c) merge or consolidate with any other entity or permit any
other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets of
any other person, partnership, corporation, or business organization;
(d) except in the ordinary course of business and consistent
with past practices, enter into any contract, transaction or agreement which
shall survive the Closing (except as permitted by Section 9.02); or
(e) enter into any agreement, transaction or arrangement with
any affiliate that will survive the Closing; or
(f) subject any portion of the Property to any option contract
or sales contract.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Company shall conduct
its business only in the ordinary course and do the following:
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(a) Subject to the provisions of Section 8.01 hereof, comply
with all regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with
reputable insurers, which in respect of amounts, types and risks insured is that
which its management reasonably believes to be adequate for the business
conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of
the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(d) Unless it is contesting the same in good faith and has
established reasonable reserves therefor, pay when required to be paid all taxes
indicated by its tax returns or otherwise lawfully levied or assessed upon it,
or any of its properties or assets, or which it is otherwise legally obligated
to pay;
(e) Comply in all material respects with each and every
undertaking, covenant and obligation of landlord under the Leases, including up
to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other
material obligations incurred by the Transferor Company in connection with the
use and ownership of the Property up to the date of Closing.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Company will give the BRI Partnership and their
attorneys, accountants, and other representatives reasonable access to
Transferor Company's personnel and all properties, documents, contracts, books,
and records of the Transferor Company, relating to the consummation of the
transactions contemplated hereunder and will furnish the BRI Partnership with
copies of such documents (certified by the Transferor Company if so requested)
and with such information with respect to the affairs of the Transferor Company
as the BRI Partnership may from time to time reasonably request.
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SECTION 10
----------
TRANSFEROR MEMBERS CLOSING OBLIGATIONS AND
-------------------------------------------
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
---------------------------------------------------
10.01 Closing, Deliveries and Obligations. At or prior to the Closing,
the Transferor Members shall deliver the following to the BRI Partnership (the
"Transferor Members Closing Documents"):
(a) Assignment of Transferor Membership Interests. An
assignment of the Transferor Membership Interests from each of the respective
Transferor Members to the BRI Partnership in the form of the Transferor
Assignment attached hereto as Exhibit III, duly executed and delivered by each
of the Transferor Members, which shall transfer the Transferor Membership
Interests to the BRI Partnership free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party.
(b) UCC Search - Transferor Members. A Uniform Commercial Code
lien search for each of the Transferor Members, indicating that the membership
interest of each Transferor Partner in the Transferor Company is unencumbered by
any security interest therein and the cost of which shall be paid by BRI
Partnership.
(c) Amended Transferor Operating Agreement and Articles. The
Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended
and Restated Transferor Company Articles in the form of Exhibit V hereto duly
executed and delivered by the Transferor Members, pursuant to which the
Transferor Members shall withdraw as members from the Transferor Company.
(d) Opinion. An opinion of counsel satisfactory to the BRI
Partnership to the effect that the Transferor Company has been duly formed in
accordance with Maryland law and is validly existing and in good standing under
such laws, that the Transferor Members are all of the members of the Transferor
Company, that no state transfer taxes, sales tax, excise tax or transfer stamps
are required to consummate the transactions contemplated by this Agreement and
as to such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Members.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI
Partnership Amendment in the form of Exhibit 3 attached hereto, duly executed
and delivered by the Transferor Members and a BRI Questionnaire, in the form of
Exhibit 5 attached hereto, duly executed by each of the Transferor Members.
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(f) Occupancy Permit. Final Certificates of Occupancy from the
local authority having jurisdiction over the construction and occupancy of the
Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable
to the BRI Partnership, that all real estate taxes and personal property taxes
and special assessments, if any, affecting the Property, which are due and
payable at the Closing have been paid unless contested in good faith and
reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together
with photocopies of all rent records (including an updated Rent Roll in the same
format as the Rent Roll attached as Schedule D dated as of the last day of the
month preceding the month in which the Closing occurs), and related documents in
the possession or under the control of the Transferor Company. Such records
shall include a schedule of all cash security deposits and credit to the BRI
Partnership in the amount of such security deposits, including interest thereon,
if any, held by the Transferor Company at the Closing Date under the Leases and
a schedule updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications and Licenses. An as-built set of
original Plans and Specifications together with original copies (or photocopies
if original copies are unavailable to the Transferor Company) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Company shall also deliver: original copies of all
certificates, licenses, permits, authorizations and approvals issued for or with
respect to the Property by governmental and quasi-governmental authorities
having jurisdiction, except that photocopies may be substituted if the originals
are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each
Transferor Member in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and to omit from its title insurance policy all exceptions for (i) judgments,
bankruptcies or other returns against persons or entities whose names are the
same as or similar to the Transferor Company's name; (ii) parties in possession
other than under the rights to possession granted under the Leases; and (iii)
mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed
by the Transferor Members, advising the tenants under the Leases of the transfer
of ownership of the Transferor Company to the BRI Partnership and directing that
all rents and other payments thereafter becoming due under the Leases be sent as
the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A
certificate by the Transferor Members to the effect that, to its knowledge, all
of the representations and warranties of the Transferor Company set forth in
this Agreement remain true and correct as of the Closing Date.
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(m) Evidence of Existence and Authority. A certificate issued
by the Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Company.
(n) Non-Foreign Affidavit. The Transferor Members shall
execute and deliver to the BRI Partnership and the BRI Partnership's counsel, at
Closing such evidence as may be reasonably required by the BRI Partnership to
show compliance by the Transferor Members with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Construction Contract Retentions. Final mechanics' lien
waivers from the general contractor and subcontractors covering at least 95% of
the construction cost, together with an amount equal to 125% of all unpaid
retentions and disputed amounts under the Construction Contract, which amount
shall be placed in an escrow account with the Escrow Agent to be released on a
monthly basis to pay amounts coming due under the Construction Contract to the
general contractor, all subcontractors and material suppliers; provided that any
request for payment shall be accompanied by all documentation required as a
prerequisite to payment under the Construction Contract, including lien waivers,
and further provided that payment of any retention shall be subject to receipt
of final lien waivers and acknowledgments of payment in full executed by the
general contractors, all subcontractors and material suppliers. In any event,
the Transferor Members shall remain liable for payment of all such unpaid
retentions and disputed amounts to the extent not covered by the escrow, which
obligation shall survive Closing.
(p) UCC Search - Property. A Uniform Commercial Code lien
search showing no Uniform Commercial Code filing (other than in respect of the
Loan Documents) or judgment or tax lien filings against the Transferor Company
with respect to the Property, which searches shall be dated not earlier than
thirty (30) days prior to the Closing and the cost of which shall be paid by the
BRI Partnership.
(q) Certificate of Completion. The original certificate of
substantial completion required under Section 3.02.
(r) Questar Builders Warranty. An original one year
construction warranty for the Improvements to be provided by Questar Builders,
Inc., which construction warranty shall be identical to that required under the
standard AIA Construction Contract substantially in the form of Exhibit X
hereto.
(s) Warranties and Guarantees. Originals of all warranties and
guarantees provided by subcontractors and material suppliers for the
Improvements.
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(t) Other Documents. Such other documents, instruments or
agreements which the Transferor Members are required to deliver to the BRI
Partnership pursuant to any other provisions of this Agreement or which the BRI
Partnership may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the BRI Partnership title to the Transferor Membership
Interests. The provisions of this Section 10.01(t) shall survive the Closing
indefinitely.
10.02 The Transferor Members' Expenses. The Transferor Members shall
pay all of the fees and expenses of their own separate legal, tax or other
advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor
Member agrees that such Transferor Member will notify the Transferor Company in
writing on or prior to the Closing Date if any of the representations and
warranties of such Transferor Member cease to be true and correct on and as of
the Closing Date. Each Transferor Member further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Company, the
representations and warranties of such Transferor Member shall be deemed to be
true and correct on and as of the Closing Date and that the BRI Partnership and
the Transferor Company shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Members. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor Member,
hereby agrees that until the tenth (10th) day following the first anniversary of
the Closing:
(a) each Transferor Member shall continue to own and hold, and
shall not assign, transfer, distribute to its partners or otherwise dispose of
any of the BRI Partnership Units received by it pursuant to this Agreement
except to the extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Member shall transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton
Gorn, Stephen M. Gorn and John B. Colvin given to the BRI Partnership pursuant
to the Pledge Agreement (described on Schedule K), no Transferor Member shall
mortgage, pledge, create a security interest in or lien on or otherwise
hypothecate or encumber any of such BRI Partnership Units except as permitted
under the BRI Partnership Agreement;
(d) the provisions of this Section 10.04 shall survive the
Closing indefinitely.
10.05 Indemnification.
(a) The Transferor Members' Indemnity. In the event the
parties proceed to Closing, each Transferor Member agrees, severally and not
jointly, to indemnify and hold the
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BRI Partnership harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the BRI Partnership subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the Transferor Company set forth in Section 5A or
of such Transferor Member set forth in Section 5B or (B) resulting from any
breach or default by the Transferor Company or such Transferor Member of any
obligation of the Transferor Company or such Transferor Member under this
Agreement or (ii) from liabilities for borrowed money incurred by the Transferor
Company or the Property prior to the Closing; provided that no Transferor Member
shall be required to indemnify the BRI Partnership for any amounts in excess of
50% of the fair market value of the BRI Partnership Units received by such
Transferor Member as of the date such indemnification obligation is satisfied
(except for indemnification obligations with respect to representations of each
of the Transferor Members in Section 5.33, which shall be limited to 100% of the
fair market value as of the date such indemnification obligation is satisfied of
the BRI Partnership Units received by such Transferor Member) (collectively, the
"Cap"); and provided further that to the extent any of the Transferor Members
have any indemnification obligation to the BRI Partnership, the Transferor
Members may elect to satisfy such indemnification obligation by directing the
BRI Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Member pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or canceled) equal
to the indemnification obligation of such Transferor Member.
(b) The BRI Partnership's Indemnity. In the event the parties
proceed to Closing, the BRI Partnership agrees to indemnify and hold the
Transferor Members harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Members, subsequent to
the Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Company or the Property after the Closing (except for such liabilities resulting
from a breach or default by the Transferor Members or the Transferor Company for
which the BRI Partnership is indemnified under Section 10.05(a) above); provided
that the BRI Partnership shall not be required to indemnify any Transferor
Member under this Section 10.05(b)(i) for any amounts in excess of 50% of the
fair market value as of the date such indemnification obligation is satisfied of
the BRI Partnership Units received by such Transferor Member (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Member).
(c) The indemnification obligations of the Transfer Members
and the BRI Partnership, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 16.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable insurance
proceeds actually received by, and other savings that actually reduce the impact
of losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor
Members shall have any liability for claims made under Section 10.05(a) or
10.05(b) unless and until the aggregate amount of all losses incurred exceeds
$50,000 (in which case the indemnifying party shall be liable for the portion of
losses exceeding $50,000).
(f) The indemnification provided in this Section 10 shall be
the sole and exclusive remedy after the Closing Date for damages available to
the BRI Partnership or the Transferor Members for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Company or the Property.
(g) Each of the Transferor Members, the Transferor Company and
the BRI Partnership acknowledge and agree that, unless otherwise agreed to in
writing by all the parties, from and after the Closing, each of the parties
hereto will be deemed to have waived any right to seek indemnification hereunder
from the other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the
Transferor Company shall terminate for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code and its tax year shall close on the Closing
Date. The Transferor Members shall prepare and timely file any federal, state,
local and foreign tax or information returns due after Closing that are required
to be filed by or on behalf of the Transferor Company with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Members
shall prepare and timely file the terminating tax returns for the Transferor
Company resulting from the consummation of the transactions contemplated under
this Agreement, provided, however, that such tax returns shall be prepared in
accordance with the terms and provisions of this Agreement and provided further,
that prior to the filing thereof the Transferor Members shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Members in obtaining such data and information regarding
the Transferor Company to permit the Transferor Members to prepare such returns
or to respond to any audits or assessments for the periods covered by such
returns.
SECTION 11
----------
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
-------------------------------------
AND POST-CLOSING AGREEMENTS
---------------------------
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
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(a) Transfer of Consideration; Execution and Delivery of BRI
Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver
to the Transferor Members (i) the Base Consideration and, if applicable, the
Additional Consideration Installments, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended
Transferor Operating Agreement and Amended Transferor Company Articles. Deliver
to the Transferor Members (i) the Transferor Assignments duly executed by the
BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended
Transferor Company Articles duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Company.
(c) Record Amended Transferor Company Articles. Cause the
Amended Transferor Company Articles to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the
Transferor Members to the effect that the BRI Partnership has been duly formed
in accordance with Delaware law and is validly existing and in good standing
under such laws, that the BRI Partnership Amendment has been duly executed and
delivered, that no state transfer taxes, sales tax, excise tax or transfer
stamps are required in connection with the issuance of the BRI Partnership Units
to the Transferor Members as contemplated by this Agreement and as to such other
matters as are customarily required in Baltimore, Maryland in connection with
the transactions contemplated under this Agreement. The opinion shall also
provide that, based solely on a certification of BRI, commencing with BRI's
taxable year ending December 31, 1991, BRI has been organized in conformity with
the requirements for qualifications as a "real estate investment trust" and its
method of operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver
to the Transferor Members a certificate by the BRI Partnership to the effect
that all of the representations and warranties of the BRI Partnership set forth
in this Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued
by the Secretary of State of the State of Delaware dated no earlier than 30 days
prior to the Closing Date certifying as to the good standing and valid existence
of the BRI Partnership.
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(g) BRI Partnership Agreement. Deliver to the Transferor
Members a true and correct copy of the BRI Partnership Agreement, as amended and
in effect on the Closing Date, certified as such by an officer of the general
partner of the BRI Partnership.
(h) Other Documents. Such other documents, instruments or
agreements which the BRI Partnership is required to deliver to the Transferor
Members pursuant to any other provisions of this Agreement or which the
Transferor Members may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the Transferor Members title to the BRI Partnership Units.
The provisions of this Section 11.01(h) shall survive the Closing indefinitely.
11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC
search costs and (v) all other Closing costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Members,
in their capacity as a limited partner of the BRI Partnership and so long as the
Transferor Company has not dissolved, terminated or liquidated, the right to
receive the Transferor Membership Interests as a distribution in kind in
satisfaction of the Transferor Members' distribution rights under Section 8.2 of
the BRI Partnership Agreement. If the Transferor Membership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Members.
(b) Until the expiration of the period (the "No Transfer
Period") ending on the earlier of (I) such time as all of the Transferor Members
have redeemed all of the BRI Partnership Units received by the Transferor
Members hereunder for cash or for shares of BRI common stock or (II) seven (7)
years from the Closing Date, neither the BRI Partnership nor BRI shall allow the
sale or transfer of either the Transferor Membership Interests or the Property,
except for (i) transfers that are fully tax-free to partnerships in which the
BRI Partnership has an interest, (ii) exchanges that are fully tax-free pursuant
to Section 1031 of the Code (iii) involuntary transfers which shall include,
without limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation
or a liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period; and (iv) voluntary
transfers arising in connection with any financing or refinancing of the
Property, which shall include, without limitation, a mortgage, deed of trust, or
any other related financing liens or security interests, the parties
affirmatively acknowledging that there shall be no restriction on the financing
or refinancing of the Property by the BRI Partnership.
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(c) The provisions of this Section 11.03 shall survive the
Closing indefinitely.
SECTION 12
----------
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
-----------------------------------------------
12.01 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and, the net amount of such prorations and
apportionments shall be paid in cash at Closing by the party owing such amount
to the other party unless the Transferor Members have made an election to
receive BRI Partnership Units, in which event such proration and apportionments
shall be settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges,
sewer rents and vault charges, if any, on the basis of the fiscal period for
which assessed, except that if there is a water meter on the Property,
apportionment on the Closing Date shall be based on the last available reading,
subject to adjustment after the Closing on a per diem basis, when the next
reading is available;
(c) charges or prepayments under transferable Service
Contracts; and
(d) all other income and expenses relating to the Property,
including without limitation, income from cable television services as are
customarily adjusted in real estate transactions of this size and type in
Baltimore, Maryland.
If as of the Closing Date, any items of income or expense attributable
to the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor
Members and the BRI Partnership shall prepare and exchange preliminary
calculations of all adjustments and prorations to be made pursuant to this
Section 12. The Transferor Members and the BRI Partnership shall cooperate in
the furnishing of all information and documentation necessary to prepare such
calculations. If the Transferor Members have elected to receive BRI Partnership
Units pursuant to Section 2.02, then prior to Closing, the Transferor Members
shall deliver to the BRI
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Partnership the final Transfer Allocation Schedule (the "Transfer Allocation
Schedule"), which shall be based upon the Preliminary Transfer Allocation
Schedule, shall incorporate all adjustments and prorations to be made pursuant
to Section 12 and shall set forth (i) the name of each Transferor Member, and
(ii) the number of BRI Partnership Units to be received by each Transferor
Member. The BRI Partnership shall have no obligation or liability with respect
to the preparation or accuracy of the Preliminary Transferor Allocation Schedule
or the Transfer Allocation Schedule or the distribution of the BRI Partnership
Units or the BRI Additional Payment, if applicable, to the Transferor Members
and the Transferor Members hereby release the BRI Partnership from any such
obligation or liability.
Subject to Section 12.04, all cash (including any escrow deposits)
shall be used by the Transferor Company to pay amounts payable by the Transferor
Company and/or distributed to the Transferor Members prior to Closing, and if
any of such cash applicable to preclosing periods is not removed from the
Transferor Company prior to Closing, the BRI Partnership shall hold such cash as
agent for the Transferor Members and refund such cash to the Transferor Members
subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Company shall distribute the
right to receive such rent to the Transferor Members immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Members in
collecting such rents. Rents received from such tenant after the Closing shall
be applied in the following order of priority: (a) first to the month in which
the Closing occurred; (b) then to any month or months following the month in
which the Closing occurred until all unpaid rents have been paid in full; and
(c) then to the period prior to the month in which the Closing occurred. After
Closing, the BRI Partnership shall cause the Transferor Company to use
reasonable efforts to collect delinquent rents attributable to the period prior
to the month in which Closing occurred, provided such efforts shall not require
the commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Members or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Company shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Members owe an amount
to the BRI Partnership, the Transferor Members shall have the right to elect to
adjust for such amounts owing by the Transferor Members to the BRI Partnership
in the form of BRI Partnership Units rather than
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cash. In addition, if as a result of the prorations and apportionments set forth
in Section 12.01, the BRI Partnership owes an amount to the Transferor Members,
such amount shall be paid in the form of BRI Partnership Units rather than cash,
if the Transferor Members have elected under Section 2.02 to receive BRI
Partnership Units. The Transferor Members shall notify the BRI Partnership at
least seven (7) business days prior to the Closing Date of the manner in which
the Transferor Members shall have elected to settle adjustments under this
Section 12.
SECTION 13
----------
FAILURE TO PERFORM
------------------
13.01 Defective Title or Condition. If the Transferor Members are
unable to give title or to contribute and transfer the Transferor Membership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Membership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Members on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the
right to elect, in its sole discretion, on the Closing Date, to accept such
title as the Transferor Members can deliver to the Transferor Membership
Interests and the Property in its then condition and to deliver in exchange
therefor the Consideration Amount then required to be paid subject to reduction
of the Consideration Amount by the amounts required to remove all Monetary
Liens.
13.03 Transferor Default. If the Transferor Company or any of the
Transferor Members default in the performance of their obligations under this
Agreement, or if any representation or warranty of the Transferor Company or the
Transferor Members is false or misleading (a "Transferor Default"), the BRI
Partnership shall be entitled to exercise any or all remedies as may be
available at law or in equity on account thereof, including, but not limited to,
an action for specific performance or an action for money damages. By their
execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby
guarantee the performance by the Transferor Company of all of its obligations
hereunder and, as part of such guaranty, shall be jointly and severally liable
with the Transferor Company of the payment of all damages to which BRI
Partnership may be entitled.
13.04 The BRI Partnership's Default. If the BRI Partnership defaults in
performing any of its obligations hereunder, then the Transferor Members shall
be entitled to exercise any or all remedies as may be available at law or in
equity on account thereof, including, but not limited to, an action for specific
performance or an action for money damages.
SECTION 14
----------
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<PAGE>
BROKERAGE FEES
--------------
14.01 Brokerage Fees. The Transferor Company and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Company understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of QPI and the Related
Entities in accordance with the provisions of the Related Agreements. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Company have any obligation to pay any
commission to APC.
SECTION 15
----------
NOTICES
-------
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Members or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
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 Members c/o Questar Properties, Inc.
124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
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<PAGE>
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 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05
and the covenant and agreements of the BRI Partnership contained in Sections
2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing
indefinitely and an action based thereon may be brought at any time after the
Closing Date. The representations, warranties, covenants and other obligations
of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and
including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04,
10.05, 12 and 14 and the representations and warranties, covenants and other
obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for
6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 11.03, 12 and 14 shall survive until
twelve (12) months after the Closing Date and thereafter during the pendency of
any claim based upon a breach thereof, and no action based thereon shall be
commenced more than twelve (12) months after the Closing Date. Except as
otherwise specifically provided in this Agreement, no other representations,
warranties, covenants or other obligations of the Transferor Members or the BRI
Partnership set forth in this Agreement shall survive the Closing, and no action
based thereon shall be commenced after Closing. Representations and warranties
in Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration
of the applicable statute of limitations.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Operating Agreement by the Transferor Members (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Members, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
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<PAGE>
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
----------
CONDITIONS TO CLOSING
---------------------
17.01 BRI Conditions. Without limiting any other conditions to Closing
of the BRI Partnership contained herein, the obligation of the BRI Partnership
to proceed with the Closing of the transactions contemplated by this Agreement
is expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the Transferor Members and the Transferor Company shall have
performed or complied with, in all material respects, all of their respective
covenants, agreements and obligations under this Agreement, (ii) the Transferor
Members shall have delivered the Transferor Members Closing Documents and (iii)
all of the representations and warranties of the Transferor Company and the
Transferor Members set forth in this Agreement shall be true and correct, in all
material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of notice of
satisfaction of the Closing Conditions, there shall not have occurred any
material adverse change in the financial condition, business, properties, assets
or liabilities of the Transferor Company;
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) Title to Membership Interests. The Transferor Membership
Interests shall, as of the Closing Date, be transferred and assigned to the BRI
Partnership, or its designees, respectively, and shall be free and clear of any
liens, pledges and encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Company shall, as of the
Closing Date, have good record, marketable and insurable title to the Property,
subject only to the title exceptions permitted under Section 1.02.
(f) Construction. The Transferor Company shall have completed
construction of the Improvements in accordance with the Plans and
Specifications, as modified in accordance with this Agreement, and in compliance
with all Codes all to the extent required under Sections 3.02 and 5.30, and, if
such completion shall have occurred prior to the occurrence of the Stabilization
Date, then, in addition to the foregoing, as of the Closing, the Improvements
shall remain completed to the extent required under Sections 3.02 and 5.30 and
shall be in
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<PAGE>
substantially the same condition (subject to the provisions of Section 7.02 and
to any damage to the Improvements caused by tenants) as they were in at the time
of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all
identified construction deficiencies corrected.
In the event that any condition set forth in Section 17.01(a) through
Section 17.07(e) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Members within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Members contained herein, the obligation of the
Transferor Members to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Members as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the BRI Partnership shall have performed or complied with, in
all material respects, all of the BRI Partnership covenants, agreements and
obligations under this Agreement, (ii) the BRI Partnership shall have delivered
the BRI Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of any election by the
Transferor Members to accept BRI Partnership Units, there shall not have
occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as
of the Closing Date, be transferred and assigned to the Transferor Members and
shall be free and clear of any liens, pledges and encumbrances of any kind
whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Members in writing, on or before the Closing Date, the Transferor Members shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
-49-
<PAGE>
17.03 Related Agreements. Simultaneously herewith, the BRI Partnership
has entered into with various parties (the "Related Entities") various
agreements, including this Agreement, for the conveyance of partnership
interests or property interests or other assets and for the making of certain
secured loans, which agreements are more particularly described on Schedule K
attached hereto (collectively the "Related Agreements"). (The transactions
described in the Related Agreements, including this Agreement, are collectively
the "Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement of even date between
the BRI Partnership and Questar Investment Corporation attached hereto as
Exhibit 6 (the "Kickout Agreement"), in the event that any of the Related
Agreements is terminated pursuant to any termination provision of any other
Related Agreement, this Agreement shall terminate automatically simultaneously
with the termination of any such Related Agreement whereupon this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive the termination of this Agreement. The
provisions of this Section 17.03 shall be of no further force or effect once
closing occurs under any one or more of the Related Agreements.
SECTION 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.01. Assignment. Except as hereinafter provided, this Agreement may
not be assigned prior to Closing by either party hereto. The BRI Partnership
shall have the right to designate an entity affiliated with the BRI Partnership
to accept title to some of the Membership Interests, but the BRI Partnership
shall remain fully liable for the performance of all of its obligations
hereunder. The Transferor Members and the Transferor Company shall have the
right to collaterally assign their interests under this Agreement to a
construction lender providing construction financing for the Improvements (the
"Lender"). This Agreement shall be automatically subject and subordinate to the
mortgage, deed of trust and all other loan documents now or hereafter entered
into evidencing the loan and security of the Lender. If the Transferor Members
and Transferor Company so assign this Agreement, then the the BRI Partnership
agrees to enter into an agreement with the Lender (the "Tri Party Agreement")
providing that: (a) the BRI Partnership agrees to provide the Lender with
reasonable notice and opportunity to cure any default by the Transferor Members
or the Transferor Company hereunder; (b) the BRI Partnership agrees not to
modify or amend this Agreement without the prior written consent of Lender, (c)
the BRI Partnership, at the written request of Lender upon a default under the
loan, will pay the Base Consideration or such lesser amount as is required to
satisfy the loan directly to Lender provided that all of the conditions to
Closing provided herein have been satisfied; (d) the Lender agrees to recognize
the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will
permit Lender to perform any obligations of the Transferor Company and
Transferor Members hereunder and will agree to recognize Lender as the
Transferor Company and the Transferor Members hereunder should Lender succeed to
the interest of the Transferor Company and Transferor Members, provided,
however, that, in such event, Lender's liability
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<PAGE>
under this Agreement shall be limited to its interest in the Transferor Company
and the Property; and further provided that (f) the BRI Partnership will have no
liability for payment of the Lender's loan or the performance of any obligations
under any of the loan documents other than the Tri-Party Agreement; and (g) the
amount to be paid to Lender shall be payable in cash only and not in BRI
Partnership Units and shall be limited to the amount provided in clause (c). The
parties acknowledge and agree that the Transferor Company is currently the owner
of land in addition to the Land (the "Additional Avalon Land") which is the
subject of a separate Development Contribution Agreement (the "Other Avalon
Agreement") between the BRI Partnership and the Transferor Company and
Transferor Members. To facilitate the transactions contemplated hereby and by
the Other Avalon Agreement, prior to the commencement of construction, the
Transferor Company will transfer either or both of the Land and the Additional
Land to a newly-formed limited partnership(s) or limited liability company(s)
such that the Land will be owned by one entity and the Additional Land will be
owned by another entity. At said time, the newly-formed entity(s) and its owners
will assume all of the obligations of either this Agreement or the Other Avalon
Agreement (whichever is applicable to the land it then owns) and the original
Transferor Company and Transferor Members shall be released from all liability
thereunder, and pursuant to instruments in form reasonably satisfactory to all
parties.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Maryland. The Transferor Members,
Transferor Company and the BRI Partnership consent to the personal jurisdiction
of the federal and state courts of the State of Maryland and agree that service
of process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Transferor Members have the right to
assign or transfer their right to receive BRI Partnership Units.
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<PAGE>
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Members and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Members of an
executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the contrary,
and all references to Schedules and Exhibits shall be to the specified Schedules
and Exhibits annexed hereto. All Schedules and Exhibits annexed hereto are made
a part hereof. All terms defined herein shall have the same meanings in the
Schedules and Exhibits, except as otherwise provided therein. All references in
this Agreement shall be deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Members or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
SECTION 19
----------
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<PAGE>
ADDITIONAL PROVISIONS RELATING TO
---------------------------------
THE TRANSFEROR MEMBERS
----------------------
19.01 Transferor Allocation Schedule. Each Transferor Member
acknowledges and agrees that the Transferor Allocation Schedule attached hereto
as Exhibit I is true, correct and complete in all respects as it relates to such
Transferor Member.
19.02 Time of Effectiveness. The Transferor Members acknowledge and
agree that this Agreement and the agreements attached as Exhibits hereto will
not be binding and effective unless and until all of the parties hereto and
thereto have executed counterparts to such agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective hands and seals as of the day and year first above
written.
WITNESS:
- ------------------------------ ----------------------------
Stephen M. Gorn
- ------------------------------ ----------------------------
John B. Colvin
- ------------------------------ ----------------------------
Morton Gorn
- Transferor Members -
BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- the BRI Partnership -
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<PAGE>
Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in
accordance with the provisions of Section 13.03.
- ------------------------------ --------------------------------
Stephen M. Gorn
- ------------------------------ --------------------------------
John B. Colvin
- the Guarantors-
RECEIPT BY ESCROW AGENT
The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by
certified check to be held as the Deposit pursuant to this Agreement.
WITNESS: LAWYERS TITLE INSURANCE
CORPORATION
________________________ By: _______________________
Name:
Title:
Date:
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<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - List of Plans and Specifications
Schedule D - Form of Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 3.03 - Pro Forma Rents
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants
Schedule 5.27 - Shared Facilities/Utilities
Schedule 5.33 - Liens on Membership Interests
List of Exhibits
BRI Exhibits
------------
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Exhibit 7 - BRI Management Agreement
Transferor Exhibits
-------------------
Exhibit I - List of Transferor Members (with address and membership
interest of each member)
Exhibit II - Transferor Operating Agreement
Exhibit III - Assignment of Transferor Membership Interests
Exhibit IV - Amended and Restated Operating Agreement of Transferor
Company
Exhibit V - Amended and Restated Articles of Organization of Transferor
Company
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Right of First Offer Agreement
Exhibit X - AIA Construction Warranty
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<PAGE>
Schedule 5.27 - Shared Facilities/Utilities
(Avalon 1, 3, 4)
1. Recreational Facilities Agreement relating to the use of pool and clubhouse
facilities on Avalon 1, 3, 4, by tenants of Avalon 2, and the sharing of costs
associated with these facilities.
2. Easement Agreement relating to the sewage pumping station and storm water
basin #2 servicing Avalon 1, 3, 4 and Avalon 2, and the sharing of costs
associated with these facilities.
DEVELOPMENT CONTRIBUTION AGREEMENT
(Liriope)
THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of the 25th day of August, 1997, by and between the individuals
and entities listed on Exhibit I attached hereto with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen
M. Gorn, individually, John B. Colvin, individually, 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.
BACKGROUND
WHEREAS, the Transferor Members are the legal and beneficial owners of
all of the membership interests, as set forth on Exhibit I, of Foxglove
Associates, L.L.C., a Maryland limited liability company (the "Transferor
Company") pursuant to the Operating Agreement dated as of July 29, 1996, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Operating Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the
general partner and Berkshire Realty Company, Inc. ("BRI") is a special limited
partner of the BRI Partnership, pursuant to the Amended and Restated Agreement
of Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Company is the owner of the following:
a. that certain tract or parcel of land located in Harford
County, Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 84-unit apartment complex, commonly known as Liriope
Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed, are under construction or are to be
constructed on the Land (collectively, the "Improvements") pursuant to certain
plans and specifications that have been approved by the Transferor Members and
BRI Partnership, as modified by certain change orders, a complete listing of
which (including the latest revision date and change orders) is attached hereto
as Schedule C (the "Plans and Specifications");
<PAGE>
c. all right, title and interest of the Transferor Company in
and to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway, street,
road, right-of-way or avenue, open or proposed, in, on, under, across, in front
of, abutting or adjoining the Land, and all right, title and interest of the
Transferor Company in and to any awards for damage thereto by reason of a change
of grade thereof;
d. the accessions, appurtenant rights, privileges,
appurtenances and all the estate and rights of the Transferor Company in and to
the Land and the Improvements, as applicable, or otherwise appertaining to any
of the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed
in Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Company and
located on or in or used solely in connection with the Land and Improvements
(collectively, the "Personal Property"); and
f. all of the Transferor Company's interest in any intangible
property now or hereafter, owned by the Transferor Company and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined (excepting (i) any cash and escrow deposits and
other current assets relating to periods prior to Closing and (ii) amounts, if
any, due to the Transferor Members pursuant to Section 12).
All of the items described in subparagraphs (a), (b), (c), (d), (e) and
(f) above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Members desire to contribute all of the
membership interests in the Transferor Company (collectively referred to as the
"Transferor Membership Interests") to the BRI Partnership, and the BRI
Partnership desires to admit the Transferor Members as limited partners in the
BRI Partnership and to accept such contribution from the Transferor Members; and
WHEREAS, in exchange for such contribution, the Transferor Members
desire to, at their election, either receive cash or BRI Partnership Units (as
hereinafter defined) in accordance with the terms of this Agreement and the BRI
Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Transferor Members
and the BRI Partnership hereby covenant and agree as follows:
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<PAGE>
SECTION 1
---------
CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE
------------------------------------------------------
1.01 The Transferor Members shall contribute to the BRI Partnership,
and the BRI Partnership shall accept from the Transferor Members, in exchange
for either cash or BRI Partnership Units, and upon the terms and conditions set
forth in this Agreement, all of the Transferor Members' membership interests in
the Transferor Company (the "Transferor Membership Interests"). The percentage
of interest that each of the Transferor Members owns in the Transferor Company
is listed on Exhibit I. At the Closing (as defined in Section 3.01), the
Transferor Members shall, respectively, contribute, assign, transfer and deliver
the Transferor Membership Interests to the BRI Partnership, or its designees as
provided in Section 18.01 hereof, by an Assignment and Assumption of Membership
Interest in the form of Exhibit III attached hereto (the "Transferor
Assignment"). Immediately thereafter, the Transferor Members and the BRI
Partnership, or its designees, shall execute and deliver an Amended and Restated
Operating Agreement in the form of Exhibit IV attached hereto (the "Amended
Transferor Operating Agreement") and an Amended and Restated Articles of
Organization in the form of Exhibit V attached hereto (the "Amended Transferor
Company Articles") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Members shall withdraw, as the members of
the Transferor Company and be released of all liability thereunder, and the
terms of the Transferor Company shall be amended in accordance with the Amended
Transferor Operating Agreement.
1.02 Property Title. Liriope: On or before September 22, 1997, the BRI
Partnership, at the BRI Partnership's sole cost, 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 Company promptly after its
receipt thereof. The Commitment shall insure fee simple title to the Property in
the sole name of the Transferor Company and shall be in the amount of
$7,622,857. 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 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 Company on or before October 1, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Company of any unacceptable exceptions as described above, the
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exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". Any easements or other agreements reasonably required
for the development and construction of the Property and the Improvements now or
hereafter entered into by the Transferor Company which are consistent with the
Plans and Specifications and, in the reasonable discretion of the BRI
Partnership, do not materially interfere with the intended use of the Property
nor materially affect the value of the Property, shall also constitute Permitted
Exceptions.
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at the BRI Partnership's sole cost, shall obtain an updated
commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B
Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the
"Title Insurer"). If any new exceptions to title appear in the Updated
Commitment that do not constitute Permitted Exceptions and that are unacceptable
to the BRI Partnership, in its reasonable discretion, the BRI Partnership may
notify the Transferor Company within thirty (30) days after the Completion Date
Notice.
If any exceptions in the Commitment or the Updated Commitment are
unacceptable to the BRI Partnership in accordance with the foregoing provisions,
and the BRI Partnership timely notifies the Transferor Company in writing of
such fact as above provided, the Transferor Company shall have thirty (30) days
from the date the Transferor Company receives notice of such unacceptable
exceptions, at the option of the Transferor Company, to remove or cure such
exceptions, provided further, the Transferor Company may, but shall not be
required to, make any monetary expenditures in connection with the removal or
cure of such exceptions. All mortgages and deeds of trust, mechanics liens, tax
liens, attachments and all other monetary liens against the Property (other than
the liens for real estate taxes and current water and sewer charges for the
fiscal year in which Closing occurs, which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Company at Closing. The
Transferor Company shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Company, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Company will attempt to cure such unacceptable exceptions.
If the Transferor Company fails or refuses to cure said unacceptable exceptions
within the time period above provided, on or before the earlier to occur of (A)
ten (10) days after the Transferor Company notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Company or
(ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Purchase Price (as defined in Section 2.01(a))
in an amount necessary to enable the BRI Partnership to remove all Monetary
Liens.
1.03 Survey. On or before September 22, 1997, the BRI Partnership, at
the BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey")
of the Land and the
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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 Company
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 Company on or before
October 1, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Company of the unacceptable survey
matters as described above, the Survey shall be deemed accepted by the BRI
Partnership and the survey matters shown on the Survey shall be included within
the "Permitted Exceptions."
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at its sole cost and expense, shall obtain an updated
survey (the "Updated Survey") by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Updated Survey shall include (i) all
existing buildings, improvements, fences, encumbrances, encroachments,
conflicts, party walls, protrusions (including the location of all highways,
streets, roads, alleys and rights-of-way upon, under, across, abutting or
adjacent to the Land, or affecting the Land or the Improvements), and any
visible evidence of all water, sewer, gas, telephone and electric lines, (ii)
the exact area of the Land to the nearest hundredth of an acre, (iii) all
buildings set back and other restriction lines, (iv) property corners and
boundary lines of the Property (including the courses and distances of each of
said boundary lines), (v) the relation of the point of beginning of the
description of the Land to the monument from which it is fixed, (vi) recorded or
otherwise known easements (stating the recording book and page references in the
case of any such recorded easements), (vii) a metes and bounds written
description of the Land, and (viii) a notation of any discrepancies between the
Updated Survey and the recorded legal description. The BRI Partnership shall
provide a copy of the Updated Survey to the Transferor Company promptly after
its receipt thereof. If any new matters appear on the Updated Survey that do not
constitute Permitted Exceptions, do not simply reflect the construction of the
Improvements in locations that do not encroach upon property lines, setback
lines or easements, and are unacceptable to the BRI Partnership in its
reasonable discretion, the BRI Partnership may notify the Transferor Company
within forty (40) days after the Substantial Completion Date Notice.
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If any survey matters are unacceptable to the BRI Partnership in
accordance with the foregoing provisions, and the BRI Partnership timely
notifies the Transferor Company in writing of such fact as above provided, the
Transferor Company shall have thirty (30) days from the date the Transferor
Company receives notice of such unacceptable survey matters, at the option of
the Transferor Company, to cure such unacceptable survey matters. The Transferor
Company shall be deemed to have refused to cure any unacceptable survey matters
unless the Transferor Company, within ten (10) days after receipt of notice from
the BRI Partnership, shall notify the BRI Partnership in writing that the
Transferor Company will attempt to cure such unacceptable survey matters. If the
Transferor Company fails or refuses to cure said unacceptable survey matters
within the time period provided, on or before the earlier to occur of (A) ten
(10) days after the Transferor Company notifies the BRI Partnership that it
refuses to cure such unacceptable survey matters, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Company or
(ii) waive such survey matters and accept title subject thereto, in which event
there shall be no reduction in the Consideration Amount.
1.04 Construction and Inspection.
(a) Plans and Specifications. Prior to the date of this
Agreement, Transferor Company has delivered to BRI Partnership true, correct and
complete copies of the Plans and Specifications for the construction of the
Improvements as set forth on Schedule C attached hereto.
(b) Transferor Company to Construct Improvements. Transferor
Company shall, at Transferor Company's expense, obtain all permits and construct
the Improvements on the Land in accordance with the Plans and Specifications, as
the same may be modified by change order in accordance with this Agreement. All
work shall be done in a good and workmanlike manner using new, good quality
materials, free of all defects and in compliance with all Codes (as defined in
Section 5.21), permits, approvals, title restrictions and insurance
requirements. Transferor Company shall obtain builder's risk insurance on the
Improvements in the amount of the construction cost of those buildings from time
to time for which construction has commenced. Transferor Company shall deliver a
certificate of such insurance to BRI Partnership. Transferor Company shall
maintain such insurance in force and effect through the course of construction
and until Closing hereunder.
(c) Inspection of Construction; Correction of Defects. BRI
Partnership and its engineers, consultants and agents may inspect the
construction of the Improvements from time to time during the course of
construction upon reasonable notice to the Transferor Company. After receipt
from the Transferor Company of written notice that the requirements of Section
3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI
Partnership and its engineers, consultants and agents shall inspect the
construction of the Improvements upon reasonable notice to Transferor Company to
determine whether such construction is completed in accordance with the Plans
and Specifications. The parties acknowledge that the Transferor Company has
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delivered the Inspection Notice as of September 8, 1997. On or before October 7,
1997, BRI Partnership will give written notice to Transferor Company of any
nonconformities with the Plans and Specifications and defects or deficiencies in
construction identified by BRI Partnership. Unless Transferor Company disagrees
with BRI Partnership, which disagreement shall be expressed by giving written
notice to the BRI Partnership stating the basis for said disagreements, within
10 days after such BRI Partnership notice, Transferor Company, at Transferor
Company's expense, shall commence to correct, repair or replace any such
nonconformities, defects or deficiencies and shall diligently continue
thereafter until completion of such corrections, repairs or replacements, and,
if such deficiencies are of such a magnitude that Closing would not otherwise be
required to occur under Section 3.02 and Section 5.30, the Closing Date shall be
extended until the deficiencies are corrected. Any dispute shall be resolved by
arbitration in accordance with Section 3.02.
(d) Change Orders. The Transferor Company shall not change or
modify the Plans and Specifications without prior written approval of the BRI
Partnership, such approval not to be unreasonably withheld, provided, however
that the following changes shall not require BRI Partnership's approval: (i)
changes required by the construction lender or governmental authorities, and
(ii) changes in the design of the Improvements resulting in a decrease or
increase in construction cost by less than $100,000 for an individual change and
less than $250,000 in the aggregate. The Transferor Company shall give written
notice to BRI Partnership of all proposed changes to the Plans and
Specifications by sending a complete copy of the change, together with copies of
any plans or drawings related thereto. BRI Partnership shall give its written
approval or disapproval within five (5) business days thereafter. If BRI
Partnership disapproves any such change, the Transferor Company shall not
implement same.
(e) Completion. The Transferor Company shall diligently
attempt to complete construction of the Improvements in accordance with the
Plans and Specifications, as modified in accordance with this Agreement, and in
compliance with all Codes (as defined in Section 5.21 hereof) by December 31,
2000 (the "Scheduled Completion Date"). For purposes of this Agreement, the
"Completion Date" shall be the date upon which all of the Closing Conditions
shall have been satisfied as set forth in Section 3.02.
(f) Force Majeure. In the event that the Transferor Company is
delayed in the commencement or completion of construction of the Improvements by
acts of God, war, civil commotion, fire, flood or other casualty, labor
difficulties, strikes, shortages of labor, materials or equipment, undue delay
in action by governmental authorities, governmental or utility company refusal
to issue building, construction, utility, occupancy or other permits or
approvals, water, sewer or other utility moratorium (including enforcement of
the requirements of any adequate public facilities ordinance) or other causes
beyond the Transferor Company's reasonable control (a "Force Majeure Event"),
the Scheduled Completion Date shall be extended for the period of delay, not to
exceed 12 months. If a Force Majeure Event continues in effect for a period in
excess of 12 months, during which construction is delayed, then the Transferor
Company may, by notice to BRI Partnership terminate this Agreement, in which
event the
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Deposit shall be returned to the BRI Partnership and neither party shall have
any further liability to the other hereunder. In addition, simultaneously with
closing under the Related Agreements, the Transferor Company shall execute and
deliver to BRI Partnership the Right of First Offer Agreement attached hereto as
Exhibit IX, which Right of First Offer Agreement shall contain, among other
provisions a Right of First Refusal which provides: (a) that the BRI Partnership
shall have a right of first refusal to purchase the Property following the
termination of this Agreement pursuant to this Section 1.04(f), (b) BRI
Partnership shall have a period of 15 business days, following receipt of a bona
fide third party letter of intent to purchase the Property, to agree to purchase
the Property on the same terms and conditions as set forth in the letter of
intent, and (c) such Right of First Offer Agreement shall be subordinate to any
mortgage or deed of trust securing construction financing on the Property.
1.05 Environmental Due Diligence Inspection.
(a) 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 Company,
inspect the Property to determine the presence of any Hazardous Materials (as
defined in Section 5.20) and the compliance of the Property with Environmental
Laws (as defined in Section 5.20) and in connection therewith to conduct such
tests and observations and compile such information as the BRI Partnership, in
its sole discretion may deem appropriate (the "Environmental Inspection"). The
BRI Partnership shall provide a copy of any third party environmental reports
obtained by the BRI Partnership, without representation or warranty, and subject
to the limitations on use set forth therein, to the Transferor Company promptly
after its receipt thereof. No such inspection, however, shall constitute a
waiver or relinquishment on the part of the BRI Partnership of its right to rely
upon the covenants, representations, warranties or agreements made by the
Transferor Company in this Agreement. Should the BRI Partnership decide, in its
reasonable judgment, that there exists an environmental risk with respect to the
Property (excluding such items as asbestos roof shingles, asbestos floor tile
and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the
presence of usual and customary cleaning and maintenance supplies and similar
items that are typically handled through the adoption of appropriate operations
policies), during the 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
Company 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 1.05. The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection performed at its
request.
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(b) From and after the date of this Agreement, the Transferor
Company shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Company's books, financial records, Service Contracts,
Leases and tenant files pertaining to the operation of the Property prior to the
Closing. The BRI Partnership's agents and representatives shall be permitted
access to such records and files during regular business hours. To the extent
that any of the Transferor Company's financial records relating to the Property
have been audited, the Transferor Company agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Company shall provide the
BRI Partnership with such information as the Transferor Company may have with
respect to actual expenditures made for all repairs, maintenance, operation and
upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Company, all taxes and utility payments made prior
to the Closing and dates of construction, installation and major repairs to the
Property. All information obtained by the BRI Partnership or its agents and
representatives pursuant to this Section 1.05(b) shall be treated as
confidential, shall not be disclosed to others until and unless the Closing
occurs, and if such information is in written form, such information shall be
returned to the Transferor Company if the Closing does not occur.
(c) The BRI Partnership shall indemnify the Transferor Members
against and from all damage to the Property and/or claims of tenants or other
third parties resulting from any entry on the Property by the BRI Partnership or
any agent, contractor, consultant or other representative of the BRI
Partnership, or any tests or other activities conducted in or on the Property by
them, or any of them, together with all expenses incurred by the Transferor
Members by reason thereof including, without limitation, reasonable attorneys'
fees and disbursements: provided, however, that nothing contained herein is
intended to obligate the BRI Partnership to indemnify, pay or otherwise
reimburse the Transferor Members for any costs of remediation or clean-up,
fines, penalties, assessments or similar charges for any condition existing at
the Property solely by reason of the fact that the BRI Partnership or its
agents, contractors, consultants or other representatives discover the existence
of such condition during the course of conducting tests or other activities on
the Property. The provisions of this Section 1.05(c) shall survive the Closing
or any termination of this Agreement; provided, however, that no claim by the
Transferor Members under this Section 1.05(c) for damage to the Property shall
be made if (i) the Closing occurs or (ii) more than 90 days after the
termination of this Agreement if the Closing does not occur, except for damage
claims made by tenants as to which the time for asserting any such claim shall
be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Members by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Members hereunder.
1.06 Tax Treatment. The parties intend that, to the extent the
Transferor Members receive BRI Partnership Units as the consideration for the
contribution of the Transferor Membership Interests by the Transferor Members to
the BRI Partnership in accordance with Section 1.01 of this Agreement, such
contribution shall be treated for federal (and applicable
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state) income tax purposes as a tax-free contribution to capital pursuant to
Section 721 of the Internal Revenue Code of 1986, as amended (the "Code") (and
any analogous state income tax provisions). The BRI Partnership and the
Transferor Members agree to report such transaction for federal and applicable
state income tax purposes consistently with the intent set forth in this Section
1.06.
SECTION 2
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CONSIDERATION
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The consideration for the Membership Interests (the "Consideration
Amount"), subject to the adjustments contained in Section 12 of this Agreement,
shall be determined pursuant to the provisions of Section 2.04, and shall be
paid by the the BRI Partnership to the Transferor Members in the following
manner:
2.01 Deposit.
(a) Simultaneously with the execution of this Agreement, the
the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the
"Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check
(subject to collection) as a Deposit to be held in an interest-bearing escrow
account on account of the Consideration Amount. Said sum, together with any
interest earned thereon, is hereinafter called the "Deposit."
(b) At the Closing, the Deposit shall be returned by the
Escrow Agent to BRI Partnership.
2.02 Balance. At the Closing, the BRI Partnership shall deliver to the
Transferor Members the Base Consideration, plus, if then due, any Additional
Consideration Installments, subject to the adjustments described in Section 12
of this Agreement by federal wired funds. Prior to any delivery to the
Transferor Members of the Base Consideration, there shall be deducted from the
Base Consideration an amount equal to the sum required to pay off the
Construction Loan in full and to remove all other Monetary Liens and
simultaneously with the Closing, the BRI Partnership shall pay off the
Construction Loan. At the Transferor members' option, to be exercised
irrevocably by written notice to the BRI Partnership given at least 15 days
prior to the satisfaction of the Closing Conditions, all or a portion of the
Consideration Amount shall be delivered to the Transferor Members in the form of
BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise
such option, then the number of BRI Partnership Units, the rights and
limitations upon such units and the method by which the units are delivered to
the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b)
and (c) below. If the Transferor Members do not exercise the foregoing option in
a timely manner, all consideration payable under this Agreement shall be paid in
cash by federal wired funds and the following Sections of this Agreement shall
be, without further action by any party, null and void and without any further
force or effect upon the parties: 1.06, 2.02(a) through (c),
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5.34, 6.03, 6.05, 6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04,
11.01(a) (ii), (iii) and (iv) and 11.01(d) (last sentence only), 11.03 and
12.04.
(a) The number of BRI Partnership Units to be issued to the
Transferor Members at Closing shall be that number determined by dividing the
portion of the Consideration Amount to be paid in BRI Partnership Units to each
Transferor Member by the value of one BRI Partnership Unit. The parties agree
that, for purposes of this Agreement, the value of each BRI Partnership Unit
shall be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the ten (10) business days prior to the day which
is five (5) business days before the Closing. If the calculation provided for
above results in a fraction of a BRI Partnership Unit to be delivered to a
Transferor Member, the number of BRI Partnership Units to be delivered shall be
rounded up or down to the nearest whole number of BRI Partnership Units.
Attached hereto as Exhibit I is a schedule (the "Transferor Allocation
Schedule") prepared by the Transferor Members setting forth (i) the name of each
Transferor Member, and (ii) the percentage interest of each Transferor Member,
together with an investor questionnaire in the form attached hereto as Exhibit 5
(the "BRI Questionnaire") for each Transferor Member. In the event that any
Transferor Member would be entitled to a fractional BRI Partnership Unit, the
number of BRI Partnership Units shall be rounded up or down, as the case may be,
to the nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Members all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Members
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Members as
a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Members in accordance with the election made by the Transferor
Members pursuant to Section 2.02. The BRI Partnership shall have no obligation
or liability with respect to the preparation or accuracy of the Transferor
Allocation Schedule.
(b) As used in this Agreement, a "BRI Partnership Unit" shall
mean a unit of limited partnership interest in the BRI Partnership as specified
in the BRI Partnership Agreement. At the time that any Transferor Member elects
to convert BRI Partnership Units to shares as provided in the BRI Partnership
Agreement, the holder of each BRI Partnership Unit shall have the right to have
the BRI Partnership Unit either (i) exchanged for one share of common stock of
BRI pursuant to the transfer provisions of the BRI Partnership Agreement, or
(ii) redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Member shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Members and Berkshire Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI
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Partnership shall deliver to the Transferor Members a certified copy of the
Registration Rights Agreement.
(c) The Transferor Members, acknowledge and agree that after
the execution hereof, the price of the common stock of BRI may increase or
decrease in value as the result of market fluctuations, and that any such
fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in this Section, the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Members in the event of a
decrease or increase in the market value of the common stock of BRI.
2.03 Payment of Monies. Any monies payable under this Agreement, unless
otherwise specified in this Agreement, shall be paid by wire transfer.
2.04 Calculation of Consideration Amount. The Consideration Amount for
the Transferor Membership Interests shall consist of a base consideration amount
("Base Consideration") plus additional consideration installments ("Additional
Consideration Installments").
(a) The Base Consideration for the Transferor Membership
Interests shall be Six Million, Fourteen Thousand, Seven Hundred Seventeen
Dollars ($6,014,717), provided, however, that, it shall be a condition of
Closing that, on the date of Closing, the value of the Property (determined by
dividing Stabilized NOI for the month preceding the date of Closing by the Cap
Rate, as such terms are hereinafter defined) is not less than the Base
Consideration, and if such amount is less than the Base Consideration, Closing
shall be extended until such time as such calculation is not less than the Base
Consideration.
(b) In addition to the Base Consideration, the BRI Partnership
shall pay one or more additional consideration installments (the "Additional
Consideration Installments"), if any, on a quarterly basis with the first
payment, if then due, on the date of Closing and on the first day of each
quarter (defined as a period of three full calendar months, plus, for the first
quarter, any partial calendar month after the date of Closing) thereafter for a
total of 18 full calendar months after the Closing (the "Earn Out Period"). As
of the Closing and as of the first day of each quarter thereafter, Stabilized
NOI shall be determined as provided below, and each Additional Consideration
Installment, if any, will be equal to the Stabilized NOI divided by 8.75% (the
"Cap Rate") and then reduced by the Base Consideration and any prior Additional
Consideration Installments. The maximum Consideration Amount, (i.e. the sum of
the Base Consideration plus all Additional Consideration Installments) shall not
exceed Seven Million, Six Hundred Twenty-Two Thousand, Eight Hundred Fifty-Seven
Dollars ($7,622,857).
(c) Stabilized NOI shall be calculated for purposes of
determining both the Base Consideration and the Additional Consideration
Installments as follows: 12 times the
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monthly actual income for the Property, (provided that if occupancy rates exceed
95%, then actual income shall be calculated as if the Property had an occupancy
rate of 95%) for the month preceding the payment date less Two Hundred
Twenty-Seven Thousand, One Hundred Dollars ($227,100) (representing the
agreed-upon annual Projected Operating Expenses for the Property), provided
that, on the first anniversary of the date of Closing under this Agreement, the
Projected Operating Expenses shall be adjusted by the percentage change in the
CPI-U, U.S. Cities Average for the period from the date of Closing under this
Agreement until the anniversary date.
SECTION 3
---------
THE CLOSING
-----------
3.01 Except as otherwise provided in this Agreement, the delivery of
all documents necessary for the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place in the offices of Hale and Dorr LLP
in Washington, D.C., or such other place as the Transferor Company and the BRI
Partnership shall mutually agree. The "Time of Closing" shall be on that date
specified in Section 3.02 at which all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Members of a so-called Gap Indemnity in the form of Exhibit VI with respect to
the gap in time period between policy issuance and recording, all as provided in
a letter of instruction executed by counsel for the BRI Partnership and counsel
for the Transferor Members. It is agreed that time is of the essence of this
Agreement.
3.02 Closing under this Agreement shall occur on the first business day
of the month after the Transferor Members have given to the BRI Partnership 60
days prior notice (the "Substantial Completion Date Notice") of the occurrence
of the last to occur of (a) the substantial completion of construction of the
Property excluding punch-list items not affecting occupancy (provided Transferor
Members shall thereafter complete all punch-list items at no expense to the BRI
Partnership within 30 days after Closing or within such additional time as may
be reasonably required) ("Completion Date") as evidenced by satisfaction of each
of the following conditions (the "Closing Conditions"): (i) final certificates
of occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Questar Builders, Inc. or such
affiliate of Transferor Members as Transferor Members may designate to be the
general contractor for construction of the Improvements ("Questar Builders")
certifying that the Improvements have been substantially completed in accordance
with the Plans and Specifications and all Codes, as such may be modified from
time to time by the Transferor Company in accordance with this Agreement, or (b)
the Stabilization Date. If a dispute shall exist as to whether substantial
completion has occurred, the dispute shall be promptly submitted to binding
arbitration by a qualified third party mutually acceptable to the parties or, if
they are unable to agree upon a third party, then by arbitrators appointed
pursuant to the applicable rules of the American Arbitration Association.
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3.03 The Stabilization Date for the Property shall be as follows:
The first day of that month which first occurs after 90% of the apartment units
in the Property have been leased for a period of 3 months to Qualified Tenants
at average rents not less than 95% of the pro-forma rents shown on Schedule
3.03; provided, however, that the value of the Property, calculated by dividing
Stabilized NOI (using monthly actual income for the month preceding the date of
Closing) divided by 8.75% is not less than the Base Consideration.
3.04 "Qualified Tenants" are those tenants with annual income equal to
not less than 3 times the annual rent who are in occupancy and have commenced
the payment of rent.
SECTION 4
---------
TRANSFEROR'S PRE-CLOSING DELIVERIES
-----------------------------------
At least thirty (30) days prior to the date of Closing, the Transferor
Company shall deliver or otherwise make available to the BRI Partnership the
following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Company shall provide the BRI Partnership with access on-site to the
originals of all Leases and related lease files.
4.02 Certificates of Occupancy and Permits. Original, final
certificates of occupancy for all buildings in the Property and copies of all
material building permits, zoning variances (if any), certificates of occupancy
(if any), subdivision plats, governmental permits, approvals, certificates and
other licenses lawfully required for the construction, use, occupancy and
operation of the Property.
4.03 Taxes. To the extent in the Transferor Company's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. A set of original Plans and
Specifications, and a copy of all guaranties and warranties made by any person
for the benefit of the Transferor Company with respect to all or any part of the
Property in connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for each completed year occurring at least 120 days
prior to Closing and each completed month of operation thereafter occurring at
least 75 days prior to Closing, and detailed operating statements
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for each completed year occurring at least 120 days prior to Closing and each
completed month of operation thereafter occurring at least 75 days prior to
Closing; provided that all such statements and records shall be provided only
for periods after the Property was first leased and occupied by rent paying
tenants.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related
documents and agreements in respect of all pending litigation, if any, relating
to the Property (excluding litigation commenced against tenants in the ordinary
course of business for evictions or collections).
4.07 Current Rent Roll. The "Rent Roll" which consists of a list of the
current rents now being collected on each of the apartment units in the
Improvements which includes: apartment number, unit status, tenant name,
commencement and termination dates, lease rent, deposits and details of any
concessions, in the form attached hereto as Schedule D.
4.08 Standard Form Lease. A copy of the standard form apartment lease
used in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water
and sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants).
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Company conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Company which shall be attached hereto as Schedule B.
SECTION 5
---------
A. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR COMPANY
-------------------------
The Transferor Company represents, warrants and covenants to the BRI
Partnership, as of the date hereof, as follows:
5.01 Organization and Standing of the Transferor Company. The
Transferor Company is a limited liability company duly organized, validly
existing and in good standing under the
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laws of the State of Maryland. The Transferor Company has all requisite power to
own and operate the Property and to carry on its business as presently being
conducted and as proposed to be conducted. The Transferor Company is duly
qualified to do business in all jurisdictions in which the failure to be so
qualified would have a material adverse effect on the Transferor Company's
business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Company is not in violation of any term
contained in the Transferor Operating Agreement, or to the Transferor Company's
knowledge in any other material instrument or contract to which the Transferor
Company is a party relating to the Property, and to the Transferor Company's
knowledge the Transferor Company is not in violation of any order, statute, rule
or regulation applicable to it, except for such violations which would not have
a Material Adverse Effect. Neither the execution, delivery and performance of
this Agreement by the Transferor Members, nor the contribution of the Transferor
Membership Interests by the Transferor Members hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Operating Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Company, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended
Transferor Company Articles to reflect the transactions contemplated hereby, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Members or the Transferor Company in connection
with the valid execution and delivery of this Agreement by the Transferor
Members and the performance of the Transferor Members' obligations hereunder.
5.04 Company Capitalization. The Transferor Operating Agreement (i) is
the only agreement among the members relating to the organization, operation, or
management of the Transferor Company, (ii) is in full force and effect and (iii)
has not been amended or modified. Exhibit I sets forth an accurate and complete
list of the names and residence addresses of all of the Transferor Members of
the Transferor Company, and the Transferor Members' respective membership
interests in the Transferor Company. Except as set forth on Exhibit I, no other
person or party owns any membership interest in the Transferor Company. No
Transferor Member is in default with respect to any capital contribution
required to be paid by him or it pursuant to the Transferor Operating Agreement.
A true, correct and complete copy of the Transferor Operating Agreement is
attached hereto as Exhibit II. The Transferor Company has no commitment to issue
any right to purchase or acquire or to issue or distribute to any of the
Transferor Members, any evidences of indebtedness or assets; and the Transferor
Company has no obligation, contingent or otherwise, to purchase, redeem or
otherwise acquire any interest in the Transferor Company or any interest therein
or to make any distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Company's knowledge, proceeding or
investigation pending or, to the
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Transferor Company's knowledge, any threat thereof, against the Transferor
Members, the Transferor Company or the Property or any part thereof which
questions the validity of this Agreement or the right of the Transferor Members
to enter into it, or which might result in or have, either individually or in
the aggregate, a material adverse effect on (i) the business of the Transferor
Company as such is presently contemplated; or (ii) the rights represented by the
Transferor Membership Interests. During the period commencing on the date hereof
and ending on the Closing Date, the Transferor Company will promptly inform the
BRI Partnership in writing of any material action, suit, proceeding or
investigation pending, or to the Transferor Company's knowledge, threat thereof
against the Transferor Members, the Transferor Company or the Property or any
part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases to which the Transferor Company
is a party or to which any agent of the Transferor Company is a party on behalf
of the Transferor Company or has entered into on behalf of the Transferor
Company, relating to the Transferor Company or all or a portion of the Property
or otherwise affecting the Property, including without limitation, all material
management, maintenance, brokerage, supply and service contracts (collectively
"Service Contracts") and any material contract agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to or by the Transferor
Company. Except as noted on Schedule E, each Service Contract is cancelable on
thirty (30) days notice. Transferor Company has no knowledge of any material
breach or material default under any Service Contract. As of Closing, the
Transferor Company will have paid all amounts due under each Service Contract,
other than payments for which an adjustment shall be made pursuant to Section 12
hereof.
5.07 Financial Statements. Attached hereto as Schedule F are financial
statements of the Transferor Company, including balance sheets, statements of
operations and statements of partners' capital (collectively, the "Financial
Statements") for the fiscal year ended December 31, 1996 (the "Statement Date").
The Financial Statements fairly present the financial condition of the
Transferor Company as of the Statement Date in accordance with generally
accepted accounting principles consistently applied, and reflect all
liabilities, fixed, contingent or otherwise, required to be disclosed in such
Financial Statements in accordance with generally accepted accounting
principles.
5.08 Title to Properties and Assets. The Transferor Company is the sole
owner of the Property. Except as disclosed in Section 18.01, the Transferor
Company does not own, or otherwise hold any interest in, any material assets
other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Company or to be obtained
by the Transferor Company prior to Closing, no other material license, permit or
authorization is necessary to own and operate the Transferor Company's business
as such is presently conducted and neither the conduct of the
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Transferor Company's business nor any material portion thereof is dependent on
the issuance or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the indebtedness for borrowed money
incurred or to be incurred to acquire and construct the Property (collectively,
the "Construction Loan"), the Transferor Company has no indebtedness for
borrowed money and the Transferor Company has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. No Transferor Member,
nor any affiliate of any Transferor Member nor any employee of the Transferor
Company is presently indebted to the Transferor Company for borrowed money and,
except for the Construction Loan, the Transferor Company is not presently
indebted for borrowed money to any of the foregoing persons. As of the Closing
Date, the Transferor Company shall have no liabilities or obligations (absolute
or contingent) of any kind, other than (a) liabilities and obligations incurred
in the ordinary course of the Transferor Company's business which are either (i)
in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership
in writing; and (b) liabilities resulting from or incurred in the ordinary
course of business arising under the Service Contracts. The Transferor Company
has conducted its business only in the ordinary course and, except for the
Construction Loan, the Transferor Company has not:
(a) created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in
excess of $10,000 (whether or not covered by insurance) to any assets or
properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete
list of all insurance policies of the Transferor Company (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Company has done nothing to reduce or impair the insurance afforded
by the Insurance Policies. To the Transferor Company's knowledge, there are no
material disputes with underwriters of any such Insurance Policies and there are
no pending or threatened terminations with respect to any of such policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Transferor
Company or for which the Transferor Company may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the Transferor Company. All taxes due
with respect to completed and settled examinations or concluded litigation have
been paid.
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(b) The Transferor Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The Transferor Company does not know of (A) any audit or
investigation of the Transferor Company with respect to any liability for taxes
relating to the Transferor Company for which any Transferor Member may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Company.
5.13 Employees. The Transferor Company has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Company has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for those given to the holder of the
Construction Loan, as provided in the Construction Loan Documents, no person
holds a power of attorney from or agency agreement with the Transferor Company.
5.16 Bank Accounts. On or before Closing, the Transferor Company shall
have closed every bank account and safe deposit box of the Transferor Company
for which the Transferor Members or their representatives are signatories, and
no representative of the Transferor Members shall be a signatory on any other
account or safe deposit box of the Transferor Company or shall have the power to
borrow, discount debt obligations, cash or draw checks, or otherwise act on
behalf of the Transferor Company in any dealings with any banks or other
financial institutions.
5.17 Ownership. The Transferor Company has not received any written
notice challenging the validity of the Transferor Company's title to the
Property. The Transferor Company has not granted any rights, options, rights of
first refusal or entered into other agreements of any kind which are currently
in effect for the acquisition of the Property or any part thereof, except for
the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the Stabilization Date, there shall be no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll, to
be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and
correct in all material respects as of the Stabilization Date. Except as
otherwise specifically set forth in the Rent Roll or elsewhere in this
Agreement:
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(a) to the Transferor Company's knowledge, the Leases are in
full force and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has
an option to purchase, right of first refusal, right of first offer or other
similar right in respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period
subsequent to the Closing Date other than for tenants who have executed a lease
prior to Closing but do not move in until after the Closing Date, which
commissions shall be paid by the Transferor Company;
(d) no tenant is entitled to rental concessions or abatements
for any period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Company, except as
set forth on Schedule 5.18 hereof, no action or proceeding instituted against
the Transferor Company by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other
than those set forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in
advance under any lease of any unit in the Property other than as shown on the
Rent Roll;
(h) all brokerage commissions with respect to the Leases shall
have been paid in full by the Closing Date, except as provided in (c) above.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor Company,
no apartment unit is subject to any rent control law, ordinance or regulation.
5.20 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Company or any of the Transferor Members'
affiliates, with respect to the Property (collectively, the "Environmental
Reports"). The Transferor Company has heretofore either furnished to the BRI
Partnership or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in the
Environmental Reports and the reports to be obtained by the BRI Partnership in
accordance with Section 1.05 hereof (the "BRI Environmental Reports"), the
Transferor Company has not received any written notice from any
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governmental entity or other person that the Property, or current or
former operations on the Property, are not or have not been in material
compliance with any Environmental Laws or that the Transferor Company has any
material liability with respect thereto. To the Transferor Company's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Company's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Company nor
the Property is in violation in any material respect of any Environmental Laws
and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. s. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. s. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. s. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. s. 2601 et seq.; the Clean Air Act (42
U.S.C. s. 9402 et seq.); the Clean Water Act (33 U.S.C. s. 1251 et seq.); the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. s. 136 et seq.);
the Occupational Safety and Health Act (29 U.S.C. s. 651 et seq.); and all other
applicable federal, state and local environmental laws (including, without
limitation, obligations under the common law), ordinances, orders, rules and
regulations, as any of the foregoing may have been amended, supplemented or
supplanted prior to the Closing, relating to regulation or control of hazardous,
toxic or dangerous substances, materials or wastes (collectively, "Hazardous
Materials"), or their handling, storage or disposal or to environmental health
and safety.
5.21 Permits and Compliance with Laws. Upon completion of construction
of the Improvements, all approvals, consents, permits, licenses or certificates
of occupancy (whether governmental or otherwise) required for the use, operation
and occupancy of the Property shall have been granted to the Transferor Company
and shall be in full force and effect, and any fees and charges shall have been
fully paid. Upon completion of construction of the Improvements, the Property
shall be in compliance in all material respects with all zoning, building,
health, traffic, fire safety, flood control, handicap and other laws,
regulations and ordinances of all governmental authorities having jurisdiction
over the Property (collectively "Codes"). To the Transferor Members' knowledge,
no governmental authority has a current plan, including without limitation, a
condemnation, a widening change of grade or limitation on use of streets, a
special assessment or a change in zoning classification, that would adversely
affect the continued use and operation of the Property as currently used and
operated except as would not have a Material Adverse Effect. The parties agree
that all matters relating to compliance with Environmental Laws shall be covered
by Section 5.20 and not by this Section 5.21.
5.22 Utilities. Upon completion of construction of the Improvements,
all utilities and all public and quasi-public improvements upon or adjacent to
the Property (including, without
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limitation, all applicable electric lines, sewer and water lines, and telephone
lines) shall be installed, and shall comply in all material respects with the
requirements of the Plans and Specifications and all applicable Codes, and all
necessary easements, permits, licenses and agreements in respect of any of the
foregoing shall be installed and operating and all installation and connection
charges, to the extent due and payable, shall have been paid for in full.
5.23 Assessments. Except as disclosed in the tax bills delivered to the
BRI Partnership pursuant to Section 4.03 hereof, to the knowledge of the
Transferor Company, no special assessments for public improvements have been
made against the Property which are unpaid, including, without limitation, those
for construction of sewer and water lines, streets, sidewalks and curbs.
5.24 Pre-Closing Deliveries Accurate. All of the materials to be
delivered by the Transferor Company to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits when delivered, will be true,
accurate and complete in all material respects.
5.25 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the Transferor Company's knowledge,
threatened against the Transferor Company, nor are any of such proceedings,
against or by the Transferor Company, anticipated or contemplated by the
Transferor Company.
5.26 Liens. The Transferor Company agrees to keep the Property free
from mechanics and materialmen's liens or other liens or encumbrances occasioned
by the actions of the Transferor Company or its contractors or subcontractors
and agrees to indemnify and save BRI Partnership harmless from any such liens or
encumbrances and all attorneys' fees and other costs and expenses incurred by
reason thereof.
5.27 Essential Facilities. Except as set forth in Schedule 5.27, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.27, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.28 Legal Access. There is, or prior to Closing will be, direct legal
access from a public way to the Property. Upon completion of construction of the
Improvements, all necessary curb cuts, access permits and other governmental
approvals required to provide such access shall have been issued and shall be in
full force and effect.
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5.29 Public Improvements. To the best knowledge of the Transferor
Company and except as shown on the Plans and Specifications, there are no
written or proposed plans to widen, modify, or realign any street or highway or
any existing or proposed eminent domain proceedings which would affect the
Property in any way that would have a Material Adverse Effect. To the best
knowledge of the Transferor Company, there are no presently planned public
improvements which would result in the creation of a special improvement or
similar lien upon the Property.
5.30 Condition of Improvements. The Property, including, without
limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical,
HVAC systems and equipment, plumbing, drainage and heating systems and other
mechanical systems, shall at the time of Closing be in good order and operating
condition, subject to normal wear and tear, and will be constructed
substantially in accordance with (i) the Plans and Specifications, (ii) all
applicable Codes, permits, approvals, title encumbrances and insurance
requirements and (iii) accepted standards of good materials and workmanship. As
of the time of Closing, there will be no physical or mechanical defects having a
Material Adverse Effect on the use or marketability of the Property and no
condition which impairs or could impair, the structure of the Property or
renders it in noncompliance with the requirements of this Agreement. No fire or
other casualty shall have occurred on any of the Property, the damage related to
which has not been repaired or restored to the condition the Property was in
prior to such fire or other casualty.
B. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR MEMBERS
-------------------------
Each of the Transferor Members on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof,
as follows:
5.31 Authorization. Such Transferor Member has full power and authority
to enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Members Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Member under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Members
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Member in accordance with their respective terms.
5.32 Additional Authorization. No approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Member of
the Transferor Membership Interests held by such Transferor Member and the
performance of such Transferor Member's obligations under this Agreement.
5.33 Membership Interest. Except as provided in this Agreement and the
Transferor Operating Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Membership Interests held by such Transferor Member is
authorized or outstanding. Except as
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disclosed on Schedule 5.33, such Transferor Member owns and holds the Transferor
Membership 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 5.33 will be paid in full. Upon the
Closing, good, valid, marketable, and indefeasible title to such Transferor
Membership Interests shall be vested in the BRI Partnership free and clear of
any lien, claim, charge, pledge, encumbrance, limitation, agreement or
instrument whatsoever. The provisions of this Section 5.33 shall survive the
Closing indefinitely.
5.34 Investment Representations and Warranties. Each Transferor Member
for itself, severally and not jointly, represents, warrants, acknowledges and
agrees as follows:
(a) Such Transferor Member is acquiring the BRI Partnership
Units for investment only to be received by it for its own account and not with
any view to the sale or distribution of the same or any part thereof in
violation of the Securities Act of 1933, as amended (the "Act") and it will not
sell or otherwise dispose of such BRI Partnership Units except in compliance
with the registration requirements or exemption provisions of any applicable
securities laws and in accordance with the terms of the BRI Partnership
Agreement and the Registration Rights Agreement.
(b) Such Transferor Member understands that the BRI
Partnership Units to be issued to each Transferor Member will not be registered
under the Act, or the securities laws of any state ("Blue Sky Laws") by reason
of a specific exemption or exemptions from registration under the Act and
applicable Blue Sky Laws and that BRI's and the BRI Partnership's reliance on
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Transferor Member.
(c) Such Transferor Member acknowledges and agrees that, for
the reasons set forth in Sections 5.34(a) and (b) above, the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units) may not be offered, sold, transferred, pledged, or otherwise disposed of
by such Transferor Member except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-action letter issued by the Securities and Exchange Commission to the effect
that a proposed transfer of the BRI Partnership Units (or shares of common stock
issued upon exchange of the BRI Partnership Units) may be made without
registration under the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the
case may be, receiving an opinion of counsel knowledgeable in securities law
matters (and which opinion and counsel shall be reasonably acceptable to both
the BRI Partnership and BRI) to the effect that the proposed transfer is exempt
from the registration requirements of the Act and any applicable Blue Sky Laws,
and that, accordingly, such Transferor Member must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Member acknowledges, represents and agrees that
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(i) its economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business matters
sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership, its
affiliates or its other legal counsel and advisors for any explanation of the
application of the various United States or state securities laws or tax laws
with regard to its acquisition of the BRI Partnership Units. Such Transferor
Member further acknowledges and represents that it has made its own independent
investigation of the BRI Partnership and the business conducted or proposed to
be conducted by the BRI Partnership.
(d) Such Transferor Member is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Act.
(e) Such Transferor Member understands that an investment in
the BRI Partnership and BRI involves substantial risks. Such Transferor Member
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Member acknowledges and agrees that:
(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 Member's principal residence or principal place of business, and such
Transferor Member has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.34 shall survive the
Closing indefinitely.
5.35 Receipt of Documents. Such Transferor Member has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
---------
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
-------------------------------------------------
The BRI Partnership represents, and warrants and covenants to the
Transferor Members as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Members prior to the execution of this Agreement, is a true, correct and
complete copy of said BRI Partnership Agreement as amended to date. The BRI
Partnership Agreement, as so delivered or made available, has not been modified
and is in full force and effect in accordance with its terms as of the date
hereof.
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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 Company true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year ended adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the BRI Partnership in connection with the valid execution and
delivery of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
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6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is
the only agreement among the partners relating to the organization, operation,
or management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Members free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the BRI
Partnership or for which the BRI Partnership may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely field, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the BRI Partnership. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The BRI Partnership has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or
investigation of the BRI Partnership with respect to any liability for taxes
relating to the BRI Partnership for which any BRI Partner may be liable, or (B)
any threatened claims or assessments for taxes against or relating to the BRI
Partnership.
(d) The BRI Partnership has previously delivered to the
Transferor Company a true and complete copy of the BRI Partnership's Federal
Income Tax Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the BRI Partnership's knowledge,
threatened against the BRI Partnership, nor are any of such proceedings
anticipated or contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof, did
not contain an untrue statement of material fact or omit to state a material
fact required to be stated
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December
31, 1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or
prior to Closing will provide, for the issuance of the BRI Partnership Units.
The BRI Partnership Units to be issued in connection with the transactions
herein contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Members, and on
the date of their issuance pursuant to the terms and conditions hereof will be
validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Company otherwise in writing) and represents that
there are no other documents known to the BRI Partnership which are required to
be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is
no material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI 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
Company shall maintain its present insurance on the Property which insurance in
respect of fire and casualty shall be covered by a standard All-Risk Policy in
the amounts as currently insured. A certificate or certificates of such
insurance shall be provided to the BRI Partnership upon written request by the
BRI Partnership. Subject to the provisions of Section 7.02, the risk of loss in
and to the Property shall remain vested in the Transferor Members until the Time
of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty and
are not restored by the Transferor Company prior to the Time of Closing, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Members at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such
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termination; or (b) proceed with the contribution and transfer of the Transferor
Membership Interests, and in such case, unless the Transferor Members shall have
previously restored the Property to its condition prior to the occurrence of any
such damage or destruction, the Transferor Members shall pay over or assign to
the BRI Partnership, on behalf of the Transferor Company, all amounts received
or due (plus an amount equal to any deductible under any insurance policy
covering the Property) from, and all claims against, any insurance company or
governmental entity as a result of such destruction or taking and there shall be
no adjustment to the Consideration hereunder. If prior to the Time of Closing,
any such damage or destruction shall occur having a replacement cost of less
than $750,000.00, or if any such damage or destruction shall occur and be
restored by the Transferor Company prior to the Time of Closing, or if any
eminent domain notice or proceeding is commenced which does not affect any
material portion of the Property, the BRI Partnership shall proceed to accept
the contribution and transfer of the Transferor Membership Interests in
accordance with the provisions of clause (b) above.
SECTION 8
---------
VIOLATIONS OF LAW
-----------------
8.01 Responsibility for Violations. All notices of material violations
of laws, ordinances, regulations or insurance requirements ("Violations of
Law"), which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall be removed or complied with by the Transferor Company, at the
expense of the Transferor Company, prior to the Closing Date.
SECTION 9
---------
OBLIGATIONS PRIOR TO CLOSING
----------------------------
The Transferor Company covenants that between the date of this
Agreement and the Closing Date:
9.01 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall, if necessary, be repaired or
otherwise maintained in accordance with the Transferor Company's usual and
customary practice without regard to the Closing contemplated by this Agreement.
9.02 Service Contracts. The Transferor Company shall not enter into any
new service contract for the Property, without the prior written consent of the
BRI Partnership which consent shall not be unreasonably withheld or delayed,
provided no consent shall be required with respect to any of the foregoing so
long as such service contract is terminable without penalty by the then owner of
the Property upon not more than thirty (30) days' notice.
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9.03 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.04 Tax Procedure. Except as to real property tax assessment appeal
proceedings now or hereafter filed by the Transferor Company to reduce real
property tax assessments, the Transferor Company shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Members and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Members, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.05 Property Operating and Maintenance. The Transferor Company shall
lease, manage, maintain and operate the Improvements in the ordinary course of
business. Without limiting the generality of the foregoing, the Transferor
Company shall perform all ordinary maintenance and repair of the mechanical,
electrical and plumbing facilities and equipment within the Improvements so as
to keep such facilities in good operating condition and repair, taking into
account ordinary wear and tear; and to the extent any such facilities or
equipment have heretofore been serviced under a Service Contract, the Transferor
Company shall keep such Service Contracts in full force and effect up to
Closing. For purposes hereof, the parties agree that the Transferor Company has
retained or will retain the BRI Partnership or its affiliate (the "Management
Company") as the manager for the Property pursuant to the Management Agreement
attached hereto as Exhibit 7. The parties agree that the Management Agreement
shall remain in effect until the expiration of the Earn Out Period and, until
then, may not be modified, amended or terminated without the consent of both
parties. Notwithstanding that the BRI Partnership is or will become the owner of
the Management Company, until the expiration of the Earn Out Period, the
Transferor Members shall have control over the activities of the Management
Company and its personnel (including both on-site and managerial) with respect
to the Property, including but not limited to, appointment, hiring, firing,
supervision and compensation (both base and incentive, of personnel, operation,
marketing, promotions and advertising, hours of operation and all other
decisions as to the Property and its leasing and management; provided that such
control shall be exercised in a commercially reasonable manner as compared with
comparable properties in comparable locations. To facilitate this continued
control, BRI Partnership agrees that Patrick Connelly, currently a vice
president of The Questar Management Company, shall remain employed by the
Management Company until the expiration of the Earn Out Period, his principal
place of employment shall remain at the principal regional office of the
Transferor Company and he shall devote such efforts to the Property as the
Transferor Members shall require. Notwithstanding the foregoing, if the
employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then
the Transferor Members at their
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option, may elect (a) to terminate the management agreement with BRI Partnership
and either manage, lease and operate the Property on their own behalf or retain
such other persons or entities to do so as they deem appropriate on
substantially the same terms (including, but not limited to, the same management
fee) as are provided in the management agreement with BRI Partnership, and (b)
to attempt to recruit Patrick Connelly as their full-time employee.
9.06 Lease Amendments. The Transferor Company shall not amend, alter,
modify or vary the terms and provisions of any of Leases except in the ordinary
course of business, without first obtaining the written consent of the BRI
Partnership, which consent shall not be unreasonably withheld or delayed.
9.07 New Leases. From and after the date hereof, the Transferor Company
shall not make, execute nor permit any new Lease for any apartment in the
Property without first obtaining the written consent of the BRI Partnership,
unless such Lease (i) is on the form lease provided to the BRI Partnership, and
(ii) is with a Qualified Tenant.
9.08 Preservation of Partnership Business. On and after the date
hereof, except with the prior written consent of the BRI Partnership or as
otherwise provided in this Agreement, the Transferor Company shall not cause,
acquiesce in, or agree to:
(a) a material amendment, modification, termination or
cancellation of the Transferor Operating Agreement without the prior written
consent of the BRI Partnership, which shall not be unreasonably withheld or
delayed, provided that such amendment modification, termination or cancellation
does not adversely affect the BRI Partnership's rights under this Agreement;
(b) any willful action by the Transferor Company which would
render any of representations and warranties contained in Section 5 hereof
untrue in any respect at and as of the Closing Date with the same effect as
though such representations and warranties had been made at and as of the
Closing Date;
and, except with the prior written consent of the BRI Partnership, the
Transferor Company shall not cause, acquiesce in or agree to any action allowing
the Transferor Company taking or agreeing to take any of the following actions:
(c) merge or consolidate with any other entity or permit any
other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets of
any other person, partnership, corporation, or business organization;
(d) except in the ordinary course of business and consistent
with past practices, enter into any contract, transaction or agreement which
shall survive the Closing (except as permitted by Section 9.02); or
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(e) enter into any agreement, transaction or arrangement with
any affiliate that will survive the Closing; or
(f) subject any portion of the Property to any option contract
or sales contract.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Company shall conduct
its business only in the ordinary course and do the following:
(a) Subject to the provisions of Section 8.01 hereof, comply
with all regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with
reputable insurers, which in respect of amounts, types and risks insured is that
which its management reasonably believes to be adequate for the business
conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of
the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(d) Unless it is contesting the same in good faith and has
established reasonable reserves therefor, pay when required to be paid all taxes
indicated by its tax returns or otherwise lawfully levied or assessed upon it,
or any of its properties or assets, or which it is otherwise legally obligated
to pay;
(e) Comply in all material respects with each and every
undertaking, covenant and obligation of landlord under the Leases, including up
to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other
material obligations incurred by the Transferor Company in connection with the
use and ownership of the Property up to the date of Closing.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Company will give the BRI Partnership and their
attorneys, accountants, and other representatives reasonable access to
Transferor Company's personnel and all properties, documents, contracts, books,
and records of the Transferor Company, relating to the consummation of the
transactions contemplated hereunder and will furnish the BRI Partnership with
copies of such documents (certified by the Transferor Company if so requested)
and with such information with respect to the affairs of the Transferor Company
as the BRI Partnership may from time to time reasonably request.
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SECTION 10
----------
TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND
-------------------------------------------
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
---------------------------------------------------
10.01 Closing, Deliveries and Obligations. At or prior to the Closing,
the Transferor Members shall deliver the following to the BRI Partnership (the
"Transferor Members Closing Documents"):
(a) Assignment of Transferor Membership Interests. An
assignment of the Transferor Membership Interests from each of the respective
Transferor Members to the BRI Partnership in the form of the Transferor
Assignment attached hereto as Exhibit III, duly executed and delivered by each
of the Transferor Members, which shall transfer the Transferor Membership
Interests to the BRI Partnership free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party.
(b) UCC Search - Transferor Members. A Uniform Commercial Code
lien search for each of the Transferor Members, indicating that the membership
interest of each Transferor Partner in the Transferor Company is unencumbered by
any security interest therein and the cost of which shall be paid by BRI
Partnership.
(c) Amended Transferor Operating Agreement and Articles. The
Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended
and Restated Transferor Company Articles in the form of Exhibit V hereto duly
executed and delivered by the Transferor Members, pursuant to which the
Transferor Members shall withdraw as members from the Transferor Company.
(d) Opinion. An opinion of counsel satisfactory to the BRI
Partnership to the effect that the Transferor Company has been duly formed in
accordance with Maryland law and is validly existing and in good standing under
such laws, that the Transferor Members are all of the members of the Transferor
Company, that no state transfer taxes, sales tax, excise tax or transfer stamps
are required to consummate the transactions contemplated by this Agreement and
as to such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Members.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI
Partnership Amendment in the form of Exhibit 3 attached hereto, duly executed
and delivered by the Transferor Members and a BRI Questionnaire, in the form of
Exhibit 5 attached hereto, duly executed by each of the Transferor Members.
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(f) Occupancy Permit. Final Certificates of Occupancy from the
local authority having jurisdiction over the construction and occupancy of the
Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable
to the BRI Partnership, that all real estate taxes and personal property taxes
and special assessments, if any, affecting the Property, which are due and
payable at the Closing have been paid unless contested in good faith and
reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together
with photocopies of all rent records (including an updated Rent Roll in the same
format as the Rent Roll attached as Schedule D dated as of the last day of the
month preceding the month in which the Closing occurs), and related documents in
the possession or under the control of the Transferor Company. Such records
shall include a schedule of all cash security deposits and credit to the BRI
Partnership in the amount of such security deposits, including interest thereon,
if any, held by the Transferor Company at the Closing Date under the Leases and
a schedule updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications and Licenses. An as-built set of
original Plans and Specifications together with original copies (or photocopies
if original copies are unavailable to the Transferor Company) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Company shall also deliver: original copies of all
certificates, licenses, permits, authorizations and approvals issued for or with
respect to the Property by governmental and quasi-governmental authorities
having jurisdiction, except that photocopies may be substituted if the originals
are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each
Transferor Member in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and to omit from its title insurance policy all exceptions for (i) judgments,
bankruptcies or other returns against persons or entities whose names are the
same as or similar to the Transferor Company's name; (ii) parties in possession
other than under the rights to possession granted under the Leases; and (iii)
mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed
by the Transferor Members, advising the tenants under the Leases of the transfer
of ownership of the Transferor Company to the BRI Partnership and directing that
all rents and other payments thereafter becoming due under the Leases be sent as
the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A
certificate by the Transferor Members to the effect that, to its knowledge, all
of the representations and warranties of the Transferor Company set forth in
this Agreement remain true and correct as of the Closing Date.
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(m) Evidence of Existence and Authority. A certificate issued
by the Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Company.
(n) Non-Foreign Affidavit. The Transferor Members shall
execute and deliver to the BRI Partnership and the BRI Partnership's counsel, at
Closing such evidence as may be reasonably required by the BRI Partnership to
show compliance by the Transferor Members with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Construction Contract Retentions. Final mechanics' lien
waivers from the general contractor and subcontractors covering at least 95% of
the construction cost, together with an amount equal to 125% of all unpaid
retentions and disputed amounts under the Construction Contract, which amount
shall be placed in an escrow account with the Escrow Agent to be released on a
monthly basis to pay amounts coming due under the Construction Contract to the
general contractor, all subcontractors and material suppliers; provided that any
request for payment shall be accompanied by all documentation required as a
prerequisite to payment under the Construction Contract, including lien waivers,
and further provided that payment of any retention shall be subject to receipt
of final lien waivers and acknowledgments of payment in full executed by the
general contractors, all subcontractors and material suppliers. In any event,
the Transferor Members shall remain liable for payment of all such unpaid
retentions and disputed amounts to the extent not covered by the escrow, which
obligation shall survive Closing.
(p) UCC Search - Property. A Uniform Commercial Code lien
search showing no Uniform Commercial Code filing (other than in respect of the
Loan Documents) or judgment or tax lien filings against the Transferor Company
with respect to the Property, which searches shall be dated not earlier than
thirty (30) days prior to the Closing and the cost of which shall be paid by the
BRI Partnership.
(q) Certificate of Completion. The original certificate of
substantial completion required under Section 3.02.
(r) Questar Builders Warranty. An original one year
construction warranty for the Improvements to be provided by Questar Builders,
Inc., which construction warranty shall be identical to that required under the
standard AIA Construction Contract substantially in the form of Exhibit X
hereto.
(s) Warranties and Guarantees. Originals of all warranties and
guarantees provided by subcontractors and material suppliers for the
Improvements.
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(t) Other Documents. Such other documents, instruments or
agreements which the Transferor Members are required to deliver to the BRI
Partnership pursuant to any other provisions of this Agreement or which the BRI
Partnership may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the BRI Partnership title to the Transferor Membership
Interests. The provisions of this Section 10.01(t) shall survive the Closing
indefinitely.
10.02 The Transferor Members' Expenses. The Transferor Members shall
pay all of the fees and expenses of their own separate legal, tax or other
advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor
Member agrees that such Transferor Member will notify the Transferor Company in
writing on or prior to the Closing Date if any of the representations and
warranties of such Transferor Member cease to be true and correct on and as of
the Closing Date. Each Transferor Member further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Company, the
representations and warranties of such Transferor Member shall be deemed to be
true and correct on and as of the Closing Date and that the BRI Partnership and
the Transferor Company shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Members. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor Member,
hereby agrees that until the tenth (10th) day following the first anniversary of
the Closing:
(a) each Transferor Member shall continue to own and hold, and
shall not assign, transfer, distribute to its partners or otherwise dispose of
any of the BRI Partnership Units received by it pursuant to this Agreement
except to the extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Member shall transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton
Gorn, Stephen M. Gorn and John B. Colvin given to the BRI Partnership pursuant
to the Pledge Agreement (described on Schedule K), no Transferor Member shall
mortgage, pledge, create a security interest in or lien on or otherwise
hypothecate or encumber any of such BRI Partnership Units except as permitted
under the BRI Partnership Agreement;
(d) the provisions of this Section 10.04 shall survive the
Closing indefinitely.
10.05 Indemnification.
(a) The Transferor Members' Indemnity. In the event the
parties proceed to Closing, each Transferor Member agrees, severally and not
jointly, to indemnify and hold the
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BRI Partnership harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the BRI Partnership subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the Transferor Company set forth in Section 5A or
of such Transferor Member set forth in Section 5B or (B) resulting from any
breach or default by the Transferor Company or such Transferor Member of any
obligation of the Transferor Company or such Transferor Member under this
Agreement or (ii) from liabilities for borrowed money incurred by the Transferor
Company or the Property prior to the Closing; provided that no Transferor Member
shall be required to indemnify the BRI Partnership for any amounts in excess of
50% of the fair market value of the BRI Partnership Units received by such
Transferor Member as of the date such indemnification obligation is satisfied
(except for indemnification obligations with respect to representations of each
of the Transferor Members in Section 5.33, which shall be limited to 100% of the
fair market value as of the date such indemnification obligation is satisfied of
the BRI Partnership Units received by such Transferor Member) (collectively, the
"Cap"); and provided further that to the extent any of the Transferor Members
have any indemnification obligation to the BRI Partnership, the Transferor
Members may elect to satisfy such indemnification obligation by directing the
BRI Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Member pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or canceled) equal
to the indemnification obligation of such Transferor Member.
(b) The BRI Partnership's Indemnity. In the event the parties
proceed to Closing, the BRI Partnership agrees to indemnify and hold the
Transferor Members harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Members, subsequent to
the Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Company or the Property after the Closing (except for such liabilities resulting
from a breach or default by the Transferor Members or the Transferor Company for
which the BRI Partnership is indemnified under Section 10.05(a) above); provided
that the BRI Partnership shall not be required to indemnify any Transferor
Member under this Section 10.05(b)(i) for any amounts in excess of 50% of the
fair market value as of the date such indemnification obligation is satisfied of
the BRI Partnership Units received by such Transferor Member (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Member).
(c) The indemnification obligations of the Transfer Members
and the BRI Partnership, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 16.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable insurance
proceeds actually received by, and other savings that actually reduce the impact
of losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor
Members shall have any liability for claims made under Section 10.05(a) or
10.05(b) unless and until the aggregate amount of all losses incurred exceeds
$50,000 (in which case the indemnifying party shall be liable for the portion of
losses exceeding $50,000).
(f) The indemnification provided in this Section 10 shall be
the sole and exclusive remedy after the Closing Date for damages available to
the BRI Partnership or the Transferor Members for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Company or the Property.
(g) Each of the Transferor Members, the Transferor Company and
the BRI Partnership acknowledge and agree that, unless otherwise agreed to in
writing by all the parties, from and after the Closing, each of the parties
hereto will be deemed to have waived any right to seek indemnification hereunder
from the other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the
Transferor Company shall terminate for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code and its tax year shall close on the Closing
Date. The Transferor Members shall prepare and timely file any federal, state,
local and foreign tax or information returns due after Closing that are required
to be filed by or on behalf of the Transferor Company with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Members
shall prepare and timely file the terminating tax returns for the Transferor
Company resulting from the consummation of the transactions contemplated under
this Agreement, provided, however, that such tax returns shall be prepared in
accordance with the terms and provisions of this Agreement and provided further,
that prior to the filing thereof the Transferor Members shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Members in obtaining such data and information regarding
the Transferor Company to permit the Transferor Members to prepare such returns
or to respond to any audits or assessments for the periods covered by such
returns.
SECTION 11
----------
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
-------------------------------------
AND POST-CLOSING AGREEMENTS
---------------------------
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
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(a) Transfer of Consideration; Execution and Delivery of BRI
Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver
to the Transferor Members (i) the Base Consideration and, if applicable, the
Additional Consideration Installments, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended
Transferor Operating Agreement and Amended Transferor Company Articles. Deliver
to the Transferor Members (i) the Transferor Assignments duly executed by the
BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended
Transferor Company Articles duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Company.
(c) Record Amended Transferor Company Articles. Cause the
Amended Transferor Company Articles to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the
Transferor Members to the effect that the BRI Partnership has been duly formed
in accordance with Delaware law and is validly existing and in good standing
under such laws, that the BRI Partnership Amendment has been duly executed and
delivered, that no state transfer taxes, sales tax, excise tax or transfer
stamps are required in connection with the issuance of the BRI Partnership Units
to the Transferor Members as contemplated by this Agreement and as to such other
matters as are customarily required in Baltimore, Maryland in connection with
the transactions contemplated under this Agreement. The opinion shall also
provide that, based solely on a certification of BRI, commencing with BRI's
taxable year ending December 31, 1991, BRI has been organized in conformity with
the requirements for qualifications as a "real estate investment trust" and its
method of operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver
to the Transferor Members a certificate by the BRI Partnership to the effect
that all of the representations and warranties of the BRI Partnership set forth
in this Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued
by the Secretary of State of the State of Delaware dated no earlier than 30 days
prior to the Closing Date certifying as to the good standing and valid existence
of the BRI Partnership.
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(g) BRI Partnership Agreement. Deliver to the Transferor
Members a true and correct copy of the BRI Partnership Agreement, as amended and
in effect on the Closing Date, certified as such by an officer of the general
partner of the BRI Partnership.
(h) Other Documents. Such other documents, instruments or
agreements which the BRI Partnership is required to deliver to the Transferor
Members pursuant to any other provisions of this Agreement or which the
Transferor Members may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the Transferor Members title to the BRI Partnership Units.
The provisions of this Section 11.01(h) shall survive the Closing indefinitely.
11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC
search costs and (v) all other Closing costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Members,
in their capacity as a limited partner of the BRI Partnership and so long as the
Transferor Company has not dissolved, terminated or liquidated, the right to
receive the Transferor Membership Interests as a distribution in kind in
satisfaction of the Transferor Members' distribution rights under Section 8.2 of
the BRI Partnership Agreement. If the Transferor Membership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Members.
(b) Until the expiration of the period (the "No Transfer
Period") ending on the earlier of (I) such time as all of the Transferor Members
have redeemed all of the BRI Partnership Units received by the Transferor
Members hereunder for cash or for shares of BRI common stock or (II) seven (7)
years from the Closing Date, neither the BRI Partnership nor BRI shall allow the
sale or transfer of either the Transferor Membership Interests or the Property,
except for (i) transfers that are fully tax-free to partnerships in which the
BRI Partnership has an interest, (ii) exchanges that are fully tax-free pursuant
to Section 1031 of the Code (iii) involuntary transfers which shall include,
without limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation
or a liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period; and (iv) voluntary
transfers arising in connection with any financing or refinancing of the
Property, which shall include, without limitation, a mortgage, deed of trust, or
any other related financing liens or security interests, the parties
affirmatively acknowledging that there shall be no restriction on the financing
or refinancing of the Property by the BRI Partnership.
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(c) The provisions of this Section 11.03 shall survive the
Closing indefinitely.
SECTION 12
----------
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
-----------------------------------------------
12.01 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and, the net amount of such prorations and
apportionments shall be paid in cash at Closing by the party owing such amount
to the other party unless the Transferor Members have made an election to
receive BRI Partnership Units, in which event such proration and apportionments
shall be settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges,
sewer rents and vault charges, if any, on the basis of the fiscal period for
which assessed, except that if there is a water meter on the Property,
apportionment on the Closing Date shall be based on the last available reading,
subject to adjustment after the Closing on a per diem basis, when the next
reading is available;
(c) charges or prepayments under transferable Service
Contracts; and
(d) all other income and expenses relating to the Property,
including without limitation, income from cable television services as are
customarily adjusted in real estate transactions of this size and type in
Baltimore, Maryland.
If as of the Closing Date, any items of income or expense attributable
to the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor
Members and the BRI Partnership shall prepare and exchange preliminary
calculations of all adjustments and prorations to be made pursuant to this
Section 12. The Transferor Members and the BRI Partnership shall cooperate in
the furnishing of all information and documentation necessary to prepare such
calculations. If the Transferor Members have elected to receive BRI Partnership
Units pursuant to Section 2.02, then prior to Closing, the Transferor Members
shall deliver to the BRI
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Partnership the final Transfer Allocation Schedule (the "Transfer Allocation
Schedule"), which shall be based upon the Preliminary Transfer Allocation
Schedule, shall incorporate all adjustments and prorations to be made pursuant
to Section 12 and shall set forth (i) the name of each Transferor Member, and
(ii) the number of BRI Partnership Units to be received by each Transferor
Member. The BRI Partnership shall have no obligation or liability with respect
to the preparation or accuracy of the Preliminary Transferor Allocation Schedule
or the Transfer Allocation Schedule or the distribution of the BRI Partnership
Units or the BRI Additional Payment, if applicable, to the Transferor Members
and the Transferor Members hereby release the BRI Partnership from any such
obligation or liability.
Subject to Section 12.04, all cash (including any escrow deposits)
shall be used by the Transferor Company to pay amounts payable by the Transferor
Company and/or distributed to the Transferor Members prior to Closing, and if
any of such cash applicable to preclosing periods is not removed from the
Transferor Company prior to Closing, the BRI Partnership shall hold such cash as
agent for the Transferor Members and refund such cash to the Transferor Members
subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Company shall distribute the
right to receive such rent to the Transferor Members immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Members in
collecting such rents. Rents received from such tenant after the Closing shall
be applied in the following order of priority: (a) first to the month in which
the Closing occurred; (b) then to any month or months following the month in
which the Closing occurred until all unpaid rents have been paid in full; and
(c) then to the period prior to the month in which the Closing occurred. After
Closing, the BRI Partnership shall cause the Transferor Company to use
reasonable efforts to collect delinquent rents attributable to the period prior
to the month in which Closing occurred, provided such efforts shall not require
the commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Members or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Company shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Members owe an amount
to the BRI Partnership, the Transferor Members shall have the right to elect to
adjust for such amounts owing by the Transferor Members to the BRI Partnership
in the form of BRI Partnership Units rather than
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cash. In addition, if as a result of the prorations and apportionments set forth
in Section 12.01, the BRI Partnership owes an amount to the Transferor Members,
such amount shall be paid in the form of BRI Partnership Units rather than cash,
if the Transferor Members have elected under Section 2.02 to receive BRI
Partnership Units. The Transferor Members shall notify the BRI Partnership at
least seven (7) business days prior to the Closing Date of the manner in which
the Transferor Members shall have elected to settle adjustments under this
Section 12.
SECTION 13
----------
FAILURE TO PERFORM
------------------
13.01 Defective Title or Condition. If the Transferor Members are
unable to give title or to contribute and transfer the Transferor Membership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Membership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Members on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the
right to elect, in its sole discretion, on the Closing Date, to accept such
title as the Transferor Members can deliver to the Transferor Membership
Interests and the Property in its then condition and to deliver in exchange
therefor the Consideration Amount then required to be paid subject to reduction
of the Consideration Amount by the amounts required to remove all Monetary
Liens.
13.03 Transferor Default. If the Transferor Company or any of the
Transferor Members default in the performance of their obligations under this
Agreement, or if any representation or warranty of the Transferor Company or the
Transferor Members is false or misleading (a "Transferor Default"), the BRI
Partnership shall be entitled to exercise any or all remedies as may be
available at law or in equity on account thereof, including, but not limited to,
an action for specific performance or an action for money damages. By their
execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby
guarantee the performance by the Transferor Company of all of its obligations
hereunder and, as part of such guaranty, shall be jointly and severally liable
with the Transferor Company of the payment of all damages to which BRI
Partnership may be entitled.
13.04 The BRI Partnership's Default. If the BRI Partnership defaults in
performing any of its obligations hereunder, then the Transferor Members shall
be entitled to exercise any or all remedies as may be available at law or in
equity on account thereof, including, but not limited to, an action for specific
performance or an action for money damages.
SECTION 14
----------
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BROKERAGE FEES
--------------
14.01 Brokerage Fees. The Transferor Company and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Company understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of QPI and the Related
Entities in accordance with the provisions of the Related Agreements. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Company have any obligation to pay any
commission to APC.
SECTION 15
----------
NOTICES
-------
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Members or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
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 Members c/o Questar Properties, Inc.
124 Slade Avenue, Suite 200
Baltimore, MD 21208
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.
SECTION 16
----------
LIMITATIONS ON SURVIVAL
-----------------------
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05
and the covenant and agreements of the BRI Partnership contained in Sections
2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing
indefinitely and an action based thereon may be brought at any time after the
Closing Date. The representations, warranties, covenants and other obligations
of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and
including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04,
10.05, 12 and 14 and the representations and warranties, covenants and other
obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for
6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 11.03, 12 and 14 shall survive until
twelve (12) months after the Closing Date and thereafter during the pendency of
any claim based upon a breach thereof, and no action based thereon shall be
commenced more than twelve (12) months after the Closing Date. Except as
otherwise specifically provided in this Agreement, no other representations,
warranties, covenants or other obligations of the Transferor Members or the BRI
Partnership set forth in this Agreement shall survive the Closing, and no action
based thereon shall be commenced after Closing. Representations and warranties
in Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration
of the applicable statute of limitations.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Operating Agreement by the Transferor Members (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Members, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
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satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
----------
CONDITIONS TO CLOSING
---------------------
17.01 BRI Conditions. Without limiting any other conditions to Closing
of the BRI Partnership contained herein, the obligation of the BRI Partnership
to proceed with the Closing of the transactions contemplated by this Agreement
is expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the Transferor Members and the Transferor Company shall have
performed or complied with, in all material respects, all of their respective
covenants, agreements and obligations under this Agreement, (ii) the Transferor
Members shall have delivered the Transferor Members Closing Documents and (iii)
all of the representations and warranties of the Transferor Company and the
Transferor Members set forth in this Agreement shall be true and correct, in all
material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of notice of
satisfaction of the Closing Conditions, there shall not have occurred any
material adverse change in the financial condition, business, properties, assets
or liabilities of the Transferor Company;
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) Title to Membership Interests. The Transferor Membership
Interests shall, as of the Closing Date, be transferred and assigned to the BRI
Partnership, or its designees, respectively, and shall be free and clear of any
liens, pledges and encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Company shall, as of the
Closing Date, have good record, marketable and insurable title to the Property,
subject only to the title exceptions permitted under Section 1.02.
(f) Construction. The Transferor Company shall have completed
construction of the Improvements in accordance with the Plans and
Specifications, as modified in accordance with this Agreement, and in compliance
with all Codes all to the extent required under Sections 3.02 and 5.30, and, if
such completion shall have occurred prior to the occurrence of the Stabilization
Date, then, in addition to the foregoing, as of the Closing, the Improvements
shall remain completed to the extent required under Sections 3.02 and 5.30 and
shall be in
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<PAGE>
substantially the same condition (subject to the provisions of Section 7.02 and
to any damage to the Improvements caused by tenants) as they were in at the time
of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all
identified construction deficiencies corrected.
In the event that any condition set forth in Section 17.01(a) through
Section 17.07(e) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Members within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Members contained herein, the obligation of the
Transferor Members to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Members as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the BRI Partnership shall have performed or complied with, in
all material respects, all of the BRI Partnership covenants, agreements and
obligations under this Agreement, (ii) the BRI Partnership shall have delivered
the BRI Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of any election by the
Transferor Members to accept BRI Partnership Units, there shall not have
occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as
of the Closing Date, be transferred and assigned to the Transferor Members and
shall be free and clear of any liens, pledges and encumbrances of any kind
whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Members in writing, on or before the Closing Date, the Transferor Members shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
-49-
<PAGE>
17.03 Related Agreements. Simultaneously herewith, the BRI Partnership
has entered into with various parties (the "Related Entities") various
agreements, including this Agreement, for the conveyance of partnership
interests or property interests or other assets and for the making of certain
secured loans, which agreements are more particularly described on Schedule K
attached hereto (collectively the "Related Agreements"). (The transactions
described in the Related Agreements, including this Agreement, are collectively
the "Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement of even date between
the BRI Partnership and Questar Investment Corporation attached hereto as
Exhibit 6 (the "Kickout Agreement"), in the event that any of the Related
Agreements is terminated pursuant to any termination provision of any other
Related Agreement, this Agreement shall terminate automatically simultaneously
with the termination of any such Related Agreement whereupon this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive the termination of this Agreement. The
provisions of this Section 17.03 shall be of no further force or effect once
closing occurs under any one or more of the Related Agreements.
SECTION 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.01. Assignment. Except as hereinafter provided, this Agreement may
not be assigned prior to Closing by either party hereto. The BRI Partnership
shall have the right to designate an entity affiliated with the BRI Partnership
to accept title to some of the Membership Interests, but the BRI Partnership
shall remain fully liable for the performance of all of its obligations
hereunder. The Transferor Members and the Transferor Company shall have the
right to collaterally assign their interests under this Agreement to a
construction lender providing construction financing for the Improvements (the
"Lender"). This Agreement shall be automatically subject and subordinate to the
mortgage, deed of trust and all other loan documents now or hereafter entered
into evidencing the loan and security of the Lender. If the Transferor Members
and Transferor Company so assign this Agreement, then the the BRI Partnership
agrees to enter into an agreement with the Lender (the "Tri Party Agreement")
providing that: (a) the BRI Partnership agrees to provide the Lender with
reasonable notice and opportunity to cure any default by the Transferor Members
or the Transferor Company hereunder; (b) the BRI Partnership agrees not to
modify or amend this Agreement without the prior written consent of Lender, (c)
the BRI Partnership, at the written request of Lender upon a default under the
loan, will pay the Base Consideration or such lesser amount as is required to
satisfy the loan directly to Lender provided that all of the conditions to
Closing provided herein have been satisfied; (d) the Lender agrees to recognize
the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will
permit Lender to perform any obligations of the Transferor Company and
Transferor Members hereunder and will agree to recognize Lender as the
Transferor Company and the Transferor Members hereunder should Lender succeed to
the interest of the Transferor Company and Transferor Members, provided,
however, that, in such event, Lender's liability
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<PAGE>
under this Agreement shall be limited to its interest in the Transferor Company
and the Property; and further provided that (f) the BRI Partnership will have no
liability for payment of the Lender's loan or the performance of any obligations
under any of the loan documents other than the Tri-Party Agreement; and (g) the
amount to be paid to Lender shall be payable in cash only and not in BRI
Partnership Units and shall be limited to the amount provided in clause (c).
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Maryland. The Transferor Members,
Transferor Company and the BRI Partnership consent to the personal jurisdiction
of the federal and state courts of the State of Maryland and agree that service
of process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Transferor Members have the right to
assign or transfer their right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Members and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Members of an
executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
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<PAGE>
18.08 Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the contrary,
and all references to Schedules and Exhibits shall be to the specified Schedules
and Exhibits annexed hereto. All Schedules and Exhibits annexed hereto are made
a part hereof. All terms defined herein shall have the same meanings in the
Schedules and Exhibits, except as otherwise provided therein. All references in
this Agreement shall be deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Members or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
SECTION 19
----------
ADDITIONAL PROVISIONS RELATING TO
---------------------------------
THE TRANSFEROR MEMBERS
----------------------
19.01 Transferor Allocation Schedule. Each Transferor Member
acknowledges and agrees that the Transferor Allocation Schedule attached hereto
as Exhibit I is true, correct and complete in all respects as it relates to such
Transferor Member.
19.02 Time of Effectiveness. The Transferor Members acknowledge and
agree that this Agreement and the agreements attached as Exhibits hereto will
not be binding and effective
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<PAGE>
unless and until all of the parties hereto and thereto have executed
counterparts to such agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective hands and seals as of the day and year first above
written.
WITNESS:
- ------------------------------ ----------------------------
Stephen M. Gorn
- ------------------------------ ----------------------------
John B. Colvin
- ------------------------------ ----------------------------
Morton Gorn
- Transferor Members -
BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- the BRI Partnership -
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<PAGE>
Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in
accordance with the provisions of Section 13.03.
- ------------------------------ --------------------------------
Stephen M. Gorn
- ------------------------------ --------------------------------
John B. Colvin
- the Guarantors-
RECEIPT BY ESCROW AGENT
The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by
certified check to be held as the Deposit pursuant to this Agreement.
WITNESS: LAWYERS TITLE INSURANCE
CORPORATION
________________________ By: _______________________
Name:
Title:
Date:
-54-
<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - List of Plans and Specifications
Schedule D - Form of Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 3.03 - Pro Forma Rents
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants
Schedule 5.27 - Shared Facilities/Utilities
Schedule 5.33 - Liens on Membership Interests
List of Exhibits
BRI Exhibits
------------
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Exhibit 7 - BRI Management Agreement
Transferor Exhibits
-------------------
Exhibit I - List of Transferor Members (with address and membership
interest of each member)
Exhibit II - Transferor Operating Agreement
Exhibit III - Assignment of Transferor Membership Interests
Exhibit IV - Amended and Restated Operating Agreement of Transferor
Company
Exhibit V - Amended and Restated Articles of Organization of Transferor
Company
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Right of First Offer Agreement
Exhibit X - AIA Construction Warranty
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<PAGE>
Schedule A - Property Description
(Liriope)
All of those lots of land located in Harford County, Maryland and more fully
described as follows:
BEING KNOWN AND DESIGNATED AS LOTS 2,4,9,10,11 AND 12, AS SHOWN ON THAT
PLAT ENTITLED "FINAL PLAT, SECTION III, PHASE II, RIVERSIDE VILLAGE OF CHURCH
CREEK", WHICH PLAT IS RECORDED AMONG THE PLAT RECORDS OF HARFORD COUNTY AT PLAT
BOOK 77, FOLIO 39; AND
BEING KNOWN AND DESIGNATED AS LOT 6, AS SHOWN ON THAT PLAT ENTITLED
"REVISED FINAL PLAT, SECTION III, PHASE II, RIVERSIDE VILLAGE OF CHURCH CREEK",
WHICH PLAT IS RECORDED AMONG THE PLAT RECORDS OF HARFORD COUNTY AT PLAT BOOK 87,
FOLIO 19.
<PAGE>
Schedule 5.05 - Litigation
--------------------------
(Liriope)
The Riverside Community Association may assert that the Riverside Community
Association covenants apply to the Property and that the owner of the Property
is obligated to pay assessments to the Riverside Community Association. The
title insurance policy of the Transferor Company does not contain an exception
to title for Riverside Community Association covenants and the title insurance
company has confirmed that these covenants do not apply to the Property. To
date, no action has been taken by the Riverside Community Association to collect
any assessment.
<PAGE>
Schedule 5.27 - Shared Facilities/Utilities
(Liriope)
1. Recreational Facilities Agreement dated July 30, 1996 by and between
Arborview Associates Limited Partnership, the owner of Arborview Apartments
("Arborview"), and Foxglove Associates L.L.C. relating to the use, by tenants of
Liriope Apartments, of recreational facilities on property owned by Arborview,
and the sharing of costs associated with these facilities.
2. Cross Easement Declaration dated October 14, 1992 and recorded in the Land
Records of Baltimore County, Maryland in Liber 1875, folio 345, by Church Creek
II Limited Partnership, for private roads and parking between Liriope Apartments
and Arborview Condominiums, and the sharing of costs associated with these
facilities.
DEVELOPMENT CONTRIBUTION AGREEMENT
(Granite Run)
THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of the 25th day of August, 1997, by and between the individuals
and entities listed on Exhibit I attached hereto with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen
M. Gorn, individually, John B. Colvin, individually, 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.
BACKGROUND
WHEREAS, the Transferor Members are the legal and beneficial owners of
all of the membership interests, as set forth on Exhibit I, Granite Run
Associates, L.L.C., a Maryland limited liability company (the "Transferor
Company") pursuant to the Operating Agreement dated as of December 18, 1996, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Operating Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the
general partner and Berkshire Realty Company, Inc. ("BRI") is a special limited
partner of the BRI Partnership, pursuant to the Amended and Restated Agreement
of Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Company is the owner of the following:
a. that certain tract or parcel of land located in Baltimore
County, Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the 264-unit apartment complex, commonly known as Granite
Run Apartments, which contains related improvements, facilities, amenities,
structures, driveways, walkways, plumbing and heating pipes, culverts, and
mains, all of which have been constructed, are under construction or are to be
constructed on the Land (collectively, the "Improvements") pursuant to certain
plans and specifications that have been approved by the Transferor Members and
BRI Partnership, as modified by certain change orders, a complete listing of
which (including the latest revision date and change orders) is attached hereto
as Schedule C (the "Plans and Specifications");
<PAGE>
c. all right, title and interest of the Transferor Company in
and to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway, street,
road, right-of-way or avenue, open or proposed, in, on, under, across, in front
of, abutting or adjoining the Land, and all right, title and interest of the
Transferor Company in and to any awards for damage thereto by reason of a change
of grade thereof;
d. the accessions, appurtenant rights, privileges,
appurtenances and all the estate and rights of the Transferor Company in and to
the Land and the Improvements, as applicable, or otherwise appertaining to any
of the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed
in Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Company and
located on or in or used solely in connection with the Land and Improvements
(collectively, the "Personal Property"); and
f. all of the Transferor Company's interest in any intangible
property now or hereafter, owned by the Transferor Company and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined (excepting (i) any cash and escrow deposits and
other current assets relating to periods prior to Closing and (ii) amounts, if
any, due to the Transferor Members pursuant to Section 12).
All of the items described in subparagraphs (a), (b), (c), (d), (e) and
(f) above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Members desire to contribute all of the
membership interests in the Transferor Company (collectively referred to as the
"Transferor Membership Interests") to the BRI Partnership, and the BRI
Partnership desires to admit the Transferor Members as limited partners in the
BRI Partnership and to accept such contribution from the Transferor Members; and
WHEREAS, in exchange for such contribution, the Transferor Members
desire to, at their election, either receive cash or BRI Partnership Units (as
hereinafter defined) in accordance with the terms of this Agreement and the BRI
Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Transferor Members
and the BRI Partnership hereby covenant and agree as follows:
-2-
<PAGE>
SECTION 1
---------
CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE
------------------------------------------------------
1.01 The Transferor Members shall contribute to the BRI Partnership,
and the BRI Partnership shall accept from the Transferor Members, in exchange
for either cash or BRI Partnership Units, and upon the terms and conditions set
forth in this Agreement, all of the Transferor Members' membership interests in
the Transferor Company (the "Transferor Membership Interests"). The percentage
of interest that each of the Transferor Members owns in the Transferor Company
is listed on Exhibit I. At the Closing (as defined in Section 3.01), the
Transferor Members shall, respectively, contribute, assign, transfer and deliver
the Transferor Membership Interests to the BRI Partnership, or its designees as
provided in Section 18.01 hereof, by an Assignment and Assumption of Membership
Interest in the form of Exhibit III attached hereto (the "Transferor
Assignment"). Immediately thereafter, the Transferor Members and the BRI
Partnership, or its designees, shall execute and deliver an Amended and Restated
Operating Agreement in the form of Exhibit IV attached hereto (the "Amended
Transferor Operating Agreement") and an Amended and Restated Articles of
Organization in the form of Exhibit V attached hereto (the "Amended Transferor
Company Articles") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Members shall withdraw, as the members of
the Transferor Company and be released of all liability thereunder, and the
terms of the Transferor Company shall be amended in accordance with the Amended
Transferor Operating Agreement.
1.02 Property Title. On or before September 22, 1997, the Transferor
Members shall deliver to the BRI Partnership a copy of the Transferor Company's
existing title insurance commitment or policy (the "Commitment") and copies of
all instruments and plans mentioned therein as exceptions to good and marketable
fee simple title, as well as copies of any instruments referred to in such
instruments which affect the Property (all of such items are hereinafter
collectively referred to as the "Title Policy").
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Company on or before October 1, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Company of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". Any easements or other agreements reasonably required
for the development and construction of the Property and the Improvements now or
hereafter entered into by the Transferor Company which are consistent with the
Plans and Specifications and, in the reasonable discretion of the BRI
Partnership, do not materially interfere with the intended use of the Property
nor materially affect the value of the Property, shall also constitute Permitted
Exceptions.
-3-
<PAGE>
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new
commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B
Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the
"Title Insurer"). The Updated Commitment shall insure fee simple title to the
Property in the sole name of the Transferor Company and shall be in the amount
of $25,508,709. The Updated Commitment shall provide for a title insurance
policy which shall contain coverage against all mechanics' liens, shall have
full survey coverage, shall have deleted therefrom all "printed standard
exceptions", shall have a 3.1 zoning endorsement, a comprehensive endorsement, a
non-imputation endorsement and such other endorsements as are reasonably
required by the BRI Partnership and are available under the law of the state in
which the Property is located. If any new exceptions to title appear in the
Updated Commitment that do not constitute Permitted Exceptions and that are
unacceptable to the BRI Partnership, in its reasonable discretion, the BRI
Partnership may notify the Transferor Company within thirty (30) days after the
Completion Date Notice.
If any exceptions in the Commitment or the Updated Commitment are
unacceptable to the BRI Partnership in accordance with the foregoing provisions,
and the BRI Partnership timely notifies the Transferor Company in writing of
such fact as above provided, the Transferor Company shall have thirty (30) days
from the date the Transferor Company receives notice of such unacceptable
exceptions, at the option of the Transferor Company, to remove or cure such
exceptions, provided further, the Transferor Company may, but shall not be
required to, make any monetary expenditures in connection with the removal or
cure of such exceptions. All mortgages and deeds of trust, mechanics liens, tax
liens, attachments and all other monetary liens against the Property (other than
the liens for real estate taxes and current water and sewer charges for the
fiscal year in which Closing occurs, which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Company at Closing. The
Transferor Company shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Company, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Company will attempt to cure such unacceptable exceptions.
If the Transferor Company fails or refuses to cure said unacceptable exceptions
within the time period above provided, on or before the earlier to occur of (A)
ten (10) days after the Transferor Company notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Company or
(ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Purchase Price (as defined in Section 2.01(a))
in an amount necessary to enable the BRI Partnership to remove all Monetary
Liens.
1.03 Survey. On or before September 22, 1997, the Transferor Company
shall provide to the BRI Partnership a copy of its existing survey (the
"Survey") of the Land and any Improvements.]
-4-
<PAGE>
Should such Survey contain any encumbrances, encroachments or other
survey defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Company on or before
October 1, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Company of the unacceptable survey
matters as described above, the Survey shall be deemed accepted by the BRI
Partnership and the survey matters shown on the Survey shall be included within
the "Permitted Exceptions."
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at its sole cost and expense, shall obtain an updated
survey (the "Updated Survey") by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Updated Survey shall include (i) all
existing buildings, improvements, fences, encumbrances, encroachments,
conflicts, party walls, protrusions (including the location of all highways,
streets, roads, alleys and rights-of-way upon, under, across, abutting or
adjacent to the Land, or affecting the Land or the Improvements), and any
visible evidence of all water, sewer, gas, telephone and electric lines, (ii)
the exact area of the Land to the nearest hundredth of an acre, (iii) all
buildings set back and other restriction lines, (iv) property corners and
boundary lines of the Property (including the courses and distances of each of
said boundary lines), (v) the relation of the point of beginning of the
description of the Land to the monument from which it is fixed, (vi) recorded or
otherwise known easements (stating the recording book and page references in the
case of any such recorded easements), (vii) a metes and bounds written
description of the Land, and (viii) a notation of any discrepancies between the
Updated Survey and the recorded legal description. The BRI Partnership shall
provide a copy of the Updated Survey to the Transferor Company promptly after
its receipt thereof. If any new matters appear on the Updated Survey that do not
constitute Permitted Exceptions, do not simply reflect the construction of the
Improvements in locations that do not encroach upon property lines, setback
lines or easements, and are unacceptable to the BRI Partnership in its
reasonable discretion, the BRI Partnership may notify the Transferor Company
within forty (40) days after the Substantial Completion Date Notice.
If any survey matters are unacceptable to the BRI Partnership in
accordance with the foregoing provisions, and the BRI Partnership timely
notifies the Transferor Company in writing of such fact as above provided, the
Transferor Company shall have thirty (30) days from the date the Transferor
Company receives notice of such unacceptable survey matters, at the option of
the Transferor Company, to cure such unacceptable survey matters. The Transferor
Company shall be deemed to have refused to cure any unacceptable survey matters
unless the Transferor Company, within ten (10) days after receipt of notice from
the BRI Partnership, shall notify the BRI Partnership in writing that the
Transferor Company will attempt to cure such unacceptable survey matters. If the
Transferor Company fails or refuses to cure said unacceptable survey matters
within the time period provided, on or before the earlier to occur of (A) ten
(10) days after the Transferor Company notifies the BRI Partnership that it
refuses to cure such unacceptable survey matters, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the
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Transferor Company or (ii) waive such survey matters and accept title subject
thereto, in which event there shall be no reduction in the Consideration Amount.
1.04 Construction and Inspection.
(a) Plans and Specifications. Prior to the date of this
Agreement, Transferor Company has delivered to BRI Partnership true, correct and
complete copies of the Plans and Specifications for the construction of the
Improvements as set forth on Schedule C attached hereto.
(b) Transferor Company to Construct Improvements. Transferor
Company shall, at Transferor Company's expense, obtain all permits and construct
the Improvements on the Land in accordance with the Plans and Specifications, as
the same may be modified by change order in accordance with this Agreement. All
work shall be done in a good and workmanlike manner using new, good quality
materials, free of all defects and in compliance with all Codes (as defined in
Section 5.21), permits, approvals, title restrictions and insurance
requirements. Transferor Company shall obtain builder's risk insurance on the
Improvements in the amount of the construction cost of those buildings from time
to time for which construction has commenced. Transferor Company shall deliver a
certificate of such insurance to BRI Partnership. Transferor Company shall
maintain such insurance in force and effect through the course of construction
and until Closing hereunder.
(c) Inspection of Construction; Correction of Defects. BRI
Partnership and its engineers, consultants and agents may inspect the
construction of the Improvements from time to time during the course of
construction upon reasonable notice to the Transferor Company. After receipt
from the Transferor Company of written notice that the requirements of Section
3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI
Partnership and its engineers, consultants and agents shall inspect the
construction of the Improvements upon reasonable notice to Transferor Company to
determine whether such construction is completed in accordance with the Plans
and Specifications. Within 30 days after the Inspection Notice, BRI Partnership
will give written notice to Transferor Company of any nonconformities with the
Plans and Specifications and defects or deficiencies in construction identified
by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership,
which disagreement shall be expressed by giving written notice to the BRI
Partnership stating the basis for said disagreements, within 10 days after such
BRI Partnership notice, Transferor Company, at Transferor Company's expense,
shall commence to correct, repair or replace any such nonconformities, defects
or deficiencies and shall diligently continue thereafter until completion of
such corrections, repairs or replacements, and, if such deficiencies are of such
a magnitude that Closing would not otherwise be required to occur under Section
3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies
are corrected. Any dispute shall be resolved by arbitration in accordance with
Section 3.02.
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(d) Change Orders. The Transferor Company shall not change or
modify the Plans and Specifications without prior written approval of the BRI
Partnership, such approval not to be unreasonably withheld, provided, however
that the following changes shall not require BRI Partnership's approval: (i)
changes required by the construction lender or governmental authorities, and
(ii) changes in the design of the Improvements resulting in a decrease or
increase in construction cost by less than $100,000 for an individual change and
less than $250,000 in the aggregate. The Transferor Company shall give written
notice to BRI Partnership of all proposed changes to the Plans and
Specifications by sending a complete copy of the change, together with copies of
any plans or drawings related thereto. BRI Partnership shall give its written
approval or disapproval within five (5) business days thereafter. If BRI
Partnership disapproves any such change, the Transferor Company shall not
implement same.
(e) Completion. The Transferor Company shall diligently
attempt to complete construction of the Improvements in accordance with the
Plans and Specifications, as modified in accordance with this Agreement, and in
compliance with all Codes (as defined in Section 5.21 hereof) by December 31,
2001 (the "Scheduled Completion Date"). For purposes of this Agreement, the
"Completion Date" shall be the date upon which all of the Closing Conditions
shall have been satisfied as set forth in Section 3.02.
(f) Force Majeure. In the event that the Transferor Company is
delayed in the commencement or completion of construction of the Improvements by
acts of God, war, civil commotion, fire, flood or other casualty, labor
difficulties, strikes, shortages of labor, materials or equipment, undue delay
in action by governmental authorities, governmental or utility company refusal
to issue building, construction, utility, occupancy or other permits or
approvals, water, sewer or other utility moratorium (including enforcement of
the requirements of any adequate public facilities ordinance) or other causes
beyond the Transferor Company's reasonable control (a "Force Majeure Event"),
the Scheduled Completion Date shall be extended for the period of delay, not to
exceed 12 months. If a Force Majeure Event continues in effect for a period in
excess of 12 months, during which construction is delayed, then the Transferor
Company may, by notice to BRI Partnership terminate this Agreement, in which
event the Deposit shall be returned to the BRI Partnership and neither party
shall have any further liability to the other hereunder. In addition,
simultaneously with closing under the Related Agreements, the Transferor Company
shall execute and deliver to BRI Partnership the Right of First Offer Agreement
attached hereto as Exhibit IX, which Right of First Offer Agreement shall
contain, among other provisions a Right of First Refusal which provides: (a)
that the BRI Partnership shall have a right of first refusal to purchase the
Property following the termination of this Agreement pursuant to this Section
1.04(f), (b) BRI Partnership shall have a period of 15 business days, following
receipt of a bona fide third party letter of intent to purchase the Property, to
agree to purchase the Property on the same terms and conditions as set forth in
the letter of intent, and (c) such Right of First Offer Agreement shall be
subordinate to any mortgage or deed of trust securing construction financing on
the Property.
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1.05 Environmental Due Diligence Inspection.
(a) On or before September 22, 1997, the Transferor Company
shall deliver to the BRI Partnership a copy of its environmental report for the
Property (the "Initial Environmental Report"). Should the BRI Partnership
decide, in its sole judgment, during the period up to and including October 1,
1997 (the "Due Diligence Period") that the Initial Environmental Report is
unsatisfactory, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so on or before the
last day of the Due Diligence Period, and upon the giving of such notice this
Agreement shall be of no further force or effect. Subject to the rights of the
tenants under the Leases, the BRI Partnership and their authorized agents and
representatives may, from time to time up to and including the period expiring
30 days after the Substantial Completion Date Notice during regular business
hours and on reasonable prior notice to the Transferor Company, inspect the
Property to determine the presence of any Hazardous Materials (as defined in
Section 5.20) and the compliance of the Property with Environmental Laws (as
defined in Section 5.20) and in connection therewith to conduct such tests and
observations and compile such information as the BRI Partnership, in its sole
discretion may deem appropriate (the "Environmental Inspection"). The BRI
Partnership shall provide a copy of any third party environmental reports
obtained by the BRI Partnership, without representation or warranty, and subject
to the limitations on use set forth therein, to the Transferor Company promptly
after its receipt thereof. No such inspection, however, shall constitute a
waiver or relinquishment on the part of the BRI Partnership of its right to rely
upon the covenants, representations, warranties or agreements made by the
Transferor Company in this Agreement. Should the BRI Partnership decide, in its
reasonable judgment, that there exists an environmental risk with respect to the
Property (excluding such items as asbestos roof shingles, asbestos floor tile
and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the
presence of usual and customary cleaning and maintenance supplies and similar
items that are typically handled through the adoption of appropriate operations
policies), during the period expiring 30 days after the Substantial Completion
Date Notice that based upon the results of the Environmental Inspection, it no
longer desires to proceed with the transactions contemplated hereby, the BRI
Partnership shall have the right to terminate this Agreement by giving written
notice of its election to do so to the Transferor Company on or before 30 days
after the Substantial Completion Date, and upon the giving of such notice this
Agreement shall be of no further force or effect. Notwithstanding the foregoing,
the BRI Partnership may not disapprove or object to any matter disclosed by the
Environmental Inspection that was disclosed in the Initial Environmental Report.
If the BRI Partnership shall fail to exercise such termination right within any
such period, the BRI Partnership shall be conclusively deemed to have waived any
right it may have had to terminate this Agreement pursuant to this Section 1.05.
The BRI Partnership shall pay when due all fees and expenses incurred in the
performance of the Environmental Inspection performed at its request.
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<PAGE>
(b) From and after the date of this Agreement, the Transferor
Company shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Company's books, financial records, Service Contracts,
Leases and tenant files pertaining to the operation of the Property prior to the
Closing. The BRI Partnership's agents and representatives shall be permitted
access to such records and files during regular business hours. To the extent
that any of the Transferor Company's financial records relating to the Property
have been audited, the Transferor Company agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Company shall provide the
BRI Partnership with such information as the Transferor Company may have with
respect to actual expenditures made for all repairs, maintenance, operation and
upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Company, all taxes and utility payments made prior
to the Closing and dates of construction, installation and major repairs to the
Property. All information obtained by the BRI Partnership or its agents and
representatives pursuant to this Section 1.05(b) shall be treated as
confidential, shall not be disclosed to others until and unless the Closing
occurs, and if such information is in written form, such information shall be
returned to the Transferor Company if the Closing does not occur.
(c) The BRI Partnership shall indemnify the Transferor Members
against and from all damage to the Property and/or claims of tenants or other
third parties resulting from any entry on the Property by the BRI Partnership or
any agent, contractor, consultant or other representative of the BRI
Partnership, or any tests or other activities conducted in or on the Property by
them, or any of them, together with all expenses incurred by the Transferor
Members by reason thereof including, without limitation, reasonable attorneys'
fees and disbursements: provided, however, that nothing contained herein is
intended to obligate the BRI Partnership to indemnify, pay or otherwise
reimburse the Transferor Members for any costs of remediation or clean-up,
fines, penalties, assessments or similar charges for any condition existing at
the Property solely by reason of the fact that the BRI Partnership or its
agents, contractors, consultants or other representatives discover the existence
of such condition during the course of conducting tests or other activities on
the Property. The provisions of this Section 1.05(c) shall survive the Closing
or any termination of this Agreement; provided, however, that no claim by the
Transferor Members under this Section 1.05(c) for damage to the Property shall
be made if (i) the Closing occurs or (ii) more than 90 days after the
termination of this Agreement if the Closing does not occur, except for damage
claims made by tenants as to which the time for asserting any such claim shall
be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Members by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Members hereunder.
1.06 Tax Treatment. The parties intend that, to the extent the
Transferor Members receive BRI Partnership Units as the consideration for the
contribution of the Transferor Membership Interests by the Transferor Members to
the BRI Partnership in accordance with Section 1.01 of this Agreement, such
contribution shall be treated for federal (and applicable
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state) income tax purposes as a tax-free contribution to capital pursuant to
Section 721 of the Internal Revenue Code of 1986, as amended (the "Code") (and
any analogous state income tax provisions). The BRI Partnership and the
Transferor Members agree to report such transaction for federal and applicable
state income tax purposes consistently with the intent set forth in this Section
1.06.
SECTION 2
---------
CONSIDERATION
-------------
The consideration for the Membership Interests (the "Consideration
Amount"), subject to the adjustments contained in Section 12 of this Agreement,
shall be determined pursuant to the provisions of Section 2.04, and shall be
paid by the the BRI Partnership to the Transferor Members in the following
manner:
2.01 Deposit.
(a) Simultaneously with the execution of this Agreement, the
the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the
"Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check
(subject to collection) as a Deposit to be held in an interest-bearing escrow
account on account of the Consideration Amount. Said sum, together with any
interest earned thereon, is hereinafter called the "Deposit."
(b) At the Closing, the Deposit shall be returned by the
Escrow Agent to BRI Partnership.
2.02 Balance. At the Closing, the BRI Partnership shall deliver to the
Transferor Members the Base Consideration, plus, if then due, any Additional
Consideration Installments, subject to the adjustments described in Section 12
of this Agreement by federal wired funds. Prior to any delivery to the
Transferor Members of the Base Consideration, there shall be deducted from the
Base Consideration an amount equal to the sum required to pay off the
Construction Loan in full and to remove all other Monetary Liens and
simultaneously with the Closing, the BRI Partnership shall pay off the
Construction Loan. At the Transferor members' option, to be exercised
irrevocably by written notice to the BRI Partnership given at least 15 days
prior to the satisfaction of the Closing Conditions, all or a portion of the
Consideration Amount shall be delivered to the Transferor Members in the form of
BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise
such option, then the number of BRI Partnership Units, the rights and
limitations upon such units and the method by which the units are delivered to
the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b)
and (c) below. If the Transferor Members do not exercise the foregoing option in
a timely manner, all consideration payable under this Agreement shall be paid in
cash by federal wired funds and the following Sections of this Agreement shall
be, without further action by any party, null and void and without any further
force or effect upon the parties: 1.06, 2.02(a) through (c),
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5.34, 6.03, 6.05, 6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04,
11.01(a) (ii), (iii) and (iv) and 11.01(d) (last sentence only), 11.03 and
12.04.
(a) The number of BRI Partnership Units to be issued to the
Transferor Members at Closing shall be that number determined by dividing the
portion of the Consideration Amount to be paid in BRI Partnership Units to each
Transferor Member by the value of one BRI Partnership Unit. The parties agree
that, for purposes of this Agreement, the value of each BRI Partnership Unit
shall be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the ten (10) business days prior to the day which
is five (5) business days before the Closing. If the calculation provided for
above results in a fraction of a BRI Partnership Unit to be delivered to a
Transferor Member, the number of BRI Partnership Units to be delivered shall be
rounded up or down to the nearest whole number of BRI Partnership Units.
Attached hereto as Exhibit I is a schedule (the "Transferor Allocation
Schedule") prepared by the Transferor Members setting forth (i) the name of each
Transferor Member, and (ii) the percentage interest of each Transferor Member,
together with an investor questionnaire in the form attached hereto as Exhibit 5
(the "BRI Questionnaire") for each Transferor Member. In the event that any
Transferor Member would be entitled to a fractional BRI Partnership Unit, the
number of BRI Partnership Units shall be rounded up or down, as the case may be,
to the nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Members all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Members
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Members as
a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Members in accordance with the election made by the Transferor
Members pursuant to Section 2.02. The BRI Partnership shall have no obligation
or liability with respect to the preparation or accuracy of the Transferor
Allocation Schedule.
(b) As used in this Agreement, a "BRI Partnership Unit" shall
mean a unit of limited partnership interest in the BRI Partnership as specified
in the BRI Partnership Agreement. At the time that any Transferor Member elects
to convert BRI Partnership Units to shares as provided in the BRI Partnership
Agreement, the holder of each BRI Partnership Unit shall have the right to have
the BRI Partnership Unit either (i) exchanged for one share of common stock of
BRI pursuant to the transfer provisions of the BRI Partnership Agreement, or
(ii) redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Member shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Members and Berkshire Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI
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Partnership shall deliver to the Transferor Members a certified copy of the
Registration Rights Agreement.
(c) The Transferor Members, acknowledge and agree that after
the execution hereof, the price of the common stock of BRI may increase or
decrease in value as the result of market fluctuations, and that any such
fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in this Section, the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Members in the event of a
decrease or increase in the market value of the common stock of BRI.
2.03 Payment of Monies. Any monies payable under this Agreement, unless
otherwise specified in this Agreement, shall be paid by wire transfer.
2.04 Calculation of Consideration Amount. The Consideration Amount for
the Transferor Membership Interests shall consist of a base consideration amount
("Base Consideration") plus additional consideration installments ("Additional
Consideration Installments").
(a) The Base Consideration for the Transferor Membership
Interests shall be Nineteen Million, Eight Hundred Twenty-Eight Thousand, Eight
Hundred Forty-Eight Dollars ($19,828,848).
(b) In addition to the Base Consideration, the BRI Partnership
shall pay one or more additional consideration installments (the "Additional
Consideration Installments"), if any, on a quarterly basis with the first
payment, if then due, on the date of Closing and on the first day of each
quarter (defined as a period of three full calendar months, plus, for the first
quarter, any partial calendar month after the date of Closing) thereafter for a
total of 18 full calendar months after the Closing (the "Earn Out Period"). As
of the Closing and as of the first day of each quarter thereafter, Stabilized
NOI shall be determined as provided below, and each Additional Consideration
Installment, if any, will be equal to the Stabilized NOI divided by 8.75% (the
"Cap Rate") and then reduced by the Base Consideration and any prior Additional
Consideration Installments. The maximum Consideration Amount, (i.e. the sum of
the Base Consideration plus all Additional Consideration Installments) shall not
exceed Twenty-Five Million, Five Hundred Eight Thousand, Seven Hundred Nine
Dollars ($25,508,709).
(c) Stabilized NOI shall be calculated for purposes of
determining the Additional Consideration Installments as follows: 12 times the
monthly actual income for the Property, (provided that if occupancy rates exceed
95%, then actual income shall be calculated as if the Property had an occupancy
rate of 95%) for the month preceding the payment date less Eight Hundred
Twenty-Eight Thousand, Nine Hundred Eighty-Eight Dollars ($828,988)
(representing the agreed-upon annual Projected Operating Expenses for the
Property), provided that,
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on the first anniversary of the date of Closing under this Agreement, the
Projected Operating Expenses shall be adjusted by the percentage change in the
CPI-U, U.S. Cities Average for the period from the date of Closing under this
Agreement until the anniversary date.
SECTION 3
---------
THE CLOSING
-----------
3.01 Except as otherwise provided in this Agreement, the delivery of
all documents necessary for the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place in the offices of Hale and Dorr LLP
in Washington, D.C., or such other place as the Transferor Company and the BRI
Partnership shall mutually agree. The "Time of Closing" shall be on that date
specified in Section 3.02 at which all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Members of a so-called Gap Indemnity in the form of Exhibit VI with respect to
the gap in time period between policy issuance and recording, all as provided in
a letter of instruction executed by counsel for the BRI Partnership and counsel
for the Transferor Members. It is agreed that time is of the essence of this
Agreement.
3.02 Closing under this Agreement shall occur on the first business day
of the month after the Transferor Members have given to the BRI Partnership 60
days prior notice (the "Substantial Completion Date Notice") of the occurrence
of the last to occur of (a) the substantial completion of construction of the
Property excluding punch-list items not affecting occupancy (provided Transferor
Members shall thereafter complete all punch-list items at no expense to the BRI
Partnership within 30 days after Closing or within such additional time as may
be reasonably required) ("Completion Date") as evidenced by satisfaction of each
of the following conditions (the "Closing Conditions"): (i) final certificates
of occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Questar Builders, Inc. or such
affiliate of Transferor Members as Transferor Members may designate to be the
general contractor for construction of the Improvements ("Questar Builders")
certifying that the Improvements have been substantially completed in accordance
with the Plans and Specifications and all Codes, as such may be modified from
time to time by the Transferor Company in accordance with this Agreement, or (b)
the Stabilization Date. If a dispute shall exist as to whether substantial
completion has occurred, the dispute shall be promptly submitted to binding
arbitration by a qualified third party mutually acceptable to the parties or, if
they are unable to agree upon a third party, then by arbitrators appointed
pursuant to the applicable rules of the American Arbitration Association.
3.03 The Stabilization Date for the Property shall be as follows:
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The first day of that month which first occurs after 90% of the apartment units
in the Property have been leased for a period of 3 months to "Qualified Tenants"
at average rents not less than 90% of the pro-forma rents shown on Schedule
3.03.
3.04 "Qualified Tenants" are those tenants with annual income equal to
not less than 3 times the annual rent who are in occupancy and have commenced
the payment of rent.
SECTION 4
---------
TRANSFEROR'S PRE-CLOSING DELIVERIES
-----------------------------------
At least thirty (30) days prior to the date of Closing, the Transferor
Company shall deliver or otherwise make available to the BRI Partnership the
following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Company shall provide the BRI Partnership with access on-site to the
originals of all Leases and related lease files.
4.02 Certificates of Occupancy and Permits. Original, final
certificates of occupancy for all buildings in the Property and copies of all
material building permits, zoning variances (if any), certificates of occupancy
(if any), subdivision plats, governmental permits, approvals, certificates and
other licenses lawfully required for the construction, use, occupancy and
operation of the Property.
4.03 Taxes. To the extent in the Transferor Company's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. A set of original Plans and
Specifications, and a copy of all guaranties and warranties made by any person
for the benefit of the Transferor Company with respect to all or any part of the
Property in connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for each completed year occurring at least 120 days
prior to Closing and each completed month of operation thereafter occurring at
least 75 days prior to Closing, and detailed operating statements for each
completed year occurring at least 120 days prior to Closing and each completed
month of operation thereafter occurring at least 75 days prior to Closing;
provided that all such statements and records shall be provided only for periods
after the Property was first leased and occupied by rent paying tenants.
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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" which consists of a list of the
current rents now being collected on each of the apartment units in the
Improvements which includes: apartment number, unit status, tenant name,
commencement and termination dates, lease rent, deposits and details of any
concessions, in the form attached hereto as Schedule D.
4.08 Standard Form Lease. A copy of the standard form apartment lease
used in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water
and sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants).
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Company conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Company which shall be attached hereto as Schedule B.
SECTION 5
---------
A. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR COMPANY
-------------------------
The Transferor Company represents, warrants and covenants to the BRI
Partnership, as of the date hereof, as follows:
5.01 Organization and Standing of the Transferor Company. The
Transferor Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Transferor Company has all requisite power to own and operate the Property and
to carry on its business as presently being conducted and as proposed to be
conducted. The Transferor Company is duly qualified to do business in all
jurisdictions in which the failure to be so qualified would have a material
adverse effect on the Transferor Company's business (a "Material Adverse
Effect").
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5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Company is not in violation of any term
contained in the Transferor Operating Agreement, or to the Transferor Company's
knowledge in any other material instrument or contract to which the Transferor
Company is a party relating to the Property, and to the Transferor Company's
knowledge the Transferor Company is not in violation of any order, statute, rule
or regulation applicable to it, except for such violations which would not have
a Material Adverse Effect. Neither the execution, delivery and performance of
this Agreement by the Transferor Members, nor the contribution of the Transferor
Membership Interests by the Transferor Members hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Operating Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Company, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended
Transferor Company Articles to reflect the transactions contemplated hereby, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Members or the Transferor Company in connection
with the valid execution and delivery of this Agreement by the Transferor
Members and the performance of the Transferor Members' obligations hereunder.
5.04 Company Capitalization. The Transferor Operating Agreement (i) is
the only agreement among the members relating to the organization, operation, or
management of the Transferor Company, (ii) is in full force and effect and (iii)
has not been amended or modified. Exhibit I sets forth an accurate and complete
list of the names and residence addresses of all of the Transferor Members of
the Transferor Company, and the Transferor Members' respective membership
interests in the Transferor Company. Except as set forth on Exhibit I, no other
person or party owns any membership interest in the Transferor Company. No
Transferor Member is in default with respect to any capital contribution
required to be paid by him or it pursuant to the Transferor Operating Agreement.
A true, correct and complete copy of the Transferor Operating Agreement is
attached hereto as Exhibit II. The Transferor Company has no commitment to issue
any right to purchase or acquire or to issue or distribute to any of the
Transferor Members, any evidences of indebtedness or assets; and the Transferor
Company has no obligation, contingent or otherwise, to purchase, redeem or
otherwise acquire any interest in the Transferor Company or any interest therein
or to make any distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Company's knowledge, proceeding or
investigation pending or, to the Transferor Company's knowledge, any threat
thereof, against the Transferor Members, the Transferor Company or the Property
or any part thereof which questions the validity of this Agreement or the right
of the Transferor Members to enter into it, or which might result in or have,
either individually or in the aggregate, a material adverse effect on (i) the
business of the Transferor Company as such is presently contemplated; or (ii)
the rights represented by the Transferor Membership Interests. During the period
commencing on the date hereof and ending
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on the Closing Date, the Transferor Company will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Company's knowledge, threat thereof against the
Transferor Members, the Transferor Company or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases to which the Transferor Company
is a party or to which any agent of the Transferor Company is a party on behalf
of the Transferor Company or has entered into on behalf of the Transferor
Company, relating to the Transferor Company or all or a portion of the Property
or otherwise affecting the Property, including without limitation, all material
management, maintenance, brokerage, supply and service contracts (collectively
"Service Contracts") and any material contract agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to or by the Transferor
Company. Except as noted on Schedule E, each Service Contract is cancelable on
thirty (30) days notice. Transferor Company has no knowledge of any material
breach or material default under any Service Contract. As of Closing, the
Transferor Company will have paid all amounts due under each Service Contract,
other than payments for which an adjustment shall be made pursuant to Section 12
hereof.
5.07 Financial Statements. Attached hereto as Schedule F are financial
statements of the Transferor Company, including balance sheets, statements of
operations and statements of partners' capital (collectively, the "Financial
Statements") for the fiscal year ended December 31, 1996 (the "Statement Date").
The Financial Statements fairly present the financial condition of the
Transferor Company as of the Statement Date in accordance with generally
accepted accounting principles consistently applied, and reflect all
liabilities, fixed, contingent or otherwise, required to be disclosed in such
Financial Statements in accordance with generally accepted accounting
principles.
5.08 Title to Properties and Assets. The Transferor Company is the sole
owner of the Property. Except as disclosed in Section 18.01, the Transferor
Company does not own, or otherwise hold any interest in, any material assets
other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Company or to be obtained
by the Transferor Company prior to Closing, no other material license, permit or
authorization is necessary to own and operate the Transferor Company's business
as such is presently conducted and neither the conduct of the Transferor
Company's business nor any material portion thereof is dependent on the issuance
or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the indebtedness for borrowed money
incurred or to be incurred to acquire and construct the Property (collectively,
the "Construction Loan"), the Transferor Company has no indebtedness for
borrowed money and the Transferor Company has
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not, directly or indirectly, created, incurred, assumed or guaranteed or
otherwise become directly or indirectly liable for the payment of any borrowed
money. No Transferor Member, nor any affiliate of any Transferor Member nor any
employee of the Transferor Company is presently indebted to the Transferor
Company for borrowed money and, except for the Construction Loan, the Transferor
Company is not presently indebted for borrowed money to any of the foregoing
persons. As of the Closing Date, the Transferor Company shall have no
liabilities or obligations (absolute or contingent) of any kind, other than (a)
liabilities and obligations incurred in the ordinary course of the Transferor
Company's business which are either (i) in the aggregate, not in excess of
$50,000, or (ii) approved by BRI Partnership in writing; and (b) liabilities
resulting from or incurred in the ordinary course of business arising under the
Service Contracts. The Transferor Company has conducted its business only in the
ordinary course and, except for the Construction Loan, the Transferor Company
has not:
(a) created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in
excess of $10,000 (whether or not covered by insurance) to any assets or
properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete
list of all insurance policies of the Transferor Company (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Company has done nothing to reduce or impair the insurance afforded
by the Insurance Policies. To the Transferor Company's knowledge, there are no
material disputes with underwriters of any such Insurance Policies and there are
no pending or threatened terminations with respect to any of such policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Transferor
Company or for which the Transferor Company may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the Transferor Company. All taxes due
with respect to completed and settled examinations or concluded litigation have
been paid.
(b) The Transferor Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The Transferor Company does not know of (A) any audit or
investigation of the Transferor Company with respect to any liability for taxes
relating to the Transferor
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Company for which any Transferor Member may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the Transferor Company.
5.13 Employees. The Transferor Company has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Company has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for those given to the holder of the
Construction Loan, as provided in the Construction Loan Documents, no person
holds a power of attorney from or agency agreement with the Transferor Company.
5.16 Bank Accounts. On or before Closing, the Transferor Company shall
have closed every bank account and safe deposit box of the Transferor Company
for which the Transferor Members or their representatives are signatories, and
no representative of the Transferor Members shall be a signatory on any other
account or safe deposit box of the Transferor Company or shall have the power to
borrow, discount debt obligations, cash or draw checks, or otherwise act on
behalf of the Transferor Company in any dealings with any banks or other
financial institutions.
5.17 Ownership. The Transferor Company has not received any written
notice challenging the validity of the Transferor Company's title to the
Property. The Transferor Company has not granted any rights, options, rights of
first refusal or entered into other agreements of any kind which are currently
in effect for the acquisition of the Property or any part thereof, except for
the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the Stabilization Date, there shall be no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll, to
be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and
correct in all material respects as of the Stabilization Date. Except as
otherwise specifically set forth in the Rent Roll or elsewhere in this
Agreement:
(a) to the Transferor Company's knowledge, the Leases are in
full force and effect and none of them has been modified, amended or extended;
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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 Company;
(d) no tenant is entitled to rental concessions or abatements
for any period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Company, except as
set forth on Schedule 5.18 hereof, no action or proceeding instituted against
the Transferor Company by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other
than those set forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in
advance under any lease of any unit in the Property other than as shown on the
Rent Roll;
(h) all brokerage commissions with respect to the Leases shall
have been paid in full by the Closing Date, except as provided in (c) above.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor Company,
no apartment unit is subject to any rent control law, ordinance or regulation.
5.20 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Company or any of the Transferor Members'
affiliates, with respect to the Property (collectively, the "Environmental
Reports"). The Transferor Company has heretofore either furnished to the BRI
Partnership or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in the
Environmental Reports and the reports to be obtained by the BRI Partnership in
accordance with Section 1.05 hereof (the "BRI Environmental Reports"), the
Transferor Company has not received any written notice from any governmental
entity or other person that the Property, or current or former operations on the
Property, are not or have not been in material compliance with any Environmental
Laws or that the Transferor Company has any material liability with respect
thereto. To the Transferor
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Company's knowledge, except as set forth in the Environmental Reports
or in the BRI Environmental Reports, there are no underground tanks for
Hazardous Materials, active or abandoned, at the Property and no Hazardous
Materials are present or have been released in a reportable quantity, where such
a quantity has been established by statute, ordinance, rule, regulation or
order, at, on or under the Property. To the Transferor Company's knowledge,
except as disclosed in the Environmental Reports or in the BRI Environmental
Reports, neither the Transferor Company nor the Property is in violation in any
material respect of any Environmental Laws and there is no asbestos, PCB's or
lead paint on the Property or any part thereof. For purposes of this Agreement,
"Environmental Laws" shall mean the Resource Conservation and Recovery Act (42
U.S.C. s. 6901 et seq.), as amended by the Hazardous and Solid Waste Amendments
of 1984; the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. s. 9601 et seq.), as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49
U.S.C. s. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. s. 2601 et
seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the Clean Water Act (33
U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. s. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C. s.
651 et seq.); and all other applicable federal, state and local environmental
laws (including, without limitation, obligations under the common law),
ordinances, orders, rules and regulations, as any of the foregoing may have been
amended, supplemented or supplanted prior to the Closing, relating to regulation
or control of hazardous, toxic or dangerous substances, materials or wastes
(collectively, "Hazardous Materials"), or their handling, storage or disposal or
to environmental health and safety.
5.21 Permits and Compliance with Laws. Upon completion of construction
of the Improvements, all approvals, consents, permits, licenses or certificates
of occupancy (whether governmental or otherwise) required for the use, operation
and occupancy of the Property shall have been granted to the Transferor Company
and shall be in full force and effect, and any fees and charges shall have been
fully paid. Upon completion of construction of the Improvements, the Property
shall be in compliance in all material respects with all zoning, building,
health, traffic, fire safety, flood control, handicap and other laws,
regulations and ordinances of all governmental authorities having jurisdiction
over the Property (collectively "Codes"). To the Transferor Members' knowledge,
no governmental authority has a current plan, including without limitation, a
condemnation, a widening change of grade or limitation on use of streets, a
special assessment or a change in zoning classification, that would adversely
affect the continued use and operation of the Property as currently used and
operated except as would not have a Material Adverse Effect. The parties agree
that all matters relating to compliance with Environmental Laws shall be covered
by Section 5.20 and not by this Section 5.21.
5.22 Utilities. Upon completion of construction of the Improvements,
all utilities and all public and quasi-public improvements upon or adjacent to
the Property (including, without limitation, all applicable electric lines,
sewer and water lines, and telephone lines) shall be installed, and shall comply
in all material respects with the requirements of the Plans and Specifications
and all applicable Codes, and all necessary easements, permits, licenses and
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agreements in respect of any of the foregoing shall be installed and operating
and all installation and connection charges, to the extent due and payable,
shall have been paid for in full.
5.23 Assessments. Except as disclosed in the tax bills delivered to the
BRI Partnership pursuant to Section 4.03 hereof, to the knowledge of the
Transferor Company, no special assessments for public improvements have been
made against the Property which are unpaid, including, without limitation, those
for construction of sewer and water lines, streets, sidewalks and curbs.
5.24 Pre-Closing Deliveries Accurate. All of the materials to be
delivered by the Transferor Company to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits when delivered, will be true,
accurate and complete in all material respects.
5.25 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the Transferor Company's knowledge,
threatened against the Transferor Company, nor are any of such proceedings,
against or by the Transferor Company, anticipated or contemplated by the
Transferor Company.
5.26 Liens. The Transferor Company agrees to keep the Property free
from mechanics and materialmen's liens or other liens or encumbrances occasioned
by the actions of the Transferor Company or its contractors or subcontractors
and agrees to indemnify and save BRI Partnership harmless from any such liens or
encumbrances and all attorneys' fees and other costs and expenses incurred by
reason thereof.
5.27 Essential Facilities. Except as set forth in Schedule 5.27, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.27, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.28 Legal Access. There is, or prior to Closing will be, direct legal
access from a public way to the Property. Upon completion of construction of the
Improvements, all necessary curb cuts, access permits and other governmental
approvals required to provide such access shall have been issued and shall be in
full force and effect.
5.29 Public Improvements. To the best knowledge of the Transferor
Company and except as shown on the Plans and Specifications, there are no
written or proposed plans to widen, modify, or realign any street or highway or
any existing or proposed eminent domain proceedings which would affect the
Property in any way that would have a Material Adverse
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Effect. To the best knowledge of the Transferor Company, there are no presently
planned public improvements which would result in the creation of a special
improvement or similar lien upon the Property.
5.30 Condition of Improvements. The Property, including, without
limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical,
HVAC systems and equipment, plumbing, drainage and heating systems and other
mechanical systems, shall at the time of Closing be in good order and operating
condition, subject to normal wear and tear, and will be constructed
substantially in accordance with (i) the Plans and Specifications, (ii) all
applicable Codes, permits, approvals, title encumbrances and insurance
requirements and (iii) accepted standards of good materials and workmanship. As
of the time of Closing, there will be no physical or mechanical defects having a
Material Adverse Effect on the use or marketability of the Property and no
condition which impairs or could impair, the structure of the Property or
renders it in noncompliance with the requirements of this Agreement. No fire or
other casualty shall have occurred on any of the Property, the damage related to
which has not been repaired or restored to the condition the Property was in
prior to such fire or other casualty.
B. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR MEMBERS
-------------------------
Each of the Transferor Members on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof,
as follows:
5.31 Authorization. Such Transferor Member has full power and authority
to enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Members Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Member under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Members
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Member in accordance with their respective terms.
5.32 Additional Authorization. No approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Member of
the Transferor Membership Interests held by such Transferor Member and the
performance of such Transferor Member's obligations under this Agreement.
5.33 Membership Interest. Except as provided in this Agreement and the
Transferor Operating Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Membership Interests held by such Transferor Member is
authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor
Member owns and holds the Transferor Membership Interests set forth opposite its
name on Exhibit I beneficially and of record free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.33 will be paid in full.
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Upon the Closing, good, valid, marketable, and indefeasible title to such
Transferor Membership Interests shall be vested in the BRI Partnership free and
clear of any lien, claim, charge, pledge, encumbrance, limitation, agreement or
instrument whatsoever. The provisions of this Section 5.33 shall survive the
Closing indefinitely.
5.34 Investment Representations and Warranties. Each Transferor Member
for itself, severally and not jointly, represents, warrants, acknowledges and
agrees as follows:
(a) Such Transferor Member is acquiring the BRI Partnership
Units for investment only to be received by it for its own account and not with
any view to the sale or distribution of the same or any part thereof in
violation of the Securities Act of 1933, as amended (the "Act") and it will not
sell or otherwise dispose of such BRI Partnership Units except in compliance
with the registration requirements or exemption provisions of any applicable
securities laws and in accordance with the terms of the BRI Partnership
Agreement and the Registration Rights Agreement.
(b) Such Transferor Member understands that the BRI
Partnership Units to be issued to each Transferor Member will not be registered
under the Act, or the securities laws of any state ("Blue Sky Laws") by reason
of a specific exemption or exemptions from registration under the Act and
applicable Blue Sky Laws and that BRI's and the BRI Partnership's reliance on
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Transferor Member.
(c) Such Transferor Member acknowledges and agrees that, for
the reasons set forth in Sections 5.34(a) and (b) above, the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units) may not be offered, sold, transferred, pledged, or otherwise disposed of
by such Transferor Member except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-action letter issued by the Securities and Exchange Commission to the effect
that a proposed transfer of the BRI Partnership Units (or shares of common stock
issued upon exchange of the BRI Partnership Units) may be made without
registration under the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the
case may be, receiving an opinion of counsel knowledgeable in securities law
matters (and which opinion and counsel shall be reasonably acceptable to both
the BRI Partnership and BRI) to the effect that the proposed transfer is exempt
from the registration requirements of the Act and any applicable Blue Sky Laws,
and that, accordingly, such Transferor Member must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Member acknowledges, represents and agrees that (i) its economic
circumstances are such that it is able to bear all risks of the investment in
the BRI Partnership and BRI for an indefinite period of time, including the risk
of a complete loss of its investment in the BRI Partnership Units (or shares of
common stock issued upon exchange of the BRI Partnership Units), (ii) it has
knowledge and experience in financial and business matters
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sufficient to evaluate the risks of investment in the BRI Partnership Units and
BRI, and (iii) it has consulted with its own separate counsel and tax advisor,
to the extent deemed necessary by it, as to all legal and taxation matters
covered by this Agreement and has not relied upon the BRI Partnership, its
affiliates or its other legal counsel and advisors for any explanation of the
application of the various United States or state securities laws or tax laws
with regard to its acquisition of the BRI Partnership Units. Such Transferor
Member further acknowledges and represents that it has made its own independent
investigation of the BRI Partnership and the business conducted or proposed to
be conducted by the BRI Partnership.
(d) Such Transferor Member is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Act.
(e) Such Transferor Member understands that an investment in
the BRI Partnership and BRI involves substantial risks. Such Transferor Member
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Member acknowledges and agrees that:
(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
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any applicable state securities laws,
receipt of a no-action letter issued by the
Securities and Exchange Commission (together
with either registration or an, exemption
under applicable state securities laws) or
an opinion of counsel (which opinion and
which counsel shall be acceptable to
Berkshire Realty Company, Inc.) that the
proposed transaction will be exempt from
registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under
the Act as aforesaid, BRI reserves the right to place a stop
order against the transfer of the BRI Partnership Units, (and
any shares of common stock issued upon exchange of the BRI
Partnership Units) and to refuse to effect any transfers
thereof, in the absence of satisfying the conditions contained
in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such
Transferor Member's principal residence or principal place of business, and such
Transferor Member has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.34 shall survive the
Closing indefinitely.
5.35 Receipt of Documents. Such Transferor Member has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
---------
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
-------------------------------------------------
The BRI Partnership represents, and warrants and covenants to the
Transferor Members as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Members prior to the execution of this Agreement, is a true, correct and
complete copy of said BRI Partnership Agreement as amended to date. The BRI
Partnership Agreement, as so delivered or made available, has not been modified
and is in full force and effect in accordance with its terms as of the date
hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements
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and covenants contained in this Agreement and contemplated hereby and any other
documents and instruments relating hereto or thereto; (iii) this Agreement and
the documents to be executed and delivered by the BRI Partnership at Closing,
upon execution and delivery will have been duly and validly authorized and
executed by the BRI Partnership and will constitute the valid and binding
obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to
the Transferor Company true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year ended adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the BRI Partnership in connection with the valid execution and
delivery of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is
the only agreement among the partners relating to the organization, operation,
or management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no
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commitment to issue any right to purchase or acquire or to issue or distribute
to any of the owners of partnership interests in the BRI Partnership (the "BRI
Partners"), any evidences of indebtedness or assets and the BRI Partnership has
no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire
any interest in the BRI Partnership or to make any distribution in respect
thereof. Upon the Closing, good, valid and marketable title to the BRI
Partnership Units shall be vested in the Transferor Members free and clear of
any lien, claim, charge, pledge encumbrance, limitation, agreement or instrument
whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the BRI
Partnership or for which the BRI Partnership may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely field, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the BRI Partnership. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The BRI Partnership has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or
investigation of the BRI Partnership with respect to any liability for taxes
relating to the BRI Partnership for which any BRI Partner may be liable, or (B)
any threatened claims or assessments for taxes against or relating to the BRI
Partnership.
(d) The BRI Partnership has previously delivered to the
Transferor Company a true and complete copy of the BRI Partnership's Federal
Income Tax Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the BRI Partnership's knowledge,
threatened against the BRI Partnership, nor are any of such proceedings
anticipated or contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof, did
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December
31, 1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate
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investment trust" and its method of operation has enabled and to BRI's knowledge
should enable it to meet the requirements for qualification and taxation as a
"real estate investment trust" under the Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or
prior to Closing will provide, for the issuance of the BRI Partnership Units.
The BRI Partnership Units to be issued in connection with the transactions
herein contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Members, and on
the date of their issuance pursuant to the terms and conditions hereof will be
validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Company otherwise in writing) and represents that
there are no other documents known to the BRI Partnership which are required to
be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is
no material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI 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
Company shall maintain its present insurance on the Property which insurance in
respect of fire and casualty shall be covered by a standard All-Risk Policy in
the amounts as currently insured. A certificate or certificates of such
insurance shall be provided to the BRI Partnership upon written request by the
BRI Partnership. Subject to the provisions of Section 7.02, the risk of loss in
and to the Property shall remain vested in the Transferor Members until the Time
of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty and
are not restored by the Transferor Company prior to the Time of Closing, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Members at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Membership Interests, and in such case, unless the Transferor
Members shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Members shall
pay over or assign to the BRI Partnership, on behalf of the Transferor Company,
all amounts received or due (plus an amount equal to any deductible under any
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insurance policy covering the Property) from, and all claims against, any
insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00, or if any such damage or destruction
shall occur and be restored by the Transferor Company prior to the Time of
Closing, or if any eminent domain notice or proceeding is commenced which does
not affect any material portion of the Property, the BRI Partnership shall
proceed to accept the contribution and transfer of the Transferor Membership
Interests in accordance with the provisions of clause (b) above.
SECTION 8
---------
VIOLATIONS OF LAW
-----------------
8.01 Responsibility for Violations. All notices of material violations
of laws, ordinances, regulations or insurance requirements ("Violations of
Law"), which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall be removed or complied with by the Transferor Company, at the
expense of the Transferor Company, prior to the Closing Date.
SECTION 9
---------
OBLIGATIONS PRIOR TO CLOSING
----------------------------
The Transferor Company covenants that between the date of this
Agreement and the Closing Date:
9.01 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall, if necessary, be repaired or
otherwise maintained in accordance with the Transferor Company's usual and
customary practice without regard to the Closing contemplated by this Agreement.
9.02 Service Contracts. The Transferor Company shall not enter into any
new service contract for the Property, without the prior written consent of the
BRI Partnership which consent shall not be unreasonably withheld or delayed,
provided no consent shall be required with respect to any of the foregoing so
long as such service contract is terminable without penalty by the then owner of
the Property upon not more than thirty (30) days' notice.
9.03 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.04 Tax Procedure. Except as to real property tax assessment appeal
proceedings now or hereafter filed by the Transferor Company to reduce real
property tax assessments, the
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Transferor Company shall not withdraw, settle or otherwise compromise any
protest or reduction proceeding affecting real estate taxes assessed against the
Property for any fiscal period in which the Closing Date is to occur or any
subsequent fiscal period without the prior written consent of BRI Partnership.
Real estate tax refunds and credits received after the Closing Date which are
attributable to (i) the fiscal tax year during which the Closing occurs shall be
apportioned between Transferor Members and the BRI Partnership, based upon the
relative time periods before and after the Closing, or (ii) any fiscal year
prior to the fiscal year in which the Closing occurs shall be paid to the
Transferor Members, in either case after deducting the expenses of collection
thereof, which obligation shall survive the Closing.
9.05 Property Operating and Maintenance. The Transferor Company shall
lease, manage, maintain and operate the Improvements in the ordinary course of
business. Without limiting the generality of the foregoing, the Transferor
Company shall perform all ordinary maintenance and repair of the mechanical,
electrical and plumbing facilities and equipment within the Improvements so as
to keep such facilities in good operating condition and repair, taking into
account ordinary wear and tear; and to the extent any such facilities or
equipment have heretofore been serviced under a Service Contract, the Transferor
Company shall keep such Service Contracts in full force and effect up to
Closing. For purposes hereof, the parties agree that the Transferor Company has
retained or will retain the BRI Partnership or its affiliate (the "Management
Company") as the manager for the Property pursuant to the Management Agreement
attached hereto as Exhibit 7. The parties agree that the Management Agreement
shall remain in effect until the expiration of the Earn Out Period and, until
then, may not be modified, amended or terminated without the consent of both
parties. Notwithstanding that the BRI Partnership is or will become the owner of
the Management Company, until the expiration of the Earn Out Period, the
Transferor Members shall have control over the activities of the Management
Company and its personnel (including both on-site and managerial) with respect
to the Property, including but not limited to, appointment, hiring, firing,
supervision and compensation (both base and incentive, of personnel, operation,
marketing, promotions and advertising, hours of operation and all other
decisions as to the Property and its leasing and management; provided that such
control shall be exercised in a commercially reasonable manner as compared with
comparable properties in comparable locations. To facilitate this continued
control, BRI Partnership agrees that Patrick Connelly, currently a vice
president of The Questar Management Company, shall remain employed by the
Management Company until the expiration of the Earn Out Period, his principal
place of employment shall remain at the principal regional office of the
Transferor Company and he shall devote such efforts to the Property as the
Transferor Members shall require. Notwithstanding the foregoing, if the
employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then
the Transferor Members at their option, may elect (a) to terminate the
management agreement with BRI Partnership and either manage, lease and operate
the Property on their own behalf or retain such other persons or entities to do
so as they deem appropriate on substantially the same terms (including, but not
limited to, the same management fee) as are provided in the management agreement
with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their
full-time employee.
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9.06 Lease Amendments. The Transferor Company shall not amend, alter,
modify or vary the terms and provisions of any of Leases except in the ordinary
course of business, without first obtaining the written consent of the BRI
Partnership, which consent shall not be unreasonably withheld or delayed.
9.07 New Leases. From and after the date hereof, the Transferor Company
shall not make, execute nor permit any new Lease for any apartment in the
Property without first obtaining the written consent of the BRI Partnership,
unless such Lease (i) is on the form lease provided to the BRI Partnership, and
(ii) is with a Qualified Tenant.
9.08 Preservation of Partnership Business. On and after the date
hereof, except with the prior written consent of the BRI Partnership or as
otherwise provided in this Agreement, the Transferor Company shall not cause,
acquiesce in, or agree to:
(a) a material amendment, modification, termination or
cancellation of the Transferor Operating Agreement without the prior written
consent of the BRI Partnership, which shall not be unreasonably withheld or
delayed, provided that such amendment modification, termination or cancellation
does not adversely affect the BRI Partnership's rights under this Agreement;
(b) any willful action by the Transferor Company which would
render any of representations and warranties contained in Section 5 hereof
untrue in any respect at and as of the Closing Date with the same effect as
though such representations and warranties had been made at and as of the
Closing Date;
and, except with the prior written consent of the BRI Partnership, the
Transferor Company shall not cause, acquiesce in or agree to any action allowing
the Transferor Company taking or agreeing to take any of the following actions:
(c) merge or consolidate with any other entity or permit any
other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets of
any other person, partnership, corporation, or business organization;
(d) except in the ordinary course of business and consistent
with past practices, enter into any contract, transaction or agreement which
shall survive the Closing (except as permitted by Section 9.02); or
(e) enter into any agreement, transaction or arrangement with
any affiliate that will survive the Closing; or
(f) subject any portion of the Property to any option contract
or sales contract.
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9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Company shall conduct
its business only in the ordinary course and do the following:
(a) Subject to the provisions of Section 8.01 hereof, comply
with all regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with
reputable insurers, which in respect of amounts, types and risks insured is that
which its management reasonably believes to be adequate for the business
conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of
the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(d) Unless it is contesting the same in good faith and has
established reasonable reserves therefor, pay when required to be paid all taxes
indicated by its tax returns or otherwise lawfully levied or assessed upon it,
or any of its properties or assets, or which it is otherwise legally obligated
to pay;
(e) Comply in all material respects with each and every
undertaking, covenant and obligation of landlord under the Leases, including up
to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other
material obligations incurred by the Transferor Company in connection with the
use and ownership of the Property up to the date of Closing.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Company will give the BRI Partnership and their
attorneys, accountants, and other representatives reasonable access to
Transferor Company's personnel and all properties, documents, contracts, books,
and records of the Transferor Company, relating to the consummation of the
transactions contemplated hereunder and will furnish the BRI Partnership with
copies of such documents (certified by the Transferor Company if so requested)
and with such information with respect to the affairs of the Transferor Company
as the BRI Partnership may from time to time reasonably request.
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SECTION 10
----------
TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND
-------------------------------------------
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
---------------------------------------------------
10.01 Closing, Deliveries and Obligations. At or prior to the Closing,
the Transferor Members shall deliver the following to the BRI Partnership (the
"Transferor Members Closing Documents"):
(a) Assignment of Transferor Membership Interests. An
assignment of the Transferor Membership Interests from each of the respective
Transferor Members to the BRI Partnership in the form of the Transferor
Assignment attached hereto as Exhibit III, duly executed and delivered by each
of the Transferor Members, which shall transfer the Transferor Membership
Interests to the BRI Partnership free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party.
(b) UCC Search - Transferor Members. A Uniform Commercial Code
lien search for each of the Transferor Members, indicating that the membership
interest of each Transferor Partner in the Transferor Company is unencumbered by
any security interest therein and the cost of which shall be paid by BRI
Partnership.
(c) Amended Transferor Operating Agreement and Articles. The
Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended
and Restated Transferor Company Articles in the form of Exhibit V hereto duly
executed and delivered by the Transferor Members, pursuant to which the
Transferor Members shall withdraw as members from the Transferor Company.
(d) Opinion. An opinion of counsel satisfactory to the BRI
Partnership to the effect that the Transferor Company has been duly formed in
accordance with Maryland law and is validly existing and in good standing under
such laws, that the Transferor Members are all of the members of the Transferor
Company, that no state transfer taxes, sales tax, excise tax or transfer stamps
are required to consummate the transactions contemplated by this Agreement and
as to such other matters as are customarily required in Baltimore, Maryland in
connection with the transactions contemplated under this Agreement. The opinion
shall also provide that such counsel has no knowledge that the Transferor
Assignments have not been duly executed and delivered by each of the Transferor
Members.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI
Partnership Amendment in the form of Exhibit 3 attached hereto, duly executed
and delivered by the Transferor Members and a BRI Questionnaire, in the form of
Exhibit 5 attached hereto, duly executed by each of the Transferor Members.
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(f) Occupancy Permit. Final Certificates of Occupancy from the
local authority having jurisdiction over the construction and occupancy of the
Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable
to the BRI Partnership, that all real estate taxes and personal property taxes
and special assessments, if any, affecting the Property, which are due and
payable at the Closing have been paid unless contested in good faith and
reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together
with photocopies of all rent records (including an updated Rent Roll in the same
format as the Rent Roll attached as Schedule D dated as of the last day of the
month preceding the month in which the Closing occurs), and related documents in
the possession or under the control of the Transferor Company. Such records
shall include a schedule of all cash security deposits and credit to the BRI
Partnership in the amount of such security deposits, including interest thereon,
if any, held by the Transferor Company at the Closing Date under the Leases and
a schedule updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications and Licenses. An as-built set of
original Plans and Specifications together with original copies (or photocopies
if original copies are unavailable to the Transferor Company) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Company shall also deliver: original copies of all
certificates, licenses, permits, authorizations and approvals issued for or with
respect to the Property by governmental and quasi-governmental authorities
having jurisdiction, except that photocopies may be substituted if the originals
are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each
Transferor Member in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and to omit from its title insurance policy all exceptions for (i) judgments,
bankruptcies or other returns against persons or entities whose names are the
same as or similar to the Transferor Company's name; (ii) parties in possession
other than under the rights to possession granted under the Leases; and (iii)
mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed
by the Transferor Members, advising the tenants under the Leases of the transfer
of ownership of the Transferor Company to the BRI Partnership and directing that
all rents and other payments thereafter becoming due under the Leases be sent as
the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A
certificate by the Transferor Members to the effect that, to its knowledge, all
of the representations and warranties of the Transferor Company set forth in
this Agreement remain true and correct as of the Closing Date.
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(m) Evidence of Existence and Authority. A certificate issued
by the Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Company.
(n) Non-Foreign Affidavit. The Transferor Members shall
execute and deliver to the BRI Partnership and the BRI Partnership's counsel, at
Closing such evidence as may be reasonably required by the BRI Partnership to
show compliance by the Transferor Members with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Construction Contract Retentions. Final mechanics' lien
waivers from the general contractor and subcontractors covering at least 95% of
the construction cost, together with an amount equal to 125% of all unpaid
retentions and disputed amounts under the Construction Contract, which amount
shall be placed in an escrow account with the Escrow Agent to be released on a
monthly basis to pay amounts coming due under the Construction Contract to the
general contractor, all subcontractors and material suppliers; provided that any
request for payment shall be accompanied by all documentation required as a
prerequisite to payment under the Construction Contract, including lien waivers,
and further provided that payment of any retention shall be subject to receipt
of final lien waivers and acknowledgments of payment in full executed by the
general contractors, all subcontractors and material suppliers. In any event,
the Transferor Members shall remain liable for payment of all such unpaid
retentions and disputed amounts to the extent not covered by the escrow, which
obligation shall survive Closing.
(p) UCC Search - Property. A Uniform Commercial Code lien
search showing no Uniform Commercial Code filing (other than in respect of the
Loan Documents) or judgment or tax lien filings against the Transferor Company
with respect to the Property, which searches shall be dated not earlier than
thirty (30) days prior to the Closing and the cost of which shall be paid by the
BRI Partnership.
(q) Certificate of Completion. The original certificate of
substantial completion required under Section 3.02.
(r) Questar Builders Warranty. An original one year
construction warranty for the Improvements to be provided by Questar Builders,
Inc., which construction warranty shall be identical to that required under the
standard AIA Construction Contract substantially in the form of Exhibit X
hereto.
(s) Warranties and Guarantees. Originals of all warranties and
guarantees provided by subcontractors and material suppliers for the
Improvements.
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(t) Other Documents. Such other documents, instruments or
agreements which the Transferor Members are required to deliver to the BRI
Partnership pursuant to any other provisions of this Agreement or which the BRI
Partnership may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the BRI Partnership title to the Transferor Membership
Interests. The provisions of this Section 10.01(t) shall survive the Closing
indefinitely.
10.02 The Transferor Members' Expenses. The Transferor Members shall
pay all of the fees and expenses of their own separate legal, tax or other
advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor
Member agrees that such Transferor Member will notify the Transferor Company in
writing on or prior to the Closing Date if any of the representations and
warranties of such Transferor Member cease to be true and correct on and as of
the Closing Date. Each Transferor Member further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Company, the
representations and warranties of such Transferor Member shall be deemed to be
true and correct on and as of the Closing Date and that the BRI Partnership and
the Transferor Company shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Members. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor Member,
hereby agrees that until the tenth (10th) day following the first anniversary of
the Closing:
(a) each Transferor Member shall continue to own and hold, and
shall not assign, transfer, distribute to its partners or otherwise dispose of
any of the BRI Partnership Units received by it pursuant to this Agreement
except to the extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Member shall transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton
Gorn, Stephen M. Gorn and John B. Colvin given to the BRI Partnership pursuant
to the Pledge Agreement (described on Schedule K), no Transferor Member shall
mortgage, pledge, create a security interest in or lien on or otherwise
hypothecate or encumber any of such BRI Partnership Units except as permitted
under the BRI Partnership Agreement;
(d) the provisions of this Section 10.04 shall survive the
Closing indefinitely.
10.05 Indemnification.
(a) The Transferor Members' Indemnity. In the event the
parties proceed to Closing, each Transferor Member agrees, severally and not
jointly, to indemnify and hold the
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BRI Partnership harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the BRI Partnership subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the Transferor Company set forth in Section 5A or
of such Transferor Member set forth in Section 5B or (B) resulting from any
breach or default by the Transferor Company or such Transferor Member of any
obligation of the Transferor Company or such Transferor Member under this
Agreement or (ii) from liabilities for borrowed money incurred by the Transferor
Company or the Property prior to the Closing; provided that no Transferor Member
shall be required to indemnify the BRI Partnership for any amounts in excess of
50% of the fair market value of the BRI Partnership Units received by such
Transferor Member as of the date such indemnification obligation is satisfied
(except for indemnification obligations with respect to representations of each
of the Transferor Members in Section 5.33, which shall be limited to 100% of the
fair market value as of the date such indemnification obligation is satisfied of
the BRI Partnership Units received by such Transferor Member) (collectively, the
"Cap"); and provided further that to the extent any of the Transferor Members
have any indemnification obligation to the BRI Partnership, the Transferor
Members may elect to satisfy such indemnification obligation by directing the
BRI Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Member pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or canceled) equal
to the indemnification obligation of such Transferor Member.
(b) The BRI Partnership's Indemnity. In the event the parties
proceed to Closing, the BRI Partnership agrees to indemnify and hold the
Transferor Members harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Members, subsequent to
the Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Company or the Property after the Closing (except for such liabilities resulting
from a breach or default by the Transferor Members or the Transferor Company for
which the BRI Partnership is indemnified under Section 10.05(a) above); provided
that the BRI Partnership shall not be required to indemnify any Transferor
Member under this Section 10.05(b)(i) for any amounts in excess of 50% of the
fair market value as of the date such indemnification obligation is satisfied of
the BRI Partnership Units received by such Transferor Member (except for
indemnification obligations with respect to Sections 6.10 and 11.03 which shall
be limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Partnership Units received by such Transferor
Member).
(c) The indemnification obligations of the Transfer Members
and the BRI Partnership, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 16.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable insurance
proceeds actually received by, and other savings that actually reduce the impact
of losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor
Members shall have any liability for claims made under Section 10.05(a) or
10.05(b) unless and until the aggregate amount of all losses incurred exceeds
$50,000 (in which case the indemnifying party shall be liable for the portion of
losses exceeding $50,000).
(f) The indemnification provided in this Section 10 shall be
the sole and exclusive remedy after the Closing Date for damages available to
the BRI Partnership or the Transferor Members for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Company or the Property.
(g) Each of the Transferor Members, the Transferor Company and
the BRI Partnership acknowledge and agree that, unless otherwise agreed to in
writing by all the parties, from and after the Closing, each of the parties
hereto will be deemed to have waived any right to seek indemnification hereunder
from the other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the
Transferor Company shall terminate for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code and its tax year shall close on the Closing
Date. The Transferor Members shall prepare and timely file any federal, state,
local and foreign tax or information returns due after Closing that are required
to be filed by or on behalf of the Transferor Company with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Members
shall prepare and timely file the terminating tax returns for the Transferor
Company resulting from the consummation of the transactions contemplated under
this Agreement, provided, however, that such tax returns shall be prepared in
accordance with the terms and provisions of this Agreement and provided further,
that prior to the filing thereof the Transferor Members shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Members in obtaining such data and information regarding
the Transferor Company to permit the Transferor Members to prepare such returns
or to respond to any audits or assessments for the periods covered by such
returns.
SECTION 11
----------
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
-------------------------------------
AND POST-CLOSING AGREEMENTS
---------------------------
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
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(a) Transfer of Consideration; Execution and Delivery of BRI
Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver
to the Transferor Members (i) the Base Consideration and, if applicable, the
Additional Consideration Installments, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended
Transferor Operating Agreement and Amended Transferor Company Articles. Deliver
to the Transferor Members (i) the Transferor Assignments duly executed by the
BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended
Transferor Company Articles duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Company.
(c) Record Amended Transferor Company Articles. Cause the
Amended Transferor Company Articles to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the
Transferor Members to the effect that the BRI Partnership has been duly formed
in accordance with Delaware law and is validly existing and in good standing
under such laws, that the BRI Partnership Amendment has been duly executed and
delivered, that no state transfer taxes, sales tax, excise tax or transfer
stamps are required in connection with the issuance of the BRI Partnership Units
to the Transferor Members as contemplated by this Agreement and as to such other
matters as are customarily required in Baltimore, Maryland in connection with
the transactions contemplated under this Agreement. The opinion shall also
provide that, based solely on a certification of BRI, commencing with BRI's
taxable year ending December 31, 1991, BRI has been organized in conformity with
the requirements for qualifications as a "real estate investment trust" and its
method of operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver
to the Transferor Members a certificate by the BRI Partnership to the effect
that all of the representations and warranties of the BRI Partnership set forth
in this Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued
by the Secretary of State of the State of Delaware dated no earlier than 30 days
prior to the Closing Date certifying as to the good standing and valid existence
of the BRI Partnership.
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(g) BRI Partnership Agreement. Deliver to the Transferor
Members a true and correct copy of the BRI Partnership Agreement, as amended and
in effect on the Closing Date, certified as such by an officer of the general
partner of the BRI Partnership.
(h) Other Documents. Such other documents, instruments or
agreements which the BRI Partnership is required to deliver to the Transferor
Members pursuant to any other provisions of this Agreement or which the
Transferor Members may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the Transferor Members title to the BRI Partnership Units.
The provisions of this Section 11.01(h) shall survive the Closing indefinitely.
11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC
search costs and (v) all other Closing costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Members,
in their capacity as a limited partner of the BRI Partnership and so long as the
Transferor Company has not dissolved, terminated or liquidated, the right to
receive the Transferor Membership Interests as a distribution in kind in
satisfaction of the Transferor Members' distribution rights under Section 8.2 of
the BRI Partnership Agreement. If the Transferor Membership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Members.
(b) Until the expiration of the period (the "No Transfer
Period") ending on the earlier of (I) such time as all of the Transferor Members
have redeemed all of the BRI Partnership Units received by the Transferor
Members hereunder for cash or for shares of BRI common stock or (II) seven (7)
years from the Closing Date, neither the BRI Partnership nor BRI shall allow the
sale or transfer of either the Transferor Membership Interests or the Property,
except for (i) transfers that are fully tax-free to partnerships in which the
BRI Partnership has an interest, (ii) exchanges that are fully tax-free pursuant
to Section 1031 of the Code (iii) involuntary transfers which shall include,
without limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation
or a liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period; and (iv) voluntary
transfers arising in connection with any financing or refinancing of the
Property, which shall include, without limitation, a mortgage, deed of trust, or
any other related financing liens or security interests, the parties
affirmatively acknowledging that there shall be no restriction on the financing
or refinancing of the Property by the BRI Partnership.
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(c) The provisions of this Section 11.03 shall survive the
Closing indefinitely.
SECTION 12
----------
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
-----------------------------------------------
12.01 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and, the net amount of such prorations and
apportionments shall be paid in cash at Closing by the party owing such amount
to the other party unless the Transferor Members have made an election to
receive BRI Partnership Units, in which event such proration and apportionments
shall be settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges,
sewer rents and vault charges, if any, on the basis of the fiscal period for
which assessed, except that if there is a water meter on the Property,
apportionment on the Closing Date shall be based on the last available reading,
subject to adjustment after the Closing on a per diem basis, when the next
reading is available;
(c) charges or prepayments under transferable Service
Contracts; and
(d) all other income and expenses relating to the Property,
including without limitation, income from cable television services as are
customarily adjusted in real estate transactions of this size and type in
Baltimore, Maryland.
If as of the Closing Date, any items of income or expense attributable
to the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor
Members and the BRI Partnership shall prepare and exchange preliminary
calculations of all adjustments and prorations to be made pursuant to this
Section 12. The Transferor Members and the BRI Partnership shall cooperate in
the furnishing of all information and documentation necessary to prepare such
calculations. If the Transferor Members have elected to receive BRI Partnership
Units pursuant to Section 2.02, then prior to Closing, the Transferor Members
shall deliver to the
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BRI Partnership the final Transfer Allocation Schedule (the "Transfer Allocation
Schedule"), which shall be based upon the Preliminary Transfer Allocation
Schedule, shall incorporate all adjustments and prorations to be made pursuant
to Section 12 and shall set forth (i) the name of each Transferor Member, and
(ii) the number of BRI Partnership Units to be received by each Transferor
Member. The BRI Partnership shall have no obligation or liability with respect
to the preparation or accuracy of the Preliminary Transferor Allocation Schedule
or the Transfer Allocation Schedule or the distribution of the BRI Partnership
Units or the BRI Additional Payment, if applicable, to the Transferor Members
and the Transferor Members hereby release the BRI Partnership from any such
obligation or liability.
Subject to Section 12.04, all cash (including any escrow deposits)
shall be used by the Transferor Company to pay amounts payable by the Transferor
Company and/or distributed to the Transferor Members prior to Closing, and if
any of such cash applicable to preclosing periods is not removed from the
Transferor Company prior to Closing, the BRI Partnership shall hold such cash as
agent for the Transferor Members and refund such cash to the Transferor Members
subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Company shall distribute the
right to receive such rent to the Transferor Members immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Members in
collecting such rents. Rents received from such tenant after the Closing shall
be applied in the following order of priority: (a) first to the month in which
the Closing occurred; (b) then to any month or months following the month in
which the Closing occurred until all unpaid rents have been paid in full; and
(c) then to the period prior to the month in which the Closing occurred. After
Closing, the BRI Partnership shall cause the Transferor Company to use
reasonable efforts to collect delinquent rents attributable to the period prior
to the month in which Closing occurred, provided such efforts shall not require
the commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Members or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Company shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Members owe an amount
to the BRI Partnership, the Transferor Members shall have the right to elect to
adjust for such amounts owing by the Transferor Members to the BRI Partnership
in the form of BRI Partnership Units rather than
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cash. In addition, if as a result of the prorations and apportionments set forth
in Section 12.01, the BRI Partnership owes an amount to the Transferor Members,
such amount shall be paid in the form of BRI Partnership Units rather than cash,
if the Transferor Members have elected under Section 2.02 to receive BRI
Partnership Units. The Transferor Members shall notify the BRI Partnership at
least seven (7) business days prior to the Closing Date of the manner in which
the Transferor Members shall have elected to settle adjustments under this
Section 12.
SECTION 13
----------
FAILURE TO PERFORM
------------------
13.01 Defective Title or Condition. If the Transferor Members are
unable to give title or to contribute and transfer the Transferor Membership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Membership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Members on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the
right to elect, in its sole discretion, on the Closing Date, to accept such
title as the Transferor Members can deliver to the Transferor Membership
Interests and the Property in its then condition and to deliver in exchange
therefor the Consideration Amount then required to be paid subject to reduction
of the Consideration Amount by the amounts required to remove all Monetary
Liens.
13.03 Transferor Default. If the Transferor Company or any of the
Transferor Members default in the performance of their obligations under this
Agreement, or if any representation or warranty of the Transferor Company or the
Transferor Members is false or misleading (a "Transferor Default"), the BRI
Partnership shall be entitled to exercise any or all remedies as may be
available at law or in equity on account thereof, including, but not limited to,
an action for specific performance or an action for money damages. By their
execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby
guarantee the performance by the Transferor Company of all of its obligations
hereunder and, as part of such guaranty, shall be jointly and severally liable
with the Transferor Company of the payment of all damages to which BRI
Partnership may be entitled.
13.04 The BRI Partnership's Default. If the BRI Partnership defaults in
performing any of its obligations hereunder, then the Transferor Members shall
be entitled to exercise any or all remedies as may be available at law or in
equity on account thereof, including, but not limited to, an action for specific
performance or an action for money damages.
SECTION 14
----------
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BROKERAGE FEES
--------------
14.01 Brokerage Fees. The Transferor Company and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Company understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of QPI and the Related
Entities in accordance with the provisions of the Related Agreements. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Company have any obligation to pay any
commission to APC.
SECTION 15
----------
NOTICES
-------
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Members or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
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 Members c/o Questar Properties, Inc.
124 Slade Avenue, Suite 200
Baltimore, MD 21208
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.
SECTION 16
----------
LIMITATIONS ON SURVIVAL
-----------------------
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05
and the covenant and agreements of the BRI Partnership contained in Sections
2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing
indefinitely and an action based thereon may be brought at any time after the
Closing Date. The representations, warranties, covenants and other obligations
of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and
including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04,
10.05, 12 and 14 and the representations and warranties, covenants and other
obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for
6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 11.03, 12 and 14 shall survive until
twelve (12) months after the Closing Date and thereafter during the pendency of
any claim based upon a breach thereof, and no action based thereon shall be
commenced more than twelve (12) months after the Closing Date. Except as
otherwise specifically provided in this Agreement, no other representations,
warranties, covenants or other obligations of the Transferor Members or the BRI
Partnership set forth in this Agreement shall survive the Closing, and no action
based thereon shall be commenced after Closing. Representations and warranties
in Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration
of the applicable statute of limitations.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Operating Agreement by the Transferor Members (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Members, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
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satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
----------
CONDITIONS TO CLOSING
---------------------
17.01 BRI Conditions. Without limiting any other conditions to Closing
of the BRI Partnership contained herein, the obligation of the BRI Partnership
to proceed with the Closing of the transactions contemplated by this Agreement
is expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the Transferor Members and the Transferor Company shall have
performed or complied with, in all material respects, all of their respective
covenants, agreements and obligations under this Agreement, (ii) the Transferor
Members shall have delivered the Transferor Members Closing Documents and (iii)
all of the representations and warranties of the Transferor Company and the
Transferor Members set forth in this Agreement shall be true and correct, in all
material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of notice of
satisfaction of the Closing Conditions, there shall not have occurred any
material adverse change in the financial condition, business, properties, assets
or liabilities of the Transferor Company;
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) Title to Membership Interests. The Transferor Membership
Interests shall, as of the Closing Date, be transferred and assigned to the BRI
Partnership, or its designees, respectively, and shall be free and clear of any
liens, pledges and encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Company shall, as of the
Closing Date, have good record, marketable and insurable title to the Property,
subject only to the title exceptions permitted under Section 1.02.
(f) Construction. The Transferor Company shall have completed
construction of the Improvements in accordance with the Plans and
Specifications, as modified in accordance with this Agreement, and in compliance
with all Codes all to the extent required under Sections 3.02 and 5.30, and, if
such completion shall have occurred prior to the occurrence of the Stabilization
Date, then, in addition to the foregoing, as of the Closing, the Improvements
shall remain completed to the extent required under Sections 3.02 and 5.30 and
shall be in
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substantially the same condition (subject to the provisions of Section 7.02 and
to any damage to the Improvements caused by tenants) as they were in at the time
of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all
identified construction deficiencies corrected.
In the event that any condition set forth in Section 17.01(a) through
Section 17.07(e) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Members within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Members contained herein, the obligation of the
Transferor Members to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Members as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the BRI Partnership shall have performed or complied with, in
all material respects, all of the BRI Partnership covenants, agreements and
obligations under this Agreement, (ii) the BRI Partnership shall have delivered
the BRI Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of any election by the
Transferor Members to accept BRI Partnership Units, there shall not have
occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as
of the Closing Date, be transferred and assigned to the Transferor Members and
shall be free and clear of any liens, pledges and encumbrances of any kind
whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Members in writing, on or before the Closing Date, the Transferor Members shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
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17.03 Related Agreements. Simultaneously herewith, the BRI Partnership
has entered into with various parties (the "Related Entities") various
agreements, including this Agreement, for the conveyance of partnership
interests or property interests or other assets and for the making of certain
secured loans, which agreements are more particularly described on Schedule K
attached hereto (collectively the "Related Agreements"). (The transactions
described in the Related Agreements, including this Agreement, are collectively
the "Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement of even date between
the BRI Partnership and Questar Investment Corporation attached hereto as
Exhibit 6 (the "Kickout Agreement"), in the event that any of the Related
Agreements is terminated pursuant to any termination provision of any other
Related Agreement, this Agreement shall terminate automatically simultaneously
with the termination of any such Related Agreement whereupon this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive the termination of this Agreement. The
provisions of this Section 17.03 shall be of no further force or effect once
closing occurs under any one or more of the Related Agreements.
SECTION 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.01. Assignment. Except as hereinafter provided, this Agreement may
not be assigned prior to Closing by either party hereto. The BRI Partnership
shall have the right to designate an entity affiliated with the BRI Partnership
to accept title to some of the Membership Interests, but the BRI Partnership
shall remain fully liable for the performance of all of its obligations
hereunder. The Transferor Members and the Transferor Company shall have the
right to collaterally assign their interests under this Agreement to a
construction lender providing construction financing for the Improvements (the
"Lender"). This Agreement shall be automatically subject and subordinate to the
mortgage, deed of trust and all other loan documents now or hereafter entered
into evidencing the loan and security of the Lender. If the Transferor Members
and Transferor Company so assign this Agreement, then the the BRI Partnership
agrees to enter into an agreement with the Lender (the "Tri Party Agreement")
providing that: (a) the BRI Partnership agrees to provide the Lender with
reasonable notice and opportunity to cure any default by the Transferor Members
or the Transferor Company hereunder; (b) the BRI Partnership agrees not to
modify or amend this Agreement without the prior written consent of Lender, (c)
the BRI Partnership, at the written request of Lender upon a default under the
loan, will pay the Base Consideration or such lesser amount as is required to
satisfy the loan directly to Lender provided that all of the conditions to
Closing provided herein have been satisfied; (d) the Lender agrees to recognize
the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will
permit Lender to perform any obligations of the Transferor Company and
Transferor Members hereunder and will agree to recognize Lender as the
Transferor Company and the Transferor Members hereunder should Lender succeed to
the interest of the Transferor Company and Transferor Members, provided,
however, that, in such event, Lender's liability
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under this Agreement shall be limited to its interest in the Transferor Company
and the Property; and further provided that (f) the BRI Partnership will have no
liability for payment of the Lender's loan or the performance of any obligations
under any of the loan documents other than the Tri-Party Agreement; and (g) the
amount to be paid to Lender shall be payable in cash only and not in BRI
Partnership Units and shall be limited to the amount provided in clause (c).
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Maryland. The Transferor Members,
Transferor Company and the BRI Partnership consent to the personal jurisdiction
of the federal and state courts of the State of Maryland and agree that service
of process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Transferor Members have the right to
assign or transfer their right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Members and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Members of an
executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
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<PAGE>
18.08 Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the contrary,
and all references to Schedules and Exhibits shall be to the specified Schedules
and Exhibits annexed hereto. All Schedules and Exhibits annexed hereto are made
a part hereof. All terms defined herein shall have the same meanings in the
Schedules and Exhibits, except as otherwise provided therein. All references in
this Agreement shall be deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Members or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding the foregoing, no party hereunder shall have any liability by
reason of the details of the transactions contemplated hereby becoming known by
means beyond the reasonable control of such party. The provisions of this
Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
SECTION 19
----------
ADDITIONAL PROVISIONS RELATING TO
---------------------------------
THE TRANSFEROR MEMBERS
----------------------
19.01 Transferor Allocation Schedule. Each Transferor Member
acknowledges and agrees that the Transferor Allocation Schedule attached hereto
as Exhibit I is true, correct and complete in all respects as it relates to such
Transferor Member.
19.02 Time of Effectiveness. The Transferor Members acknowledge and
agree that this Agreement and the agreements attached as Exhibits hereto will
not be binding and effective
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<PAGE>
unless and until all of the parties hereto and thereto have executed
counterparts to such agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective hands and seals as of the day and year first above
written.
WITNESS:
- ------------------------------ ----------------------------
Stephen M. Gorn
- ------------------------------ ----------------------------
John B. Colvin
- ------------------------------ ----------------------------
Morton Gorn
- Transferor Members -
BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- the BRI Partnership -
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<PAGE>
Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in
accordance with the provisions of Section 13.03.
- ------------------------------ --------------------------------
Stephen M. Gorn
- ------------------------------ --------------------------------
John B. Colvin
- the Guarantors-
RECEIPT BY ESCROW AGENT
The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by
certified check to be held as the Deposit pursuant to this Agreement.
WITNESS: LAWYERS TITLE INSURANCE
CORPORATION
________________________ By: _______________________
Name:
Title:
Date:
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<PAGE>
List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - List of Plans and Specifications
Schedule D - Form of Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 3.03 - Pro Forma Rents
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants
Schedule 5.27 - Shared Facilities/Utilities
Schedule 5.33 - Liens on Membership Interests
List of Exhibits
BRI Exhibits
------------
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire Exhibit 6 - Kickout Agreement
Exhibit 7 - BRI Management Agreement
Transferor Exhibits
-------------------
Exhibit I - List of Transferor Members (with address and membership
interest of each member)
Exhibit II - Transferor Operating Agreement
Exhibit III - Assignment of Transferor Membership Interests
Exhibit IV - Amended and Restated Operating Agreement of Transferor
Company
Exhibit V - Amended and Restated Articles of Organization of Transferor
Company
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Right of First Offer Agreement
Exhibit X - AIA Construction Warranty
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<PAGE>
Schedule A - Property Description
(Granite Run)
All of that land located in Baltimore County, Maryland and more particularly
described as follows:
BEING THE SAME PROPERTY AS SHOWN ON THAT PLAT ENTITLED "GRANITE RUN
APARTMENTS AT ROLLING WIND, PHASE IV, SECTION ONE (FORMERLY ROLLING WIND PHASE
IV)", WHICH PLAT IS RECORDED AMONG THE LAND RECORDS OF BALTIMORE COUNTY IN PLAT
BOOK S.M. NO. 68, FOLIO 94, THEREON SHOWN TO CONTAIN 29.1219 ACRES OF GROUND,
MORE OR LESS.
<PAGE>
Schedule 5.27 - Shared Facilities/Utilities
(Granite Run)
1. Easement Agreement dated May 17, 1996 and recorded in the Land Records of
Baltimore County as Liber 11603, folio 389, by and between Questar Homes, Inc.
and Rolling Wind Associates Limited Partnership, relating to the pumping station
and storm water management facilities servicing Granite Run Apartments, Putnam
Green Townhomes Condominium and Devon Court Condominiums at Rolling Wind, and
the sharing of costs associated with these facilities.
2. Recreational Facilities Agreement relating to the use of pool and fitness
facilities at Granite Run Apartments by residents of Devon Court Condominiums
and Putnam Green Townhomes Condominium.
DEVELOPMENT CONTRIBUTION AGREEMENT
(Avalon 2)
THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and
entered into as of the 25th day of August, 1997, by and between the individuals
and entities listed on Exhibit I attached hereto with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen
M. Gorn, individually, John B. Colvin, individually, 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.
BACKGROUND
WHEREAS, the Transferor Members are the legal and beneficial owners of
all of the membership interests, as set forth on Exhibit I, of Ironhorse
Associates, L.L.C., a Maryland limited liability company (the "Transferor
Company") pursuant to the Operating Agreement dated as of June 26, 1996, as
amended (a copy of which, including all amendments, is attached hereto as
Exhibit II and is referred to as the "Transferor Operating Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the
general partner and Berkshire Realty Company, Inc. ("BRI") is a special limited
partner of the BRI Partnership, pursuant to the Amended and Restated Agreement
of Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Company is the owner of the following:
a. that certain tract or parcel of land located in Baltimore
County, Maryland, more particularly described in Schedule A attached hereto (the
"Land");
b. the approximately 152-unit apartment complex, commonly
known as Avalon Apartments, which contains related improvements, facilities,
amenities, structures, driveways, walkways, plumbing and heating pipes,
culverts, and mains, all of which have been constructed, are under construction
or are to be constructed on the Land (collectively, the "Improvements") pursuant
to certain plans and specifications that are to be prepared in accordance with
the provisions of Section 1.04 based upon certain engineering plans and
schematic plans listed on Schedule C hereto (the "Preliminary Plans and
Specifications");
<PAGE>
c. all right, title and interest of the Transferor Company in
and to any alleys, strips or gores adjoining the Land, and any easements,
rights-of-way or other interests in, on, under or to, any land, highway, street,
road, right-of-way or avenue, open or proposed, in, on, under, across, in front
of, abutting or adjoining the Land, and all right, title and interest of the
Transferor Company in and to any awards for damage thereto by reason of a change
of grade thereof;
d. the accessions, appurtenant rights, privileges,
appurtenances and all the estate and rights of the Transferor Company in and to
the Land and the Improvements, as applicable, or otherwise appertaining to any
of the property described in the immediately preceding clauses (a), (b) and/or
(c);
e. the fixtures, equipment and other personal property listed
in Schedule B attached hereto and all other fixtures, machinery, supplies,
equipment and other personal property owned by the Transferor Company and
located on or in or used solely in connection with the Land and Improvements
(collectively, the "Personal Property"); and
f. all of the Transferor Company's interest in any intangible
property now or hereafter, owned by the Transferor Company and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined (excepting (i) any cash and escrow deposits and
other current assets relating to periods prior to Closing and (ii) amounts, if
any, due to the Transferor Members pursuant to Section 12).
All of the items described in subparagraphs (a), (b), (c), (d), (e) and
(f) above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Members desire to contribute all of the
membership interests in the Transferor Company (collectively referred to as the
"Transferor Membership Interests") to the BRI Partnership, and the BRI
Partnership desires to admit the Transferor Members as limited partners in the
BRI Partnership and to accept such contribution from the Transferor Members; and
WHEREAS, in exchange for such contribution, the Transferor Members
desire to, at their election, either receive cash or BRI Partnership Units (as
hereinafter defined) in accordance with the terms of this Agreement and the BRI
Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Transferor Members
and the BRI Partnership hereby covenant and agree as follows:
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<PAGE>
SECTION 1
---------
CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE
------------------------------------------------------
1.01 The Transferor Members shall contribute to the BRI Partnership,
and the BRI Partnership shall accept from the Transferor Members, in exchange
for either cash or BRI Partnership Units, and upon the terms and conditions set
forth in this Agreement, all of the Transferor Members' membership interests in
the Transferor Company (the "Transferor Membership Interests"). The percentage
of interest that each of the Transferor Members owns in the Transferor Company
is listed on Exhibit I. At the Closing (as defined in Section 3.01), the
Transferor Members shall, respectively, contribute, assign, transfer and deliver
the Transferor Membership Interests to the BRI Partnership, or its designees as
provided in Section 18.01 hereof, by an Assignment and Assumption of Membership
Interest in the form of Exhibit III attached hereto (the "Transferor
Assignment"). Immediately thereafter, the Transferor Members and the BRI
Partnership, or its designees, shall execute and deliver an Amended and Restated
Operating Agreement in the form of Exhibit IV attached hereto (the "Amended
Transferor Operating Agreement") and an Amended and Restated Articles of
Organization in the form of Exhibit V attached hereto (the "Amended Transferor
Company Articles") pursuant to which the BRI Partnership, or its designees,
shall be admitted and the Transferor Members shall withdraw, as the members of
the Transferor Company and be released of all liability thereunder, and the
terms of the Transferor Company shall be amended in accordance with the Amended
Transferor Operating Agreement.
1.02 Property Title. On or before September 22, 1997, the Transferor
Members shall deliver to the BRI Partnership a copy of the Transferor Company's
existing title insurance commitment or policy (the "Commitment") and copies of
all instruments and plans mentioned therein as exceptions to good and marketable
fee simple title, as well as copies of any instruments referred to in such
instruments which affect the Property (all of such items are hereinafter
collectively referred to as the "Title Policy").
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Company on or before October 1, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Company of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". Any easements or other agreements reasonably required
for the development and construction of the Property and the Improvements now or
hereafter entered into by the Transferor Company; including an agreement for the
shared use and the sharing of the operating expenses of the common recreational
facilities located on the Property and an easement declaration creating
cross-easements for the roads, storm water management ponds and the sewage
pumping station on the Property, all of which are consistent with the Plans and
Specifications and, in the reasonable discretion of the BRI Partnership, do not
materially interfere with the intended use of
-3-
<PAGE>
the Property nor materially affect the value of the Property, shall also
constitute Permitted Exceptions.
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new
commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B
Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the
"Title Insurer"). The Updated Commitment shall insure fee simple title to the
Property in the sole name of the Transferor Company and shall be in the amount
of $15,419,635. The Updated Commitment shall provide for a title insurance
policy which shall contain coverage against all mechanics' liens, shall have
full survey coverage, shall have deleted therefrom all "printed standard
exceptions", shall have a 3.1 zoning endorsement, a comprehensive endorsement, a
non-imputation endorsement and such other endorsements as are reasonably
required by the BRI Partnership and are available under the law of the state in
which the Property is located. If any new exceptions to title appear in the
Updated Commitment that do not constitute Permitted Exceptions and that are
unacceptable to the BRI Partnership, in its reasonable discretion, the BRI
Partnership may notify the Transferor Company within thirty (30) days after the
Completion Date Notice.
If any exceptions in the Commitment or the Updated Commitment are
unacceptable to the BRI Partnership in accordance with the foregoing provisions,
and the BRI Partnership timely notifies the Transferor Company in writing of
such fact as above provided, the Transferor Company shall have thirty (30) days
from the date the Transferor Company receives notice of such unacceptable
exceptions, at the option of the Transferor Company, to remove or cure such
exceptions, provided further, the Transferor Company may, but shall not be
required to, make any monetary expenditures in connection with the removal or
cure of such exceptions. All mortgages and deeds of trust, mechanics liens, tax
liens, attachments and all other monetary liens against the Property (other than
the liens for real estate taxes and current water and sewer charges for the
fiscal year in which Closing occurs, which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Company at Closing. The
Transferor Company shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Company, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Company will attempt to cure such unacceptable exceptions.
If the Transferor Company fails or refuses to cure said unacceptable exceptions
within the time period above provided, on or before the earlier to occur of (A)
ten (10) days after the Transferor Company notifies the BRI Partnership that it
refuses to cure such unacceptable exceptions, and (B) Closing Date, the BRI
Partnership may, in accordance with the provisions of Section 13 hereof, (i)
terminate this Agreement by giving written notice to the Transferor Company or
(ii) waive such exceptions and accept title subject thereto, in which event
there shall be a reduction in the Purchase Price (as defined in Section 2.01(a))
in an amount necessary to enable the BRI Partnership to remove all Monetary
Liens.
-4-
<PAGE>
1.03 Survey. On or before September 22, 1997, the Transferor Company
shall provide to the BRI Partnership a copy of its existing survey (the
"Survey") of the Land and any Improvements.
Should such Survey contain any encumbrances, encroachments or other
survey defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Company on or before
October 1, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Company of the unacceptable survey
matters as described above, the Survey shall be deemed accepted by the BRI
Partnership and the survey matters shown on the Survey shall be included within
the "Permitted Exceptions."
Within thirty (30) days after the Substantial Completion Date Notice,
the BRI Partnership, at its sole cost and expense, shall obtain an updated
survey (the "Updated Survey") by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Updated Survey shall include (i) all
existing buildings, improvements, fences, encumbrances, encroachments,
conflicts, party walls, protrusions (including the location of all highways,
streets, roads, alleys and rights-of-way upon, under, across, abutting or
adjacent to the Land, or affecting the Land or the Improvements), and any
visible evidence of all water, sewer, gas, telephone and electric lines, (ii)
the exact area of the Land to the nearest hundredth of an acre, (iii) all
buildings set back and other restriction lines, (iv) property corners and
boundary lines of the Property (including the courses and distances of each of
said boundary lines), (v) the relation of the point of beginning of the
description of the Land to the monument from which it is fixed, (vi) recorded or
otherwise known easements (stating the recording book and page references in the
case of any such recorded easements), (vii) a metes and bounds written
description of the Land, and (viii) a notation of any discrepancies between the
Updated Survey and the recorded legal description. The BRI Partnership shall
provide a copy of the Updated Survey to the Transferor Company promptly after
its receipt thereof. If any new matters appear on the Updated Survey that do not
constitute Permitted Exceptions, do not simply reflect the construction of the
Improvements in locations that do not encroach upon property lines, setback
lines or easements, and are unacceptable to the BRI Partnership in its
reasonable discretion, the BRI Partnership may notify the Transferor Company
within forty (40) days after the Substantial Completion Date Notice.
If any survey matters are unacceptable to the BRI Partnership in
accordance with the foregoing provisions, and the BRI Partnership timely
notifies the Transferor Company in writing of such fact as above provided, the
Transferor Company shall have thirty (30) days from the date the Transferor
Company receives notice of such unacceptable survey matters, at the option of
the Transferor Company, to cure such unacceptable survey matters. The Transferor
Company shall be deemed to have refused to cure any unacceptable survey matters
unless the Transferor Company, within ten (10) days
-5-
<PAGE>
after receipt of notice from the BRI Partnership, shall notify the BRI
Partnership in writing that the Transferor Company will attempt to cure such
unacceptable survey matters. If the Transferor Company fails or refuses to cure
said unacceptable survey matters within the time period provided, on or before
the earlier to occur of (A) ten (10) days after the Transferor Company notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Company or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
1.04 Construction and Inspection.
(a) Plans and Specifications. Prior to the date of this
Agreement, Transferor Company has delivered to BRI Partnership true, correct and
complete copies of the Preliminary Plans and Specifications for the construction
of the Improvements as set forth on Schedule C attached hereto. After the date
hereof, the Transferor Company, at its sole cost and expense, shall prepare
complete construction plans and specifications for the Improvements and submit
them to the BRI Partnership for approval, such approval not to be unreasonably
withheld. The Transferor Company shall prepare the construction plans and
specifications in good faith and so as to be in accordance with the Preliminary
Plans and Specifications, and the BRI Partnership shall act in good faith when
approving the construction plans and specifications and shall not disapprove any
aspects of the construction plans and specifications that are in accordance with
the Preliminary Plans and Specifications. BRI Partnership shall notify the
Transferor Company in writing of its approval or disapproval of the construction
plans and specifications within 30 days following receipt. If BRI Partnership
does not approve the construction plans and specifications, then the parties
shall work in good faith to resolve any differences, but, if within 30 days
after submittal, the parties have not agreed upon the construction plans and
specifications, then either party, by written notice to the other, may terminate
this Agreement, and, upon the giving of such notice, the Deposit shall be
returned to the BRI Partnership and neither party shall have any further rights
or obligations hereunder. Once agreed upon, the construction plans and
specifications shall be deemed the "Plans and Specifications" for all purposes
of this Agreement. BRI Partnership and the Transferor Company, as part of, or
prior to, the approval of the construction plans and specifications may mutually
agree upon changes to the quality or level of Improvements to that shown in the
Preliminary Plans and Specifications and, in such event, the parties shall also
agree upon an appropriate upward or downward adjustment in the Consideration
Amount.
(b) Transferor Company to Construct Improvements. Transferor
Company shall, at Transferor Company's expense, obtain all permits and construct
the Improvements on the Land in accordance with the Plans and Specifications, as
the same may be modified by change order in accordance with this Agreement. All
work shall be done in a good and workmanlike manner using new, good quality
materials, free of all defects and in compliance with all Codes (as defined in
Section 5.21), permits, approvals, title restrictions and insurance
requirements. Transferor Company shall obtain builder's risk insurance on the
Improvements in the amount of the construction cost of those buildings from time
to time for which construction has commenced. Transferor Company shall deliver a
certificate of such insurance to BRI
-6-
<PAGE>
Partnership. Transferor Company shall maintain such insurance in force and
effect through the course of construction and until Closing hereunder.
(c) Inspection of Construction; Correction of Defects. BRI
Partnership and its engineers, consultants and agents may inspect the
construction of the Improvements from time to time during the course of
construction upon reasonable notice to the Transferor Company. After receipt
from the Transferor Company of written notice that the requirements of Section
3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI
Partnership and its engineers, consultants and agents shall inspect the
construction of the Improvements upon reasonable notice to Transferor Company to
determine whether such construction is completed in accordance with the Plans
and Specifications. Within 30 days after the Inspection Notice, BRI Partnership
will give written notice to Transferor Company of any nonconformities with the
Plans and Specifications and defects or deficiencies in construction identified
by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership,
which disagreement shall be expressed by giving written notice to the BRI
Partnership stating the basis for said disagreements, within 10 days after such
BRI Partnership notice, Transferor Company, at Transferor Company's expense,
shall commence to correct, repair or replace any such nonconformities, defects
or deficiencies and shall diligently continue thereafter until completion of
such corrections, repairs or replacements, and, if such deficiencies are of such
a magnitude that Closing would not otherwise be required to occur under Section
3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies
are corrected. Any dispute shall be resolved by arbitration in accordance with
Section 3.02.
(d) Change Orders. The Transferor Company shall not change or
modify the Plans and Specifications without prior written approval of the BRI
Partnership, such approval not to be unreasonably withheld, provided, however
that the following changes shall not require BRI Partnership's approval: (i)
changes required by the construction lender or governmental authorities, and
(ii) changes in the design of the Improvements resulting in a decrease or
increase in construction cost by less than $100,000 for an individual change and
less than $250,000 in the aggregate. The Transferor Company shall give written
notice to BRI Partnership of all proposed changes to the Plans and
Specifications by sending a complete copy of the change, together with copies of
any plans or drawings related thereto. BRI Partnership shall give its written
approval or disapproval within five (5) business days thereafter. If BRI
Partnership disapproves any such change, the Transferor Company shall not
implement same.
(e) Completion. The Transferor Company shall diligently
attempt to complete construction of the Improvements in accordance with the
Plans and Specifications, as modified in accordance with this Agreement, and in
compliance with all Codes (as defined in Section 5.21 hereof) by December 31,
2003 (the "Scheduled Completion Date"). For purposes of this Agreement, the
"Completion Date" shall be the date upon which all of the Closing Conditions
shall have been satisfied as set forth in Section 3.02.
-7-
<PAGE>
(f) Force Majeure. In the event that the Transferor Company is
delayed in the commencement or completion of construction of the Improvements by
acts of God, war, civil commotion, fire, flood or other casualty, labor
difficulties, strikes, shortages of labor, materials or equipment, undue delay
in action by governmental authorities, governmental or utility company refusal
to issue building, construction, utility, occupancy or other permits or
approvals, water, sewer or other utility moratorium (including enforcement of
the requirements of any adequate public facilities ordinance) or other causes
beyond the Transferor Company's reasonable control (a "Force Majeure Event"),
the Scheduled Completion Date shall be extended for the period of delay, not to
exceed 12 months. If a Force Majeure Event continues in effect for a period in
excess of 12 months, during which construction is delayed, then the Transferor
Company may, by notice to BRI Partnership terminate this Agreement, in which
event the Deposit shall be returned to the BRI Partnership and neither party
shall have any further liability to the other hereunder. In addition,
simultaneously with closing under the Related Agreements, the Transferor Company
shall execute and deliver to BRI Partnership the Right of First Offer Agreement
attached hereto as Exhibit IX, which Right of First Offer Agreement shall
contain, among other provisions a Right of First Refusal which provides: (a)
that the BRI Partnership shall have a right of first refusal to purchase the
Property following the termination of this Agreement pursuant to this Section
1.04(f), (b) BRI Partnership shall have a period of 15 business days, following
receipt of a bona fide third party letter of intent to purchase the Property, to
agree to purchase the Property on the same terms and conditions as set forth in
the letter of intent, and (c) such Right of First Offer Agreement shall be
subordinate to any mortgage or deed of trust securing construction financing on
the Property.
1.05 Environmental Due Diligence Inspection.
(a) On or before September 22, 1997, the Transferor Company
shall deliver to the BRI Partnership a copy of its environmental report for the
Property (the "Initial Environmental Report"). Should the BRI Partnership
decide, in its sole judgment, during the period up to and including October 1,
1997 (the "Due Diligence Period") that the Initial Environmental Report is
unsatisfactory, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so on or before the
last day of the Due Diligence Period, and upon the giving of such notice this
Agreement shall be of no further force or effect. Subject to the rights of the
tenants under the Leases, the BRI Partnership and their authorized agents and
representatives may, from time to time up to and including the period expiring
30 days after the Substantial Completion Date Notice during regular business
hours and on reasonable prior notice to the Transferor Company, inspect the
Property to determine the presence of any Hazardous Materials (as defined in
Section 5.20) and the compliance of the Property with Environmental Laws (as
defined in Section 5.20) and in connection therewith to conduct such tests and
observations and compile such information as the BRI Partnership, in its sole
discretion may deem appropriate (the "Environmental Inspection"). The BRI
Partnership shall provide a copy of any third party environmental reports
obtained by the BRI Partnership, without representation or warranty, and subject
to the limitations on use set forth therein, to the
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Transferor Company promptly after its receipt thereof. No such inspection,
however, shall constitute a waiver or relinquishment on the part of the BRI
Partnership of its right to rely upon the covenants, representations, warranties
or agreements made by the Transferor Company in this Agreement. Should the BRI
Partnership decide, in its reasonable judgment, that there exists an
environmental risk with respect to the Property (excluding such items as
asbestos roof shingles, asbestos floor tile and mastic, PCBs in electric light
ballasts, HCFCs or CFSs in HVAC units, the presence of usual and customary
cleaning and maintenance supplies and similar items that are typically handled
through the adoption of appropriate operations policies), during the period
expiring 30 days after the Substantial Completion Date Notice that based upon
the results of the Environmental Inspection, it no longer desires to proceed
with the transactions contemplated hereby, the BRI Partnership shall have the
right to terminate this Agreement by giving written notice of its election to do
so to the Transferor Company on or before 30 days after the Substantial
Completion Date, and upon the giving of such notice this Agreement shall be of
no further force or effect. Notwithstanding the foregoing, the BRI Partnership
may not disapprove or object to any matter disclosed by the Environmental
Inspection that was disclosed in the Initial Environmental Report. If the BRI
Partnership shall fail to exercise such termination right within any such
period, the BRI Partnership shall be conclusively deemed to have waived any
right it may have had to terminate this Agreement pursuant to this Section 1.05.
The BRI Partnership shall pay when due all fees and expenses incurred in the
performance of the Environmental Inspection performed at its request.
(b) From and after the date of this Agreement, the Transferor
Company shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Company's books, financial records, Service Contracts,
Leases and tenant files pertaining to the operation of the Property prior to the
Closing. The BRI Partnership's agents and representatives shall be permitted
access to such records and files during regular business hours. To the extent
that any of the Transferor Company's financial records relating to the Property
have been audited, the Transferor Company agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Company shall provide the
BRI Partnership with such information as the Transferor Company may have with
respect to actual expenditures made for all repairs, maintenance, operation and
upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Company, all taxes and utility payments made prior
to the Closing and dates of construction, installation and major repairs to the
Property. All information obtained by the BRI Partnership or its agents and
representatives pursuant to this Section 1.05(b) shall be treated as
confidential, shall not be disclosed to others until and unless the Closing
occurs, and if such information is in written form, such information shall be
returned to the Transferor Company if the Closing does not occur.
(c) The BRI Partnership shall indemnify the Transferor Members
against and from all damage to the Property and/or claims of tenants or other
third parties resulting from any entry on the Property by the BRI Partnership or
any agent, contractor, consultant or other representative of the BRI
Partnership, or any tests or other activities conducted in or on the
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Property by them, or any of them, together with all expenses incurred by the
Transferor Members by reason thereof including, without limitation, reasonable
attorneys' fees and disbursements: provided, however, that nothing contained
herein is intended to obligate the BRI Partnership to indemnify, pay or
otherwise reimburse the Transferor Members for any costs of remediation or
clean-up, fines, penalties, assessments or similar charges for any condition
existing at the Property solely by reason of the fact that the BRI Partnership
or its agents, contractors, consultants or other representatives discover the
existence of such condition during the course of conducting tests or other
activities on the Property. The provisions of this Section 1.05(c) shall survive
the Closing or any termination of this Agreement; provided, however, that no
claim by the Transferor Members under this Section 1.05(c) for damage to the
Property shall be made if (i) the Closing occurs or (ii) more than 90 days after
the termination of this Agreement if the Closing does not occur, except for
damage claims made by tenants as to which the time for asserting any such claim
shall be not later than 180 days after the termination of this Agreement. If the
Closing occurs, the BRI Partnership shall not have any claim against the
Transferor Members by reason of any damage to the Property of the nature
specified above or by reason of any claim against which the BRI Partnership is
indemnifying the Transferor Members hereunder.
1.06 Tax Treatment. The parties intend that, to the extent the
Transferor Members receive BRI Partnership Units as the consideration for the
contribution of the Transferor Membership Interests by the Transferor Members to
the BRI Partnership in accordance with Section 1.01 of this Agreement, such
contribution shall be treated for federal (and applicable state) income tax
purposes as a tax-free contribution to capital pursuant to Section 721 of the
Internal Revenue Code of 1986, as amended (the "Code") (and any analogous state
income tax provisions). The BRI Partnership and the Transferor Members agree to
report such transaction for federal and applicable state income tax purposes
consistently with the intent set forth in this Section 1.06.
SECTION 2
---------
CONSIDERATION
-------------
The consideration for the Membership Interests (the "Consideration
Amount"), subject to the adjustments contained in Section 12 of this Agreement,
shall be determined pursuant to the provisions of Section 2.04, and shall be
paid by the the BRI Partnership to the Transferor Members in the following
manner:
2.01 Deposit.
(a) Simultaneously with the execution of this Agreement, the
the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the
"Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check
(subject to collection) as a Deposit to be held in an interest-bearing escrow
account on account of the Consideration Amount. Said sum, together with any
interest earned thereon, is hereinafter called the "Deposit."
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(b) At the Closing, the Deposit shall be returned by the
Escrow Agent to BRI Partnership.
2.02 Balance. At the Closing, the BRI Partnership shall deliver to the
Transferor Members the Base Consideration, plus, if then due, any Additional
Consideration Installments, subject to the adjustments described in Section 12
of this Agreement by federal wired funds. Prior to any delivery to the
Transferor Members of the Base Consideration, there shall be deducted from the
Base Consideration an amount equal to the sum required to pay off the
Construction Loan in full and to remove all other Monetary Liens and
simultaneously with the Closing, the BRI Partnership shall pay off the
Construction Loan. At the Transferor members' option, to be exercised
irrevocably by written notice to the BRI Partnership given at least 15 days
prior to the satisfaction of the Closing Conditions, all or a portion of the
Consideration Amount shall be delivered to the Transferor Members in the form of
BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise
such option, then the number of BRI Partnership Units, the rights and
limitations upon such units and the method by which the units are delivered to
the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b)
and (c) below. If the Transferor Members do not exercise the foregoing option in
a timely manner, all consideration payable under this Agreement shall be paid in
cash by federal wired funds and the following Sections of this Agreement shall
be, without further action by any party, null and void and without any further
force or effect upon the parties: 1.06, 2.02(a) through (c), 5.34, 6.03, 6.05,
6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii)
and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04.
(a) The number of BRI Partnership Units to be issued to the
Transferor Members at Closing shall be that number determined by dividing the
portion of the Consideration Amount to be paid in BRI Partnership Units to each
Transferor Member by the value of one BRI Partnership Unit. The parties agree
that, for purposes of this Agreement, the value of each BRI Partnership Unit
shall be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the ten (10) business days prior to the day which
is five (5) business days before the Closing. If the calculation provided for
above results in a fraction of a BRI Partnership Unit to be delivered to a
Transferor Member, the number of BRI Partnership Units to be delivered shall be
rounded up or down to the nearest whole number of BRI Partnership Units.
Attached hereto as Exhibit I is a schedule (the "Transferor Allocation
Schedule") prepared by the Transferor Members setting forth (i) the name of each
Transferor Member, and (ii) the percentage interest of each Transferor Member,
together with an investor questionnaire in the form attached hereto as Exhibit 5
(the "BRI Questionnaire") for each Transferor Member. In the event that any
Transferor Member would be entitled to a fractional BRI Partnership Unit, the
number of BRI Partnership Units shall be rounded up or down, as the case may be,
to the nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Members all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Members
in accordance with the Transferor Allocation
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Schedule. In addition, if pursuant to Section 12, the BRI Partnership owes any
amounts to the Transferor Members as a result of prorations and apportionments
(the "BRI Additional Payment"), at Closing, the BRI Partnership shall pay the
BRI Additional Payment to the Transferor Members in accordance with the election
made by the Transferor Members pursuant to Section 2.02. The BRI Partnership
shall have no obligation or liability with respect to the preparation or
accuracy of the Transferor Allocation Schedule.
(b) As used in this Agreement, a "BRI Partnership Unit" shall
mean a unit of limited partnership interest in the BRI Partnership as specified
in the BRI Partnership Agreement. At the time that any Transferor Member elects
to convert BRI Partnership Units to shares as provided in the BRI Partnership
Agreement, the holder of each BRI Partnership Unit shall have the right to have
the BRI Partnership Unit either (i) exchanged for one share of common stock of
BRI pursuant to the transfer provisions of the BRI Partnership Agreement, or
(ii) redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Member shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Members and Berkshire Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Members a certified copy of the
Registration Rights Agreement.
(c) The Transferor Members, acknowledge and agree that after
the execution hereof, the price of the common stock of BRI may increase or
decrease in value as the result of market fluctuations, and that any such
fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
Units have been established as provided in this Section, the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Members in the event of a
decrease or increase in the market value of the common stock of BRI.
2.03 Payment of Monies. Any monies payable under this Agreement, unless
otherwise specified in this Agreement, shall be paid by wire transfer.
2.04 Calculation of Consideration Amount. The Consideration Amount for
the Transferor Membership Interests shall consist of a base consideration amount
("Base Consideration") plus additional consideration installments ("Additional
Consideration Installments").
(a) The Base Consideration for the Transferor Membership
Interests shall be Fifteen Million, Four Hundred Nineteen Thousand, Six Hundred
Thirty-Five Dollars ($15,419,635).
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(b) In addition to the Base Consideration, the BRI Partnership
shall pay one or more additional consideration installments (the "Additional
Consideration Installments"), if any, on a quarterly basis with the first
payment, if then due, on the date of Closing and on the first day of each
quarter (defined as a period of three full calendar months, plus, for the first
quarter, any partial calendar month after the date of Closing) thereafter for a
total of 18 full calendar months after the Closing (the "Earn Out Period). As
of the Closing and as of the first day of each quarter thereafter, Stabilized
NOI shall be determined as provided below, and each Additional Consideration
Installment, if any, will be equal to the Stabilized NOI divided by 10% (the
"Cap Rate") and then reduced by the Base Consideration and any prior Additional
Consideration Installments.
(c) Stabilized NOI shall be calculated for purposes of
determining the Additional Consideration Installments as follows: 12 times the
monthly actual income for the Property, (provided that if occupancy rates exceed
95%, then actual income shall be calculated as if the Property had an occupancy
rate of 95%) for the month preceding the payment date less Three Hundred
Ninety-Six Thousand, One Hundred Dollars ($396,100) (representing the
agreed-upon annual Projected Operating Expenses for the Property), provided
that, on the first anniversary of the date of Closing under this Agreement, the
Projected Operating Expenses shall be adjusted by the percentage change in the
CPI-U, U.S. Cities Average for the period from the date of Closing under this
Agreement until the anniversary date.
SECTION 3
---------
THE CLOSING
-----------
3.01 Except as otherwise provided in this Agreement, the delivery of
all documents necessary for the closing of the transactions contemplated by this
Agreement (the "Closing") shall take place in the offices of Hale and Dorr LLP
in Washington, D.C., or such other place as the Transferor Company and the BRI
Partnership shall mutually agree. The "Time of Closing" shall be on that date
specified in Section 3.02 at which all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Members of a so-called Gap Indemnity in the form of Exhibit VI with respect to
the gap in time period between policy issuance and recording, all as provided in
a letter of instruction executed by counsel for the BRI Partnership and counsel
for the Transferor Members. It is agreed that time is of the essence of this
Agreement.
3.02 Closing under this Agreement shall occur on the first business day
of the month after the Transferor Members have given to the BRI Partnership 60
days prior notice (the "Substantial Completion Date Notice") of the occurrence
of the last to occur of (a) the substantial completion of construction of the
Property excluding punch-list items not affecting occupancy (provided Transferor
Members shall thereafter complete all punch-list items at no expense to the BRI
Partnership within 30 days after Closing or within such additional time as may
be
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reasonably required) ("Completion Date") as evidenced by satisfaction of each of
the following conditions (the "Closing Conditions"): (i) final certificates of
occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Questar Builders, Inc. or such
affiliate of Transferor Members as Transferor Members may designate to be the
general contractor for construction of the Improvements ("Questar Builders")
certifying that the Improvements have been substantially completed in accordance
with the Plans and Specifications and all Codes, as such may be modified from
time to time by the Transferor Company in accordance with this Agreement, or (b)
the Stabilization Date. If a dispute shall exist as to whether substantial
completion has occurred, the dispute shall be promptly submitted to binding
arbitration by a qualified third party mutually acceptable to the parties or, if
they are unable to agree upon a third party, then by arbitrators appointed
pursuant to the applicable rules of the American Arbitration Association.
3.03 The Stabilization Date for the Property shall be as follows:
The first day of that month which first occurs after 90% of the apartment units
in the Property have been leased for a period of 3 months to Qualified Tenants.
3.04 "Qualified Tenants" are those tenants with annual income equal to
not less than 3 times the annual rent who are in occupancy and have commenced
the payment of rent.
SECTION 4
---------
TRANSFEROR'S PRE-CLOSING DELIVERIES
-----------------------------------
At least thirty (30) days prior to the date of Closing, the Transferor
Company shall deliver or otherwise make available to the BRI Partnership the
following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Company shall provide the BRI Partnership with access on-site to the
originals of all Leases and related lease files.
4.02 Certificates of Occupancy and Permits. Original, final
certificates of occupancy for all buildings in the Property and copies of all
material building permits, zoning variances (if any), certificates of occupancy
(if any), subdivision plats, governmental permits, approvals, certificates and
other licenses lawfully required for the construction, use, occupancy and
operation of the Property.
4.03 Taxes. To the extent in the Transferor Company's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
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4.04 Plans and Specifications. A set of original Plans and
Specifications, and a copy of all guaranties and warranties made by any person
for the benefit of the Transferor Company with respect to all or any part of the
Property in connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for each completed year occurring at least 120 days
prior to Closing and each completed month of operation thereafter occurring at
least 75 days prior to Closing, and detailed operating statements for each
completed year occurring at least 120 days prior to Closing and each completed
month of operation thereafter occurring at least 75 days prior to Closing;
provided that all such statements and records shall be provided only for periods
after the Property was first leased and occupied by rent paying tenants.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related
documents and agreements in respect of all pending litigation, if any, relating
to the Property (excluding litigation commenced against tenants in the ordinary
course of business for evictions or collections).
4.07 Current Rent Roll. The "Rent Roll" which consists of a list of the
current rents now being collected on each of the apartment units in the
Improvements which includes: apartment number, unit status, tenant name,
commencement and termination dates, lease rent, deposits and details of any
concessions, in the form attached hereto as Schedule D.
4.08 Standard Form Lease. A copy of the standard form apartment lease
used in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water
and sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants).
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Company conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Company which shall be attached hereto as Schedule B.
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SECTION 5
---------
A. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR COMPANY
-------------------------
The Transferor Company represents, warrants and covenants to the BRI
Partnership, as of the date hereof, as follows:
5.01 Organization and Standing of the Transferor Company. The
Transferor Company is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Maryland. The
Transferor Company has all requisite power to own and operate the Property and
to carry on its business as presently being conducted and as proposed to be
conducted. The Transferor Company is duly qualified to do business in all
jurisdictions in which the failure to be so qualified would have a material
adverse effect on the Transferor Company's business (a "Material Adverse
Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in
Section 5.05 hereof, the Transferor Company is not in violation of any term
contained in the Transferor Operating Agreement, or to the Transferor Company's
knowledge in any other material instrument or contract to which the Transferor
Company is a party relating to the Property, and to the Transferor Company's
knowledge the Transferor Company is not in violation of any order, statute, rule
or regulation applicable to it, except for such violations which would not have
a Material Adverse Effect. Neither the execution, delivery and performance of
this Agreement by the Transferor Members, nor the contribution of the Transferor
Membership Interests by the Transferor Members hereunder, will result in any
Material Adverse Effect or be in conflict with or constitute a default under the
Transferor Operating Agreement or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Transferor Company, except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended
Transferor Company Articles to reflect the transactions contemplated hereby, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the Transferor Members or the Transferor Company in connection
with the valid execution and delivery of this Agreement by the Transferor
Members and the performance of the Transferor Members' obligations hereunder.
5.04 Company Capitalization. The Transferor Operating Agreement (i) is
the only agreement among the members relating to the organization, operation, or
management of the Transferor Company, (ii) is in full force and effect and (iii)
has not been amended or modified. Exhibit I sets forth an accurate and complete
list of the names and residence addresses of all of the Transferor Members of
the Transferor Company, and the Transferor Members' respective membership
interests in the Transferor Company. Except as set forth on Exhibit I, no other
person or party owns any membership interest in the Transferor Company. No
Transferor
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Member is in default with respect to any capital contribution required to be
paid by him or it pursuant to the Transferor Operating Agreement. A true,
correct and complete copy of the Transferor Operating Agreement is attached
hereto as Exhibit II. The Transferor Company has no commitment to issue any
right to purchase or acquire or to issue or distribute to any of the Transferor
Members, any evidences of indebtedness or assets; and the Transferor Company has
no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire
any interest in the Transferor Company or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Company's knowledge, proceeding or
investigation pending or, to the Transferor Company's knowledge, any threat
thereof, against the Transferor Members, the Transferor Company or the Property
or any part thereof which questions the validity of this Agreement or the right
of the Transferor Members to enter into it, or which might result in or have,
either individually or in the aggregate, a material adverse effect on (i) the
business of the Transferor Company as such is presently contemplated; or (ii)
the rights represented by the Transferor Membership Interests. During the period
commencing on the date hereof and ending on the Closing Date, the Transferor
Company will promptly inform the BRI Partnership in writing of any material
action, suit, proceeding or investigation pending, or to the Transferor
Company's knowledge, threat thereof against the Transferor Members, the
Transferor Company or the Property or any part thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases to which the Transferor Company
is a party or to which any agent of the Transferor Company is a party on behalf
of the Transferor Company or has entered into on behalf of the Transferor
Company, relating to the Transferor Company or all or a portion of the Property
or otherwise affecting the Property, including without limitation, all material
management, maintenance, brokerage, supply and service contracts (collectively
"Service Contracts") and any material contract agreement or other arrangement
providing for the employment of, furnishing of services by, rental of real or
personal property from or otherwise requiring payments to or by the Transferor
Company. Except as noted on Schedule E, each Service Contract is cancelable on
thirty (30) days notice. Transferor Company has no knowledge of any material
breach or material default under any Service Contract. As of Closing, the
Transferor Company will have paid all amounts due under each Service Contract,
other than payments for which an adjustment shall be made pursuant to Section 12
hereof.
5.07 Financial Statements. Attached hereto as Schedule F are financial
statements of the Transferor Company, including balance sheets, statements of
operations and statements of partners' capital (collectively, the "Financial
Statements") for the fiscal year ended December 31, 1996 (the "Statement Date").
The Financial Statements fairly present the financial condition of the
Transferor Company as of the Statement Date in accordance with generally
accepted accounting principles consistently applied, and reflect all
liabilities, fixed, contingent or
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otherwise, required to be disclosed in such Financial Statements in accordance
with generally accepted accounting principles.
5.08 Title to Properties and Assets. The Transferor Company is the sole
owner of the Property. Except as disclosed in Section 18.01, the Transferor
Company does not own, or otherwise hold any interest in, any material assets
other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or
authorizations previously obtained by the Transferor Company or to be obtained
by the Transferor Company prior to Closing, no other material license, permit or
authorization is necessary to own and operate the Transferor Company's business
as such is presently conducted and neither the conduct of the Transferor
Company's business nor any material portion thereof is dependent on the issuance
or obtaining of any other license, permit or authorization.
5.10 Liabilities. Except for the indebtedness for borrowed money
incurred or to be incurred to acquire and construct the Property (collectively,
the "Construction Loan"), the Transferor Company has no indebtedness for
borrowed money and the Transferor Company has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. No Transferor Member,
nor any affiliate of any Transferor Member nor any employee of the Transferor
Company is presently indebted to the Transferor Company for borrowed money and,
except for the Construction Loan, the Transferor Company is not presently
indebted for borrowed money to any of the foregoing persons. As of the Closing
Date, the Transferor Company shall have no liabilities or obligations (absolute
or contingent) of any kind, other than (a) liabilities and obligations incurred
in the ordinary course of the Transferor Company's business which are either (i)
in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership
in writing; and (b) liabilities resulting from or incurred in the ordinary
course of business arising under the Service Contracts. The Transferor Company
has conducted its business only in the ordinary course and, except for the
Construction Loan, the Transferor Company has not:
(a) created, permitted or allowed any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind with respect
to any of its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in
excess of $10,000 (whether or not covered by insurance) to any assets or
properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete
list of all insurance policies of the Transferor Company (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Company has done nothing to reduce or impair the insurance afforded
by the Insurance Policies. To the Transferor Company's knowledge, there are no
material disputes with underwriters of any such Insurance Policies and there are
no pending or threatened terminations with respect to any of such policies.
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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
Company or for which the Transferor Company may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely filed, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the Transferor Company. All taxes due
with respect to completed and settled examinations or concluded litigation have
been paid.
(b) The Transferor Company has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The Transferor Company does not know of (A) any audit or
investigation of the Transferor Company with respect to any liability for taxes
relating to the Transferor Company for which any Transferor Member may be
liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Company.
5.13 Employees. The Transferor Company has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Company has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for those given to the holder of the
Construction Loan, as provided in the Construction Loan Documents, no person
holds a power of attorney from or agency agreement with the Transferor Company.
5.16 Bank Accounts. On or before Closing, the Transferor Company shall
have closed every bank account and safe deposit box of the Transferor Company
for which the Transferor Members or their representatives are signatories, and
no representative of the Transferor Members shall be a signatory on any other
account or safe deposit box of the Transferor Company or shall have the power to
borrow, discount debt obligations, cash or draw checks, or otherwise act on
behalf of the Transferor Company in any dealings with any banks or other
financial institutions.
5.17 Ownership. The Transferor Company has not received any written
notice challenging the validity of the Transferor Company's title to the
Property. The Transferor Company has not granted any rights, options, rights of
first refusal or entered into other
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agreements of any kind which are currently in effect for the acquisition of the
Property or any part thereof, except for the rights of the BRI Partnership under
this Agreement.
5.18 Leases. As of the Stabilization Date, there shall be no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll, to
be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and
correct in all material respects as of the Stabilization Date. Except as
otherwise specifically set forth in the Rent Roll or elsewhere in this
Agreement:
(a) to the Transferor Company's knowledge, the Leases are in
full force and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has
an option to purchase, right of first refusal, right of first offer or other
similar right in respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period
subsequent to the Closing Date other than for tenants who have executed a lease
prior to Closing but do not move in until after the Closing Date, which
commissions shall be paid by the Transferor Company;
(d) no tenant is entitled to rental concessions or abatements
for any period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Company, except as
set forth on Schedule 5.18 hereof, no action or proceeding instituted against
the Transferor Company by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other
than those set forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in
advance under any lease of any unit in the Property other than as shown on the
Rent Roll;
(h) all brokerage commissions with respect to the Leases shall
have been paid in full by the Closing Date, except as provided in (c) above.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor Company,
no apartment unit is subject to any rent control law, ordinance or regulation.
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5.20 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Company or any of the Transferor Members'
affiliates, with respect to the Property (collectively, the "Environmental
Reports"). The Transferor Company has heretofore either furnished to the BRI
Partnership or made available to the BRI Partnership for inspection complete and
accurate copies of the Environmental Reports. Except as disclosed in the
Environmental Reports and the reports to be obtained by the BRI Partnership in
accordance with Section 1.05 hereof (the "BRI Environmental Reports"), the
Transferor Company has not received any written notice from any governmental
entity or other person that the Property, or current or former operations on the
Property, are not or have not been in material compliance with any Environmental
Laws or that the Transferor Company has any material liability with respect
thereto. To the Transferor Company's knowledge, except as set forth in the
Environmental Reports or in the BRI Environmental Reports, there are no
underground tanks for Hazardous Materials, active or abandoned, at the Property
and no Hazardous Materials are present or have been released in a reportable
quantity, where such a quantity has been established by statute, ordinance,
rule, regulation or order, at, on or under the Property. To the Transferor
Company's knowledge, except as disclosed in the Environmental Reports or in the
BRI Environmental Reports, neither the Transferor Company nor the Property is in
violation in any material respect of any Environmental Laws and there is no
asbestos, PCB's or lead paint on the Property or any part thereof. For purposes
of this Agreement, "Environmental Laws" shall mean the Resource Conservation and
Recovery Act (42 U.S.C. s. 6901 et seq.), as amended by the Hazardous and Solid
Waste Amendments of 1984; the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. s. 9601 et seq.), as amended by the Superfund
Amendments and Reauthorization Act of 1986; the Hazardous Materials
Transportation Act (49 U.S.C. s. 1801 et seq.); the Toxic Substance Control Act
(15 U.S.C. s. 2601 et seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the
Clean Water Act (33 U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide
and Rodenticide Act (7 U.S.C. s. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. s. 651 et seq.); and all other applicable federal, state
and local environmental laws (including, without limitation, obligations under
the common law), ordinances, orders, rules and regulations, as any of the
foregoing may have been amended, supplemented or supplanted prior to the
Closing, relating to regulation or control of hazardous, toxic or dangerous
substances, materials or wastes (collectively, "Hazardous Materials"), or their
handling, storage or disposal or to environmental health and safety.
5.21 Permits and Compliance with Laws. Upon completion of construction
of the Improvements, all approvals, consents, permits, licenses or certificates
of occupancy (whether governmental or otherwise) required for the use, operation
and occupancy of the Property shall have been granted to the Transferor Company
and shall be in full force and effect, and any fees and charges shall have been
fully paid. Upon completion of construction of the Improvements, the Property
shall be in compliance in all material respects with all zoning, building,
health,
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traffic, fire safety, flood control, handicap and other laws, regulations and
ordinances of all governmental authorities having jurisdiction over the Property
(collectively "Codes"). To the Transferor Members' knowledge, no governmental
authority has a current plan, including without limitation, a condemnation, a
widening change of grade or limitation on use of streets, a special assessment
or a change in zoning classification, that would adversely affect the continued
use and operation of the Property as currently used and operated except as would
not have a Material Adverse Effect. The parties agree that all matters relating
to compliance with Environmental Laws shall be covered by Section 5.20 and not
by this Section 5.21.
5.22 Utilities. Upon completion of construction of the Improvements,
all utilities and all public and quasi-public improvements upon or adjacent to
the Property (including, without limitation, all applicable electric lines,
sewer and water lines, and telephone lines) shall be installed, and shall comply
in all material respects with the requirements of the Plans and Specifications
and all applicable Codes, and all necessary easements, permits, licenses and
agreements in respect of any of the foregoing shall be installed and operating
and all installation and connection charges, to the extent due and payable,
shall have been paid for in full.
5.23 Assessments. Except as disclosed in the tax bills delivered to the
BRI Partnership pursuant to Section 4.03 hereof, to the knowledge of the
Transferor Company, no special assessments for public improvements have been
made against the Property which are unpaid, including, without limitation, those
for construction of sewer and water lines, streets, sidewalks and curbs.
5.24 Pre-Closing Deliveries Accurate. All of the materials to be
delivered by the Transferor Company to the BRI Partnership pursuant to Section 4
or attached hereto as Schedules or Exhibits when delivered, will be true,
accurate and complete in all material respects.
5.25 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the Transferor Company's knowledge,
threatened against the Transferor Company, nor are any of such proceedings,
against or by the Transferor Company, anticipated or contemplated by the
Transferor Company.
5.26 Liens. The Transferor Company agrees to keep the Property free
from mechanics and materialmen's liens or other liens or encumbrances occasioned
by the actions of the Transferor Company or its contractors or subcontractors
and agrees to indemnify and save BRI Partnership harmless from any such liens or
encumbrances and all attorneys' fees and other costs and expenses incurred by
reason thereof.
5.27 Essential Facilities. Except as set forth in Schedule 5.27, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water
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companies) located on any property not included in the Property to fulfill any
municipal or governmental requirement or for the furnishing to the Property of
any essential building systems or utilities. Except as set forth on Schedule
5.27, no property not included in the Property relies for its operation,
maintenance or legal compliance on any facilities located on the Property.
5.28 Legal Access. There is, or prior to Closing will be, direct legal
access from a public way to the Property. Upon completion of construction of the
Improvements, all necessary curb cuts, access permits and other governmental
approvals required to provide such access shall have been issued and shall be in
full force and effect.
5.29 Public Improvements. To the best knowledge of the Transferor
Company and except as shown on the Plans and Specifications, there are no
written or proposed plans to widen, modify, or realign any street or highway or
any existing or proposed eminent domain proceedings which would affect the
Property in any way that would have a Material Adverse Effect. To the best
knowledge of the Transferor Company, there are no presently planned public
improvements which would result in the creation of a special improvement or
similar lien upon the Property.
5.30 Condition of Improvements. The Property, including, without
limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical,
HVAC systems and equipment, plumbing, drainage and heating systems and other
mechanical systems, shall at the time of Closing be in good order and operating
condition, subject to normal wear and tear, and will be constructed
substantially in accordance with (i) the Plans and Specifications, (ii) all
applicable Codes, permits, approvals, title encumbrances and insurance
requirements and (iii) accepted standards of good materials and workmanship. As
of the time of Closing, there will be no physical or mechanical defects having a
Material Adverse Effect on the use or marketability of the Property and no
condition which impairs or could impair, the structure of the Property or
renders it in noncompliance with the requirements of this Agreement. No fire or
other casualty shall have occurred on any of the Property, the damage related to
which has not been repaired or restored to the condition the Property was in
prior to such fire or other casualty.
B. REPRESENTATIONS AND WARRANTIES
---------------------------------
OF THE TRANSFEROR MEMBERS
-------------------------
Each of the Transferor Members on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof,
as follows:
5.31 Authorization. Such Transferor Member has full power and authority
to enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Members Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Member under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Members
Closing
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<PAGE>
Documents will constitute valid and binding obligations, enforceable against
such Transferor Member in accordance with their respective terms.
5.32 Additional Authorization. No approval of any person not a party to
this Agreement is necessary for the contribution by such Transferor Member of
the Transferor Membership Interests held by such Transferor Member and the
performance of such Transferor Member's obligations under this Agreement.
5.33 Membership Interest. Except as provided in this Agreement and the
Transferor Operating Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Membership Interests held by such Transferor Member is
authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor
Member owns and holds the Transferor Membership Interests set forth opposite its
name on Exhibit I beneficially and of record free and clear of any liens,
pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.33 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Membership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.33 shall survive the Closing indefinitely.
5.34 Investment Representations and Warranties. Each Transferor Member
for itself, severally and not jointly, represents, warrants, acknowledges and
agrees as follows:
(a) Such Transferor Member is acquiring the BRI Partnership
Units for investment only to be received by it for its own account and not with
any view to the sale or distribution of the same or any part thereof in
violation of the Securities Act of 1933, as amended (the "Act") and it will not
sell or otherwise dispose of such BRI Partnership Units except in compliance
with the registration requirements or exemption provisions of any applicable
securities laws and in accordance with the terms of the BRI Partnership
Agreement and the Registration Rights Agreement.
(b) Such Transferor Member understands that the BRI
Partnership Units to be issued to each Transferor Member will not be registered
under the Act, or the securities laws of any state ("Blue Sky Laws") by reason
of a specific exemption or exemptions from registration under the Act and
applicable Blue Sky Laws and that BRI's and the BRI Partnership's reliance on
such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Transferor Member.
(c) Such Transferor Member acknowledges and agrees that, for
the reasons set forth in Sections 5.34(a) and (b) above, the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units) may not be offered, sold, transferred, pledged, or otherwise disposed of
by such Transferor Member except (i) pursuant to an effective registration
statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a
no-
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<PAGE>
action letter issued by the Securities and Exchange Commission to the effect
that a proposed transfer of the BRI Partnership Units (or shares of common stock
issued upon exchange of the BRI Partnership Units) may be made without
registration under the Act, together with either registration or an exemption
under applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the
case may be, receiving an opinion of counsel knowledgeable in securities law
matters (and which opinion and counsel shall be reasonably acceptable to both
the BRI Partnership and BRI) to the effect that the proposed transfer is exempt
from the registration requirements of the Act and any applicable Blue Sky Laws,
and that, accordingly, such Transferor Member must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Member acknowledges, represents and agrees that (i) its economic
circumstances are such that it is able to bear all risks of the investment in
the BRI Partnership and BRI for an indefinite period of time, including the risk
of a complete loss of its investment in the BRI Partnership Units (or shares of
common stock issued upon exchange of the BRI Partnership Units), (ii) it has
knowledge and experience in financial and business matters sufficient to
evaluate the risks of investment in the BRI Partnership Units and BRI, and (iii)
it has consulted with its own separate counsel and tax advisor, to the extent
deemed necessary by it, as to all legal and taxation matters covered by this
Agreement and has not relied upon the BRI Partnership, its affiliates or its
other legal counsel and advisors for any explanation of the application of the
various United States or state securities laws or tax laws with regard to its
acquisition of the BRI Partnership Units. Such Transferor Member further
acknowledges and represents that it has made its own independent investigation
of the BRI Partnership and the business conducted or proposed to be conducted by
the BRI Partnership.
(d) Such Transferor Member is an "accredited investor" within
the meaning of Rule 501(a) promulgated under the Act.
(e) Such Transferor Member understands that an investment in
the BRI Partnership and BRI involves substantial risks. Such Transferor Member
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Member acknowledges and agrees that:
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<PAGE>
(i) the BRI Partnership Units to be acquired by it
hereunder will not be registered under the Act in reliance
upon the exemption afforded by Section 4(2) thereof for
transactions by an issuer not involving any public offering,
and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange
of the BRI Partnership Units, unless registered under the Act
pursuant to an effective Registration Statement, will bear a
legend substantially to the effect of the following:
"The securities represented by this
certificate have not been registered under
the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state.
The securities may not be offered, sold,
transferred, pledged or otherwise disposed
of without an effective registration
statement under the Act and under any
applicable state securities laws, receipt of
a no-action letter issued by the Securities
and Exchange Commission (together with
either registration or an, exemption under
applicable state securities laws) or an
opinion of counsel (which opinion and which
counsel shall be acceptable to Berkshire
Realty Company, Inc.) that the proposed
transaction will be exempt from registration
under the Act and its applicable state
securities laws"; and
(iii) unless such shares have been registered under
the Act as aforesaid, BRI reserves the right to place a stop
order against the transfer of the BRI Partnership Units, (and
any shares of common stock issued upon exchange of the BRI
Partnership Units) and to refuse to effect any transfers
thereof, in the absence of satisfying the conditions contained
in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such
Transferor Member's principal residence or principal place of business, and such
Transferor Member has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.34 shall survive the
Closing indefinitely.
5.35 Receipt of Documents. Such Transferor Member has received all
Exhibits and Schedules described herein as attached hereto.
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<PAGE>
SECTION 6
---------
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
-------------------------------------------------
The BRI Partnership represents, and warrants and covenants to the
Transferor Members as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Members prior to the execution of this Agreement, is a true, correct and
complete copy of said BRI Partnership Agreement as amended to date. The BRI
Partnership Agreement, as so delivered or made available, has not been modified
and is in full force and effect in accordance with its terms as of the date
hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to
the Transferor Company true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in
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<PAGE>
the SEC Filings and the PPM have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated assets, liabilities and financial
position of the general partner of the BRI Partnership as of the dates thereof
and the consolidated results of its operations and changes in cash flow for the
periods then ended (subject, in the case of any unaudited interim financial
statements, to normal year ended adjustments).
6.04 Governmental Consent, etc. Except as disclosed in the PPM, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental agency, commission, board or public authority is required
on the part of the BRI Partnership in connection with the valid execution and
delivery of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is
the only agreement among the partners relating to the organization, operation,
or management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Members free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the BRI
Partnership or for which the BRI Partnership may have any liability have been
accurately prepared in all material respects and duly and timely filed (or
requests for extensions have been timely field, granted and have not expired).
As of the date hereof, there is no audit examination, deficiency or refund
litigation or matter in controversy with respect to any taxes that might result
in a determination materially adverse to the BRI Partnership. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The BRI Partnership has not executed an extension or
waiver that is currently in effect of any statute of limitations on the
assessment or collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or
investigation of the BRI Partnership with respect to any liability for taxes
relating to the BRI Partnership for
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<PAGE>
which any BRI Partner may be liable, or (B) any threatened claims or assessments
for taxes against or relating to the BRI Partnership.
(d) The BRI Partnership has previously delivered to the
Transferor Company a true and complete copy of the BRI Partnership's Federal
Income Tax Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
similar proceedings are pending or, to the BRI Partnership's knowledge,
threatened against the BRI Partnership, nor are any of such proceedings
anticipated or contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof, did
not contain an untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December
31, 1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or
prior to Closing will provide, for the issuance of the BRI Partnership Units.
The BRI Partnership Units to be issued in connection with the transactions
herein contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Members, and on
the date of their issuance pursuant to the terms and conditions hereof will be
validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Company otherwise in writing) and represents that
there are no other documents known to the BRI Partnership which are required to
be delivered hereunder which have not been so delivered.
6.12 Litigation, etc. Except as described in the SEC Filings there is
no material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI
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<PAGE>
Partnership's knowledge, any threat thereof, against the BRI Partners, the BRI
Partnership or its properties or any part thereof which questions the validity
of this Agreement and the transactions contemplated hereby or the right of the
BRI Partnership to enter into it, or which would likely have, either
individually or in the aggregate, a material adverse effect on the business of
the BRI Partnership as such is presently conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings,
no action has been commenced by any enforcement agency under any Environmental
Laws which, if adversely determined, would have a material adverse effect on the
BRI Partnership and BRI is not in material violation of any Environmental Laws
to such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
SECTION 7
---------
INSURANCE AND CASUALTY
----------------------
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Company shall maintain its present insurance on the Property which insurance in
respect of fire and casualty shall be covered by a standard All-Risk Policy in
the amounts as currently insured. A certificate or certificates of such
insurance shall be provided to the BRI Partnership upon written request by
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<PAGE>
the BRI Partnership. Subject to the provisions of Section 7.02, the risk of loss
in and to the Property shall remain vested in the Transferor Members until the
Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty and
are not restored by the Transferor Company prior to the Time of Closing, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Members at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Membership Interests, and in such case, unless the Transferor
Members shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Members shall
pay over or assign to the BRI Partnership, on behalf of the Transferor Company,
all amounts received or due (plus an amount equal to any deductible under any
insurance policy covering the Property) from, and all claims against, any
insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00, or if any such damage or destruction
shall occur and be restored by the Transferor Company prior to the Time of
Closing, or if any eminent domain notice or proceeding is commenced which does
not affect any material portion of the Property, the BRI Partnership shall
proceed to accept the contribution and transfer of the Transferor Membership
Interests in accordance with the provisions of clause (b) above.
SECTION 8
---------
VIOLATIONS OF LAW
-----------------
8.01 Responsibility for Violations. All notices of material violations
of laws, ordinances, regulations or insurance requirements ("Violations of
Law"), which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall be removed or complied with by the Transferor Company, at the
expense of the Transferor Company, prior to the Closing Date.
SECTION 9
---------
OBLIGATIONS PRIOR TO CLOSING
----------------------------
The Transferor Company covenants that between the date of this
Agreement and the Closing Date:
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9.01 Condition of Units. Up to the Time of Closing, all apartment units
on the Property which become vacant shall, if necessary, be repaired or
otherwise maintained in accordance with the Transferor Company's usual and
customary practice without regard to the Closing contemplated by this Agreement.
9.02 Service Contracts. The Transferor Company shall not enter into any
new service contract for the Property, without the prior written consent of the
BRI Partnership which consent shall not be unreasonably withheld or delayed,
provided no consent shall be required with respect to any of the foregoing so
long as such service contract is terminable without penalty by the then owner of
the Property upon not more than thirty (30) days' notice.
9.03 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.04 Tax Procedure. Except as to real property tax assessment appeal
proceedings now or hereafter filed by the Transferor Company to reduce real
property tax assessments, the Transferor Company shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Members and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Members, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.05 Property Operating and Maintenance. The Transferor Company shall
lease, manage, maintain and operate the Improvements in the ordinary course of
business. Without limiting the generality of the foregoing, the Transferor
Company shall perform all ordinary maintenance and repair of the mechanical,
electrical and plumbing facilities and equipment within the Improvements so as
to keep such facilities in good operating condition and repair, taking into
account ordinary wear and tear; and to the extent any such facilities or
equipment have heretofore been serviced under a Service Contract, the Transferor
Company shall keep such Service Contracts in full force and effect up to
Closing. For purposes hereof, the parties agree that the Transferor Company has
retained or will retain the BRI Partnership or its affiliate (the "Management
Company") as the manager for the Property pursuant to the Management Agreement
attached hereto as Exhibit 7. The parties agree that the Management Agreement
shall remain in effect until the expiration of the Earn Out Period and, until
then, may not be modified, amended or terminated without the consent of both
parties. Notwithstanding that the BRI Partnership is or will become the owner of
the Management Company, until the expiration of the Earn Out Period, the
Transferor Members shall have control over the activities of the Management
Company and its personnel (including both on-site and managerial) with respect
to
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the Property, including but not limited to, appointment, hiring, firing,
supervision and compensation (both base and incentive, of personnel, operation,
marketing, promotions and advertising, hours of operation and all other
decisions as to the Property and its leasing and management; provided that such
control shall be exercised in a commercially reasonable manner as compared with
comparable properties in comparable locations. To facilitate this continued
control, BRI Partnership agrees that Patrick Connelly, currently a vice
president of The Questar Management Company, shall remain employed by the
Management Company until the expiration of the Earn Out Period, his principal
place of employment shall remain at the principal regional office of the
Transferor Company and he shall devote such efforts to the Property as the
Transferor Members shall require. Notwithstanding the foregoing, if the
employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then
the Transferor Members at their option, may elect (a) to terminate the
management agreement with BRI Partnership and either manage, lease and operate
the Property on their own behalf or retain such other persons or entities to do
so as they deem appropriate on substantially the same terms (including, but not
limited to, the same management fee) as are provided in the management agreement
with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their
full-time employee.
9.06 Lease Amendments. The Transferor Company shall not amend, alter,
modify or vary the terms and provisions of any of Leases except in the ordinary
course of business, without first obtaining the written consent of the BRI
Partnership, which consent shall not be unreasonably withheld or delayed.
9.07 New Leases. From and after the date hereof, the Transferor Company
shall not make, execute nor permit any new Lease for any apartment in the
Property without first obtaining the written consent of the BRI Partnership,
unless such Lease (i) is on the form lease provided to the BRI Partnership, and
(ii) is with a Qualified Tenant.
9.08 Preservation of Partnership Business. On and after the date
hereof, except with the prior written consent of the BRI Partnership or as
otherwise provided in this Agreement, the Transferor Company shall not cause,
acquiesce in, or agree to:
(a) a material amendment, modification, termination or
cancellation of the Transferor Operating Agreement without the prior written
consent of the BRI Partnership, which shall not be unreasonably withheld or
delayed, provided that such amendment modification, termination or cancellation
does not adversely affect the BRI Partnership's rights under this Agreement;
(b) any willful action by the Transferor Company which would
render any of representations and warranties contained in Section 5 hereof
untrue in any respect at and as of the Closing Date with the same effect as
though such representations and warranties had been made at and as of the
Closing Date;
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and, except with the prior written consent of the BRI Partnership, the
Transferor Company shall not cause, acquiesce in or agree to any action allowing
the Transferor Company taking or agreeing to take any of the following actions:
(c) merge or consolidate with any other entity or permit any
other entity to merge into it; acquire any stock or partnership interests;
effect any reorganization or recapitalization; or acquire any material assets of
any other person, partnership, corporation, or business organization;
(d) except in the ordinary course of business and consistent
with past practices, enter into any contract, transaction or agreement which
shall survive the Closing (except as permitted by Section 9.02); or
(e) enter into any agreement, transaction or arrangement with
any affiliate that will survive the Closing; or
(f) subject any portion of the Property to any option contract
or sales contract.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Company shall conduct
its business only in the ordinary course and do the following:
(a) Subject to the provisions of Section 8.01 hereof, comply
with all regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with
reputable insurers, which in respect of amounts, types and risks insured is that
which its management reasonably believes to be adequate for the business
conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of
the time for filing, all material reports, and all tax returns and other
material documents required to be filed with federal, state, local and other
authorities;
(d) Unless it is contesting the same in good faith and has
established reasonable reserves therefor, pay when required to be paid all taxes
indicated by its tax returns or otherwise lawfully levied or assessed upon it,
or any of its properties or assets, or which it is otherwise legally obligated
to pay;
(e) Comply in all material respects with each and every
undertaking, covenant and obligation of landlord under the Leases, including up
to the Closing Date; and
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(f) Pay or cause to be paid all material debts, and other
material obligations incurred by the Transferor Company in connection with the
use and ownership of the Property up to the date of Closing.
9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Company will give the BRI Partnership and their
attorneys, accountants, and other representatives reasonable access to
Transferor Company's personnel and all properties, documents, contracts, books,
and records of the Transferor Company, relating to the consummation of the
transactions contemplated hereunder and will furnish the BRI Partnership with
copies of such documents (certified by the Transferor Company if so requested)
and with such information with respect to the affairs of the Transferor Company
as the BRI Partnership may from time to time reasonably request.
SECTION 10
----------
TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND
-------------------------------------------
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
---------------------------------------------------
10.01 Closing, Deliveries and Obligations. At or prior to the Closing,
the Transferor Members shall deliver the following to the BRI Partnership (the
"Transferor Members Closing Documents"):
(a) Assignment of Transferor Membership Interests. An
assignment of the Transferor Membership Interests from each of the respective
Transferor Members to the BRI Partnership in the form of the Transferor
Assignment attached hereto as Exhibit III, duly executed and delivered by each
of the Transferor Members, which shall transfer the Transferor Membership
Interests to the BRI Partnership free and clear of any lien, pledge,
restriction, encumbrance or other claim by any third party.
(b) UCC Search - Transferor Members. A Uniform Commercial Code
lien search for each of the Transferor Members, indicating that the membership
interest of each Transferor Partner in the Transferor Company is unencumbered by
any security interest therein and the cost of which shall be paid by BRI
Partnership.
(c) Amended Transferor Operating Agreement and Articles. The
Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended
and Restated Transferor Company Articles in the form of Exhibit V hereto duly
executed and delivered by the Transferor Members, pursuant to which the
Transferor Members shall withdraw as members from the Transferor Company.
(d) Opinion. An opinion of counsel satisfactory to the BRI
Partnership to the effect that the Transferor Company has been duly formed in
accordance with Maryland law and is validly existing and in good standing under
such laws, that the Transferor Members are all of
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<PAGE>
the members of the Transferor Company, that no state transfer taxes, sales tax,
excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Members.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI
Partnership Amendment in the form of Exhibit 3 attached hereto, duly executed
and delivered by the Transferor Members and a BRI Questionnaire, in the form of
Exhibit 5 attached hereto, duly executed by each of the Transferor Members.
(f) Occupancy Permit. Final Certificates of Occupancy from the
local authority having jurisdiction over the construction and occupancy of the
Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable
to the BRI Partnership, that all real estate taxes and personal property taxes
and special assessments, if any, affecting the Property, which are due and
payable at the Closing have been paid unless contested in good faith and
reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together
with photocopies of all rent records (including an updated Rent Roll in the same
format as the Rent Roll attached as Schedule D dated as of the last day of the
month preceding the month in which the Closing occurs), and related documents in
the possession or under the control of the Transferor Company. Such records
shall include a schedule of all cash security deposits and credit to the BRI
Partnership in the amount of such security deposits, including interest thereon,
if any, held by the Transferor Company at the Closing Date under the Leases and
a schedule updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications and Licenses. An as-built set of
original Plans and Specifications together with original copies (or photocopies
if original copies are unavailable to the Transferor Company) of all current
site plans, surveys, soil and substrata studies, architectural drawings, plans
and specifications, engineering plans and studies, floor plans, landscape plans
and other plans or studies of any kind that relate to all or any part of the
Property. The Transferor Company shall also deliver: original copies of all
certificates, licenses, permits, authorizations and approvals issued for or with
respect to the Property by governmental and quasi-governmental authorities
having jurisdiction, except that photocopies may be substituted if the originals
are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each
Transferor Member in the form of Exhibits VII and VIII, respectively, as
required by the Title Insurer in order to issue the non-imputation endorsement
and to omit from its title insurance policy all exceptions for (i) judgments,
bankruptcies or other returns against persons or entities whose names are the
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same as or similar to the Transferor Company's name; (ii) parties in possession
other than under the rights to possession granted under the Leases; and (iii)
mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed
by the Transferor Members, advising the tenants under the Leases of the transfer
of ownership of the Transferor Company to the BRI Partnership and directing that
all rents and other payments thereafter becoming due under the Leases be sent as
the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A
certificate by the Transferor Members to the effect that, to its knowledge, all
of the representations and warranties of the Transferor Company set forth in
this Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued
by the Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Company.
(n) Non-Foreign Affidavit. The Transferor Members shall
execute and deliver to the BRI Partnership and the BRI Partnership's counsel, at
Closing such evidence as may be reasonably required by the BRI Partnership to
show compliance by the Transferor Members with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Construction Contract Retentions. Final mechanics' lien
waivers from the general contractor and subcontractors covering at least 95% of
the construction cost, together with an amount equal to 125% of all unpaid
retentions and disputed amounts under the Construction Contract, which amount
shall be placed in an escrow account with the Escrow Agent to be released on a
monthly basis to pay amounts coming due under the Construction Contract to the
general contractor, all subcontractors and material suppliers; provided that any
request for payment shall be accompanied by all documentation required as a
prerequisite to payment under the Construction Contract, including lien waivers,
and further provided that payment of any retention shall be subject to receipt
of final lien waivers and acknowledgments of payment in full executed by the
general contractors, all subcontractors and material suppliers. In any event,
the Transferor Members shall remain liable for payment of all such unpaid
retentions and disputed amounts to the extent not covered by the escrow, which
obligation shall survive Closing.
(p) UCC Search - Property. A Uniform Commercial Code lien
search showing no Uniform Commercial Code filing (other than in respect of the
Loan Documents) or judgment or tax lien filings against the Transferor Company
with respect to the Property, which searches shall be dated not earlier than
thirty (30) days prior to the Closing and the cost of which shall be paid by the
BRI Partnership.
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(q) Certificate of Completion. The original certificate of
substantial completion required under Section 3.02.
(r) Questar Builders Warranty. An original one year
construction warranty for the Improvements to be provided by Questar Builders,
Inc., which construction warranty shall be identical to that required under the
standard AIA Construction Contract substantially in the form of Exhibit X
hereto.
(s) Warranties and Guarantees. Originals of all warranties and
guarantees provided by subcontractors and material suppliers for the
Improvements.
(t) Other Documents. Such other documents, instruments or
agreements which the Transferor Members are required to deliver to the BRI
Partnership pursuant to any other provisions of this Agreement or which the BRI
Partnership may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the BRI Partnership title to the Transferor Membership
Interests. The provisions of this Section 10.01(t) shall survive the Closing
indefinitely.
10.02 The Transferor Members' Expenses. The Transferor Members shall
pay all of the fees and expenses of their own separate legal, tax or other
advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor
Member agrees that such Transferor Member will notify the Transferor Company in
writing on or prior to the Closing Date if any of the representations and
warranties of such Transferor Member cease to be true and correct on and as of
the Closing Date. Each Transferor Member further agrees that, subject to Section
10.05(g), if no such notice is given to the Transferor Company, the
representations and warranties of such Transferor Member shall be deemed to be
true and correct on and as of the Closing Date and that the BRI Partnership and
the Transferor Company shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Members. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor Member,
hereby agrees that until the tenth (10th) day following the first anniversary of
the Closing:
(a) each Transferor Member shall continue to own and hold, and
shall not assign, transfer, distribute to its partners or otherwise dispose of
any of the BRI Partnership Units received by it pursuant to this Agreement
except to the extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Member shall transfer or exchange the BRI
Partnership Units for shares of common stock of BRI;
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(c) except for the pledge of BRI Partnership Units by Morton
Gorn, Stephen M. Gorn and John B. Colvin given to the BRI Partnership pursuant
to the Pledge Agreement (described on Schedule K), no Transferor Member shall
mortgage, pledge, create a security interest in or lien on or otherwise
hypothecate or encumber any of such BRI Partnership Units except as permitted
under the BRI Partnership Agreement;
(d) the provisions of this Section 10.04 shall survive the
Closing indefinitely.
10.05 Indemnification.
(a) The Transferor Members' Indemnity. In the event the
parties proceed to Closing, each Transferor Member agrees, severally and not
jointly, to indemnify and hold the BRI Partnership harmless against and with
respect to (i) any loss or damage (including reasonable attorney's fees) to the
BRI Partnership subsequent to the Closing Date, resulting from (A) any
inaccuracy in or breach of any representation or warranty of the Transferor
Company set forth in Section 5A or of such Transferor Member set forth in
Section 5B or (B) resulting from any breach or default by the Transferor Company
or such Transferor Member of any obligation of the Transferor Company or such
Transferor Member under this Agreement or (ii) from liabilities for borrowed
money incurred by the Transferor Company or the Property prior to the Closing;
provided that no Transferor Member shall be required to indemnify the BRI
Partnership for any amounts in excess of 50% of the fair market value of the BRI
Partnership Units received by such Transferor Member as of the date such
indemnification obligation is satisfied (except for indemnification obligations
with respect to representations of each of the Transferor Members in Section
5.33, which shall be limited to 100% of the fair market value as of the date
such indemnification obligation is satisfied of the BRI Partnership Units
received by such Transferor Member) (collectively, the "Cap"); and provided
further that to the extent any of the Transferor Members have any
indemnification obligation to the BRI Partnership, the Transferor Members may
elect to satisfy such indemnification obligation by directing the BRI
Partnership to cancel such amount of BRI Partnership Units acquired by such
Transferor Member pursuant to this Agreement having a fair market value
(measured at the time such BRI Partnership Units are returned or canceled) equal
to the indemnification obligation of such Transferor Member.
(b) The BRI Partnership's Indemnity. In the event the parties
proceed to Closing, the BRI Partnership agrees to indemnify and hold the
Transferor Members harmless against and with respect to (i) any loss or damage
(including reasonable attorney's fees) to the Transferor Members, subsequent to
the Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Company or the Property after the Closing (except for such liabilities resulting
from a breach or default by the Transferor Members or the Transferor Company for
which the BRI Partnership is indemnified under Section 10.05(a) above); provided
that the BRI Partnership shall not be required to indemnify any Transferor
Member under this Section 10.05(b)(i) for any amounts in excess of 50% of the
fair market value as of the date such
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<PAGE>
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Member (except for indemnification obligations with respect to
Sections 6.10 and 11.03 which shall be limited to 100% of the fair market value
as of the date such indemnification obligation is satisfied of the BRI
Partnership Units received by such Transferor Member).
(c) The indemnification obligations of the Transfer Members
and the BRI Partnership, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 16.
(d) The amount of the indemnifying party's liability under
this Agreement shall be determined taking into account any applicable insurance
proceeds actually received by, and other savings that actually reduce the impact
of losses upon, the indemnified party.
(e) Neither the BRI Partnership nor any of the Transferor
Members shall have any liability for claims made under Section 10.05(a) or
10.05(b) unless and until the aggregate amount of all losses incurred exceeds
$50,000 (in which case the indemnifying party shall be liable for the portion of
losses exceeding $50,000).
(f) The indemnification provided in this Section 10 shall be
the sole and exclusive remedy after the Closing Date for damages available to
the BRI Partnership or the Transferor Members for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Company or the Property.
(g) Each of the Transferor Members, the Transferor Company and
the BRI Partnership acknowledge and agree that, unless otherwise agreed to in
writing by all the parties, from and after the Closing, each of the parties
hereto will be deemed to have waived any right to seek indemnification hereunder
from the other party for any breach or default of a representation, warranty or
obligation hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the
Transferor Company shall terminate for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code and its tax year shall close on the Closing
Date. The Transferor Members shall prepare and timely file any federal, state,
local and foreign tax or information returns due after Closing that are required
to be filed by or on behalf of the Transferor Company with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Members
shall prepare and timely file the terminating tax returns for the Transferor
Company resulting from the consummation of the transactions contemplated under
this Agreement, provided, however, that such tax returns shall be prepared in
accordance with the terms and provisions of this Agreement and provided further,
that prior to the filing thereof the Transferor Members shall submit the
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terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Members in obtaining such data and information regarding
the Transferor Company to permit the Transferor Members to prepare such returns
or to respond to any audits or assessments for the periods covered by such
returns.
SECTION 11
----------
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
-------------------------------------
AND POST-CLOSING AGREEMENTS
---------------------------
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI
Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver
to the Transferor Members (i) the Base Consideration and, if applicable, the
Additional Consideration Installments, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended
Transferor Operating Agreement and Amended Transferor Company Articles. Deliver
to the Transferor Members (i) the Transferor Assignments duly executed by the
BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended
Transferor Company Articles duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Company.
(c) Record Amended Transferor Company Articles. Cause the
Amended Transferor Company Articles to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the
Transferor Members to the effect that the BRI Partnership has been duly formed
in accordance with Delaware law and is validly existing and in good standing
under such laws, that the BRI Partnership Amendment has been duly executed and
delivered, that no state transfer taxes, sales tax, excise tax or transfer
stamps are required in connection with the issuance of the BRI Partnership Units
to the Transferor Members as contemplated by this Agreement and as to such other
matters as are customarily required in Baltimore, Maryland in connection with
the transactions contemplated under this Agreement. The opinion shall also
provide that, based solely on a certification of BRI, commencing with BRI's
taxable year ending December 31, 1991, BRI has been organized in
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conformity with the requirements for qualifications as a "real estate investment
trust" and its method of operation has enabled and will enable it to meet the
requirements for qualification and taxation as a "real estate investment trust"
under the Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver
to the Transferor Members a certificate by the BRI Partnership to the effect
that all of the representations and warranties of the BRI Partnership set forth
in this Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued
by the Secretary of State of the State of Delaware dated no earlier than 30 days
prior to the Closing Date certifying as to the good standing and valid existence
of the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor
Members a true and correct copy of the BRI Partnership Agreement, as amended and
in effect on the Closing Date, certified as such by an officer of the general
partner of the BRI Partnership.
(h) Other Documents. Such other documents, instruments or
agreements which the BRI Partnership is required to deliver to the Transferor
Members pursuant to any other provisions of this Agreement or which the
Transferor Members may, either at or subsequent to the Closing, deem reasonably
necessary in order to consummate the transactions contemplated by this Agreement
or to better vest in the Transferor Members title to the BRI Partnership Units.
The provisions of this Section 11.01(h) shall survive the Closing indefinitely.
11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own
counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and
recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC
search costs and (v) all other Closing costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Members,
in their capacity as a limited partner of the BRI Partnership and so long as the
Transferor Company has not dissolved, terminated or liquidated, the right to
receive the Transferor Membership Interests as a distribution in kind in
satisfaction of the Transferor Members' distribution rights under Section 8.2 of
the BRI Partnership Agreement. If the Transferor Membership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Members.
(b) Until the expiration of the period (the "No Transfer
Period") ending on the earlier of (I) such time as all of the Transferor Members
have redeemed all of the BRI Partnership Units received by the Transferor
Members hereunder for cash or for shares of BRI
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common stock or (II) seven (7) years from the Closing Date, neither the BRI
Partnership nor BRI shall allow the sale or transfer of either the Transferor
Membership Interests or the Property, except for (i) transfers that are fully
tax-free to partnerships in which the BRI Partnership has an interest, (ii)
exchanges that are fully tax-free pursuant to Section 1031 of the Code (iii)
involuntary transfers which shall include, without limitation, a foreclosure, a
deed-in-lieu of foreclosure, a condemnation or a liquidation of the BRI
Partnership or BRI, provided that in the event of a condemnation, the BRI
Partnership shall use reasonable efforts to reinvest the net condemnation
proceeds in accordance with Section 1033 of the Code and hold the same until the
expiration of the No Transfer Period; and (iv) voluntary transfers arising in
connection with any financing or refinancing of the Property, which shall
include, without limitation, a mortgage, deed of trust, or any other related
financing liens or security interests, the parties affirmatively acknowledging
that there shall be no restriction on the financing or refinancing of the
Property by the BRI Partnership.
(c) The provisions of this Section 11.03 shall survive the
Closing indefinitely.
SECTION 12
----------
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
-----------------------------------------------
12.01 Apportionments. The following apportionments shall be made
between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and, the net amount of such prorations and
apportionments shall be paid in cash at Closing by the party owing such amount
to the other party unless the Transferor Members have made an election to
receive BRI Partnership Units, in which event such proration and apportionments
shall be settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges,
sewer rents and vault charges, if any, on the basis of the fiscal period for
which assessed, except that if there is a water meter on the Property,
apportionment on the Closing Date shall be based on the last available reading,
subject to adjustment after the Closing on a per diem basis, when the next
reading is available;
(c) charges or prepayments under transferable Service
Contracts; and
(d) all other income and expenses relating to the Property,
including without limitation, income from cable television services as are
customarily adjusted in real estate transactions of this size and type in
Baltimore, Maryland.
If as of the Closing Date, any items of income or expense attributable
to the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same
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are identified within 90 days after the Closing. If the Closing Date shall occur
before the applicable real estate or personal property tax rate is fixed, the
apportionment of taxes on the Closing Date shall be upon the basis of the tax
rate for the preceding period applied to the latest assessed valuation. Promptly
after the new tax rate is fixed, the apportionment of taxes shall be recomputed.
Any discrepancy resulting from such recomputation and any material errors or
omissions in computing any apportionments on the Closing Date shall be promptly
corrected, which obligation shall survive the Closing Date for a period of
ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor
Members and the BRI Partnership shall prepare and exchange preliminary
calculations of all adjustments and prorations to be made pursuant to this
Section 12. The Transferor Members and the BRI Partnership shall cooperate in
the furnishing of all information and documentation necessary to prepare such
calculations. If the Transferor Members have elected to receive BRI Partnership
Units pursuant to Section 2.02, then prior to Closing, the Transferor Members
shall deliver to the BRI Partnership the final Transfer Allocation Schedule (the
"Transfer Allocation Schedule"), which shall be based upon the Preliminary
Transfer Allocation Schedule, shall incorporate all adjustments and prorations
to be made pursuant to Section 12 and shall set forth (i) the name of each
Transferor Member, and (ii) the number of BRI Partnership Units to be received
by each Transferor Member. The BRI Partnership shall have no obligation or
liability with respect to the preparation or accuracy of the Preliminary
Transferor Allocation Schedule or the Transfer Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Members and the Transferor Members hereby release
the BRI Partnership from any such obligation or liability.
Subject to Section 12.04, all cash (including any escrow deposits)
shall be used by the Transferor Company to pay amounts payable by the Transferor
Company and/or distributed to the Transferor Members prior to Closing, and if
any of such cash applicable to preclosing periods is not removed from the
Transferor Company prior to Closing, the BRI Partnership shall hold such cash as
agent for the Transferor Members and refund such cash to the Transferor Members
subsequent to Closing.
12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Company shall distribute the
right to receive such rent to the Transferor Members immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Members in
collecting such rents. Rents received from such tenant after the Closing shall
be applied in the following order of priority: (a) first to the month in which
the Closing occurred; (b) then to any month or months following the month in
which the Closing occurred until all unpaid rents have been paid in full; and
(c) then to the period prior to the month in which the Closing occurred. After
Closing, the BRI Partnership shall cause the Transferor Company to use
reasonable efforts to collect delinquent rents attributable to the period prior
to the month in which Closing occurred, provided such efforts shall not require
the commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Members or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
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otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Company shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Members owe an amount
to the BRI Partnership, the Transferor Members shall have the right to elect to
adjust for such amounts owing by the Transferor Members to the BRI Partnership
in the form of BRI Partnership Units rather than cash. In addition, if as a
result of the prorations and apportionments set forth in Section 12.01, the BRI
Partnership owes an amount to the Transferor Members, such amount shall be paid
in the form of BRI Partnership Units rather than cash, if the Transferor Members
have elected under Section 2.02 to receive BRI Partnership Units. The Transferor
Members shall notify the BRI Partnership at least seven (7) business days prior
to the Closing Date of the manner in which the Transferor Members shall have
elected to settle adjustments under this Section 12.
SECTION 13
----------
FAILURE TO PERFORM
------------------
13.01 Defective Title or Condition. If the Transferor Members are
unable to give title or to contribute and transfer the Transferor Membership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Membership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Members on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the
right to elect, in its sole discretion, on the Closing Date, to accept such
title as the Transferor Members can deliver to the Transferor Membership
Interests and the Property in its then condition and to deliver in exchange
therefor the Consideration Amount then required to be paid subject to reduction
of the Consideration Amount by the amounts required to remove all Monetary
Liens.
13.03 Transferor Default. If the Transferor Company or any of the
Transferor Members default in the performance of their obligations under this
Agreement, or if any representation or warranty of the Transferor Company or the
Transferor Members is false or misleading (a
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<PAGE>
"Transferor Default"), the BRI Partnership shall be entitled to exercise any or
all remedies as may be available at law or in equity on account thereof,
including, but not limited to, an action for specific performance or an action
for money damages. By their execution hereof, Stephen M. Gorn and John B. Colvin
("Guarantors") hereby guarantee the performance by the Transferor Company of all
of its obligations hereunder and, as part of such guaranty, shall be jointly and
severally liable with the Transferor Company of the payment of all damages to
which BRI Partnership may be entitled.
13.04 The BRI Partnership's Default. If the BRI Partnership defaults in
performing any of its obligations hereunder, then the Transferor Members shall
be entitled to exercise any or all remedies as may be available at law or in
equity on account thereof, including, but not limited to, an action for specific
performance or an action for money damages.
SECTION 14
----------
BROKERAGE FEES
--------------
14.01 Brokerage Fees. The Transferor Company and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Company understands that
American Property Consultants ("APC") had entered into a fee arrangement with
Questar Properties, Inc. ("QPI"), which might not apply to this transaction in
any event. Nevertheless, to the extent that it is determined that a commission
or fee is owed to APC, it shall be the obligation of QPI and the Related
Entities in accordance with the provisions of the Related Agreements. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Company have any obligation to pay any
commission to APC.
SECTION 15
----------
NOTICES
-------
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or to such address as the Transferor Members or
the BRI Partnership shall otherwise have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
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<PAGE>
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 Members c/o Questar Properties, Inc.
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 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05
and the covenant and agreements of the BRI Partnership contained in Sections
2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing
indefinitely and an action based thereon may be brought at any time after the
Closing Date. The representations, warranties, covenants and other obligations
of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and
including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04,
10.05, 12 and 14 and the representations and warranties,
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covenants and other obligations of the BRI Partnership contained in Sections
1.05(c), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 11.03, 12 and 14
shall survive until twelve (12) months after the Closing Date and thereafter
during the pendency of any claim based upon a breach thereof, and no action
based thereon shall be commenced more than twelve (12) months after the Closing
Date. Except as otherwise specifically provided in this Agreement, no other
representations, warranties, covenants or other obligations of the Transferor
Members or the BRI Partnership set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after Closing.
Representations and warranties in Sections 5.12, 6.06 and 6.09 shall survive
until 30 days after the expiration of the applicable statute of limitations.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Operating Agreement by the Transferor Members (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Members, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
----------
CONDITIONS TO CLOSING
---------------------
17.01 BRI Conditions. Without limiting any other conditions to Closing
of the BRI Partnership contained herein, the obligation of the BRI Partnership
to proceed with the Closing of the transactions contemplated by this Agreement
is expressly conditioned upon the fulfillment of each of the conditions listed
below as of the Closing Date, any or all of which may be waived, only in
writing, by the BRI Partnership, as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the Transferor Members and the Transferor Company shall have
performed or complied with, in all material respects, all of their respective
covenants, agreements and obligations under this Agreement, (ii) the Transferor
Members shall have delivered the Transferor Members Closing Documents and (iii)
all of the representations and warranties of the Transferor Company and the
Transferor Members set forth in this Agreement shall be true and correct, in all
material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of notice of
satisfaction of the Closing Conditions, there shall not have occurred any
material adverse change in the financial condition, business, properties, assets
or liabilities of the Transferor Company;
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
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(d) Title to Membership Interests. The Transferor Membership
Interests shall, as of the Closing Date, be transferred and assigned to the BRI
Partnership, or its designees, respectively, and shall be free and clear of any
liens, pledges and encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Company shall, as of the
Closing Date, have good record, marketable and insurable title to the Property,
subject only to the title exceptions permitted under Section 1.02.
(f) Construction. The Transferor Company shall have completed
construction of the Improvements in accordance with the Plans and
Specifications, as modified in accordance with this Agreement, and in compliance
with all Codes all to the extent required under Sections 3.02 and 5.30, and, if
such completion shall have occurred prior to the occurrence of the Stabilization
Date, then, in addition to the foregoing, as of the Closing, the Improvements
shall remain completed to the extent required under Sections 3.02 and 5.30 and
shall be in substantially the same condition (subject to the provisions of
Section 7.02 and to any damage to the Improvements caused by tenants) as they
were in at the time of the BRI Partnerships' inspection pursuant to Section
1.04(c) with all identified construction deficiencies corrected.
In the event that any condition set forth in Section 17.01(a) through
Section 17.07(e) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Members within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Members contained herein, the obligation of the
Transferor Members to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Members as follows:
(a) Performance and Representations and Warranties. As of the
Closing Date, (i) the BRI Partnership shall have performed or complied with, in
all material respects, all of the BRI Partnership covenants, agreements and
obligations under this Agreement, (ii) the BRI Partnership shall have delivered
the BRI Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. After the date of any election by the
Transferor Members to accept BRI Partnership Units, there shall not have
occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
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<PAGE>
(c) Consents. Any and all consents, authorizations and
approvals necessary to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as
of the Closing Date, be transferred and assigned to the Transferor Members and
shall be free and clear of any liens, pledges and encumbrances of any kind
whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Members in writing, on or before the Closing Date, the Transferor Members shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Related Agreements. Simultaneously herewith, the BRI Partnership
has entered into with various parties (the "Related Entities") various
agreements, including this Agreement, for the conveyance of partnership
interests or property interests or other assets and for the making of certain
secured loans, which agreements are more particularly described on Schedule K
attached hereto (collectively the "Related Agreements"). (The transactions
described in the Related Agreements, including this Agreement, are collectively
the "Related Transactions"). Except to the extent the parties expressly agree
otherwise in writing or in that certain Kickout Agreement of even date between
the BRI Partnership and Questar Investment Corporation attached hereto as
Exhibit 6 (the "Kickout Agreement"), in the event that any of the Related
Agreements is terminated pursuant to any termination provision of any other
Related Agreement, this Agreement shall terminate automatically simultaneously
with the termination of any such Related Agreement whereupon this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive the termination of this Agreement. The
provisions of this Section 17.03 shall be of no further force or effect once
closing occurs under any one or more of the Related Agreements.
SECTION 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.01. Assignment. Except as hereinafter provided, this Agreement may
not be assigned prior to Closing by either party hereto. The BRI Partnership
shall have the right to designate an entity affiliated with the BRI Partnership
to accept title to some of the Membership Interests, but the BRI Partnership
shall remain fully liable for the performance of all of its obligations
hereunder. The Transferor Members and the Transferor Company shall have the
right to collaterally assign their interests under this Agreement to a
construction lender providing construction financing for the Improvements (the
"Lender"). This Agreement shall be automatically subject and subordinate to the
mortgage, deed of trust and all other loan documents
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<PAGE>
now or hereafter entered into evidencing the loan and security of the Lender. If
the Transferor Members and Transferor Company so assign this Agreement, then the
the BRI Partnership agrees to enter into an agreement with the Lender (the "Tri
Party Agreement") providing that: (a) the BRI Partnership agrees to provide the
Lender with reasonable notice and opportunity to cure any default by the
Transferor Members or the Transferor Company hereunder; (b) the BRI Partnership
agrees not to modify or amend this Agreement without the prior written consent
of Lender, (c) the BRI Partnership, at the written request of Lender upon a
default under the loan, will pay the Base Consideration or such lesser amount as
is required to satisfy the loan directly to Lender provided that all of the
conditions to Closing provided herein have been satisfied; (d) the Lender agrees
to recognize the rights of BRI Partnership under this Agreement; (e) the BRI
Partnership will permit Lender to perform any obligations of the Transferor
Company and Transferor Members hereunder and will agree to recognize Lender as
the Transferor Company and the Transferor Members hereunder should Lender
succeed to the interest of the Transferor Company and Transferor Members,
provided, however, that, in such event, Lender's liability under this Agreement
shall be limited to its interest in the Transferor Company and the Property; and
further provided that (f) the BRI Partnership will have no liability for payment
of the Lender's loan or the performance of any obligations under any of the loan
documents other than the Tri-Party Agreement; and (g) the amount to be paid to
Lender shall be payable in cash only and not in BRI Partnership Units and shall
be limited to the amount provided in clause (c). The parties acknowledge and
agree that the Transferor Company is currently the owner of land in addition to
the Land (the "Additional Avalon Land") which is the subject of a separate
Development Contribution Agreement (the "Other Avalon Agreement") between the
BRI Partnership and the Transferor Company and Transferor Members. To facilitate
the transactions contemplated hereby and by the Other Avalon Agreement, prior to
the commencement of construction, the Transferor Company will transfer either or
both of the Land and the Additional Land to a newly-formed limited
partnership(s) or limited liability company(s) such that the Land will be owned
by one entity and the Additional Land will be owned by another entity. At said
time, the newly-formed entity(s) and its owners will assume all of the
obligations of either this Agreement or the Other Avalon Agreement (whichever is
applicable to the land it then owns) and the original Transferor Company and
Transferor Members shall be released from all liability thereunder, and pursuant
to instruments in form reasonably satisfactory to all parties.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Maryland. The Transferor Members,
Transferor Company and the BRI Partnership consent to the personal jurisdiction
of the federal and state
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courts of the State of Maryland and agree that service of process may be made
upon each of them by certified mail, return receipt requested or in any other
manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Transferor Members have the right to
assign or transfer their right to receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Members and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Members of an
executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the contrary,
and all references to Schedules and Exhibits shall be to the specified Schedules
and Exhibits annexed hereto. All Schedules and Exhibits annexed hereto are made
a part hereof. All terms defined herein shall have the same meanings in the
Schedules and Exhibits, except as otherwise provided therein. All references in
this Agreement shall be deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Members or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting
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requirements, nor shall the BRI Partnership or BRI be precluded from describing
this Agreement and the transactions herein contemplated in any filings made
pursuant to any securities laws or in connection with the Public Offering or
Private Placement, or from filing this Agreement, the Exhibits hereto and the
Schedules as exhibits to any filings by the BRI Partnership or BRI required by
any securities laws. Notwithstanding the foregoing, no party hereunder shall
have any liability by reason of the details of the transactions contemplated
hereby becoming known by means beyond the reasonable control of such party. The
provisions of this Section 18.09 shall survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
SECTION 19
----------
ADDITIONAL PROVISIONS RELATING TO
---------------------------------
THE TRANSFEROR MEMBERS
----------------------
19.01 Transferor Allocation Schedule. Each Transferor Member
acknowledges and agrees that the Transferor Allocation Schedule attached hereto
as Exhibit I is true, correct and complete in all respects as it relates to such
Transferor Member.
19.02 Time of Effectiveness. The Transferor Members acknowledge and
agree that this Agreement and the agreements attached as Exhibits hereto will
not be binding and effective unless and until all of the parties hereto and
thereto have executed counterparts to such agreements.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under their respective hands and seals as of the day and year first above
written.
WITNESS:
- ------------------------------ ----------------------------
Stephen M. Gorn
- ------------------------------ ----------------------------
John B. Colvin
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- ------------------------------ ----------------------------
Morton Gorn
- Transferor Members -
BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- the BRI Partnership -
Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in
accordance with the provisions of Section 13.03.
- ------------------------------ --------------------------------
Stephen M. Gorn
- ------------------------------ --------------------------------
John B. Colvin
- the Guarantors-
RECEIPT BY ESCROW AGENT
The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by
certified check to be held as the Deposit pursuant to this Agreement.
WITNESS: LAWYERS TITLE INSURANCE
CORPORATION
________________________ By: _______________________
Name:
Title:
Date:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - List of Preliminary Plans and Specifications
Schedule D - Form of Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 3.03 - Pro Forma Rents
Schedule 5.05 - Litigation
Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants
Schedule 5.27 - Shared Facilities/Utilities
Schedule 5.33 - Liens on Membership Interests
List of Exhibits
BRI Exhibits
------------
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - Kickout Agreement
Exhibit 7 - BRI Management Agreement
Transferor Exhibits
-------------------
Exhibit I - List of Transferor Members (with address and membership
interest of each member)
Exhibit II - Transferor Operating Agreement
Exhibit III - Assignment of Transferor Membership Interests
Exhibit IV - Amended and Restated Operating Agreement of Transferor Company
Exhibit V - Amended and Restated Articles of Organization of Transferor
Company
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation Affidavit
Exhibit VIII - Title Affidavit
Exhibit IX - Right of First Offer Agreement
Exhibit X - AIA Construction Warranty
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Schedule 5.27 - Shared Facilities/Utilities
(Avalon 2)
1. Recreational Facilities Agreement relating to the use of pool and clubhouse
facilities on Avalon 1, 3, 4, by tenants of Avalon 2, and the sharing of costs
associated with these facilities.
2. Easement Agreement relating to the sewage pumping station and storm water
basin #2 servicing Avalon 1, 3, 4 and Avalon 2, and the sharing of costs
associated with these facilities.
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the 25th day of August,
1997 by and between BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership
("Lender") and GGC, L.L.C., a Maryland limited liability company ("Borrower").
RECITALS
WHEREAS, Borrower has requested that Lender make a loan (the "Loan") to be
secured by a pledge of certain partnership interests of Borrower; and
WHEREAS, Lender has agreed to make the Loan to Borrower subject to an in
accordance with the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. As used herein, the following definitions shall apply:
"Berkshire Offering Cost Percentage" shall have the meaning given to that
term in Section 2.02.
"BRI" shall mean Berkshire Realty Company, Inc., a Delaware corporation.
"BRI OP Cost of Equity" shall have the meaning given to that term in Section
2.02.
"Closing Date" shall mean the date of closing under the Related Agreements.
"Collateral" shall mean the Partnership Units and other security to be
pledged to Lender under the Pledge Agreement as security for the Loan pursuant
to Section 2.05 hereof.
<PAGE>
"Common Stock" shall have the meaning given to such term in Section 3.01(c).
"Financing Statements" shall mean UCC-1 Financing Statements with respect to
Lender's security interests under the Pledge Agreement.
"Guarantors" shall mean Morton Gorn, Stephen M. Gorn and John B. Colvin.
"Guaranty" shall mean a Guaranty in the form attached hereto as Schedule 5 to
be made by the Guarantors to secure the Loan.
"Loan" shall have the meaning given to such term in the Recitals.
"Loan to Value Ratio" shall have the meaning given to such term in Section
2.05 hereof.
"Note" shall mean a Promissory Note in the original principal amount of the
Loan, in the form attached hereto as Schedule 2.
"Offering Price" shall have the meaning given to such term in Section 2.07
hereof.
"Partnership Agreement" shall mean that certain Amended and Restated
Agreement of Limited Partnership of Lender dated May 1, 1995, as it may be
amended from time to time.
"Partnership Unit" shall mean a unit of limited partnership interests in
Lender under the Partnership Agreement.
"Pledge Agreement" shall mean a Pledge Agreement of the Guarantors' interests
in certain Partnership Units and other security, in the form attached hereto as
Schedule 3.
"Private Placement" shall have the meaning given to such term in Section
3.01(b) hereof.
"Projected 1998 Funds from Operation Per Share of Berkshire Common Stock"
shall mean $1.17/per share.
"Public Offering" shall have the meaning given to such term in Section
3.01(6) hereof.
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<PAGE>
"Related Agreements" shall have the meaning given to such term in Section
3.01(c).
"Related Transactions" shall have the meaning given to such term in Section
3.01(c).
"Semi-Annual Loan Review Date" shall have the meaning given to that term in
Section 2.06 hereof.
ARTICLE II
LOAN
2.01 Loan. By and subject to the terms of this Agreement, Lender agrees to
lend and Borrower agrees to borrow on the Closing Date the principal sum of
SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($7,500,000.00) or such
lesser amount as Borrower, in its sole discretion may elect at Closing (but once
a lesser amount is elected, no subsequent increase will be allowed), subject to
the limitation described in Section 2.06 below.
2.02 Interest Rate. The Interest Rate shall be equal to the BRI OP Cost of
Equity. The BRI OP Cost of Equity shall be computed as follows: (i) Projected
1998 Funds From Operation Per Share of Berkshire Common Stock divided by (ii)
the initial offering price per Share of Berkshire Common Stock pursuant to the
Public Offering divided by (iii) a decimal equal to one (1) minus the Berkshire
Offering Cost Percentage, where the Berkshire Offering Cost Percentage is the
quotient of the total offering cost incurred by Berkshire divided by the total
dollars raised by Berkshire in connection with the Public Offering. An example
of the computation of the BRI OP Cost of Equity is attached hereto as Schedule
1.
2.03 Payment. Interest only on the outstanding principal balance of the Loan
shall be payable monthly in arrears. Principal may be paid at any time in whole
or in part without penalty. A mandatory payment of one half of the original
principal balance of the Loan shall be due thirty-six (36) months from the date
of Closing.
2.04 Maturity. All principal and any unpaid interest shall be due on the
fifth anniversary of the date of Closing.
2.05 Security. The Loan shall be secured by the Guaranty and a pledge by the
Guarantors of a sufficient amount of the Partnership Units or Common Stock such
that the amount of the Loan does not exceed eighty percent (80%) of the value of
Partnership Units or Common Stock pledged as security for the Loan on either (a)
the Closing Date or (b) to the extent provided in Section 2.06, any Semi-Annual
Loan Review Date. The value of the Partnership
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<PAGE>
Units and Common Stock shall be determined in accordance with the provisions of
Section 2.07 hereof.
2.06 Release of Security. On a semi-annual basis, commencing on the date
which is six months after the Closing (each such date being referred to herein
as a "Semi-Annual Loan Review Date"), the number of pledged Partnership Units or
shares of Common Stock or other collateral held by Lender pursuant to Section
5(a) or 5(c) of the Pledge Agreement shall be reduced to reflect the decrease,
if any, in the outstanding principal balance of the Loan, provided that no such
reduction shall be made to the extent that it would cause the outstanding
principal balance of the Loan on any such Semi-Annual Review Date to be less
than eighty percent (80%) of the value of the Partnership Units or Common Stock
or other collateral held by Lender pursuant to Section 5(a) or 5(c) of the
Pledge Agreement which would remain pledged as security for the Loan on such
date (as such value is determined in accordance with the provisions of Section
2.07(b) hereof).
2.07 Calculation of Loan to Value Ratio.
(a) For purposes of establishing the value of Partnership Units on the
Closing Date, the value of each Partnership Unit shall be the offering price per
share ("Offering Price"), rounded to the nearest one-thousandth, of one share of
Common Stock of BRI as such price is established at the closing of the Public
Offering. If such calculation provided would result in the pledge of a
fractional Partnership Unit under Section 2.05 hereof, the required number of
Partnership Units to be pledged shall be rounded up or down, as the case may be,
to the nearest whole number of Partnership Units.
(b) For purposes of establishing the value of Partnership Units and
Common Stock on each Semi-Annual Loan Review Date, the value of each Partnership
Unit or share of Common Stock shall be the average price per share during the
ten (10) day period immediately preceding the applicable Semi-Annual Loan Review
Date, rounded to the nearest one-thousandth, of one share of Common Stock of
BRI. If such calculation would result in the release of a fractional Partnership
Unit under Section 2.06 hereof, the required number of Partnership Units or
shares of Common Stock (if any) to be released shall be rounded up or down, as
the case may be, to the nearest whole number of Partnership Units or shares of
Common Stock.
-4-
<PAGE>
ARTICLE III
CONDITIONS PRECEDENT
3.01 Lender's Conditions Precedent. Lender shall not be obligated to make any
disbursement hereunder or to take any other action under the Loan Documents
unless all of the following conditions precedent are satisfied at the time of
such action:
(a) Delivery of Loan Documents. Borrower and the Guarantors have
delivered to Lender each of the following loan documents (the "Loan
Documents"):
(i) The Promissory Note;
(ii) The Pledge Agreement;
(iii) The Financing Statements for each filing office required to
perfect Lender's security interest in the Collateral;
(iv) The Guaranty; and
(v) Such other documents, certificates and instruments as Lender
may reasonably require in connection with the Loan.
(b) Public Offering. Lender has informed Borrower that in connection
with the consummation of the various Related Transactions, Lender
intends to undertake either or both of (i) a public offering (the
"Public Offering") of common stock or other equity securities of
Lender (the "Common Stock"), or (ii) a private placement of Common
Stock (the "Private Placement"). Borrower shall supply any
documentation and additional information reasonably required by
Lender in order to complete the offering materials in connection
with the Public Offering or the Private Placement. The obligation of
Lender 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 dollars. If the Public Offering and
Private Placement do not in the aggregate complete offerings which
raise a minimum of $75,000,000.00 as aforesaid prior to the Closing
Date hereunder, Lender shall have the right to terminate this
Agreement effective
-5-
<PAGE>
as of the Closing Date hereunder, 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.
(c) Related Agreements. Simultaneously herewith, Lender has entered into
certain agreements, more particularly described on Schedule 4
attached hereto (collectively the "Related Agreements"). (The
transactions described in the Related Agreements, including this
Agreement, are collectively referred to herein as the "Related
Transactions"). Except to the extent the parties expressly agree
otherwise in writing, in the event that any of the Related
Agreements is terminated pursuant to any termination provision of
any other Related Agreement, this Agreement shall terminate
automatically simultaneously with the termination of any such
Related Agreement, whereupon this Agreement shall be void and
without recourse to all parties, except for provisions which are
expressly stated to survive the termination of this Agreement. The
Closing under this Agreement shall be simultaneous with the closings
under the Related Agreements. Except as provided in the Kickout
Agreement (as such term is defined in the Related Agreements), 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.
(d) Opinion of Borrower's and Guarantors' Counsel. Lender shall have
received the favorable opinion of counsel to Borrower and the
Guarantors, or such other evidence as Lender may reasonably require
(i) that Borrower has been duly formed in accordance with Maryland
law and is validly existing and in good standing under such laws,
(ii) that the Loan Documents executed by Borrower have been duly
executed and delivered and constitute the valid, legal and binding
obligation of Borrower, enforceable in accordance with their terms,
subject only to bankruptcy laws and matters of equitable
jurisdiction, (iii) that the Guaranty, the Pledge Agreement and any
other Loan Documents executed by the Guarantors have been duly
executed and delivered and constitute the valid, legal and binding
obligation of the Guarantors, enforceable in accordance with their
terms, subject only to bankruptcy laws and matters of equitable
jurisdiction, (iv) that the Guarantors are all of the members of
Borrower, (v) that Lender has a valid, enforceable and perfected
security interest in the Collateral, (vi) that, to the best of such
counsel's knowledge, the execution, delivery and performance by the
Borrower and the Guarantors of the Loan Documents to which each is a
party do not conflict with, violate or breach any provision of the
organizational documents of Borrower or any agreement or indenture
by which either the Borrower or any of the Guarantors may be bound,
or any judgments or awards
-6-
<PAGE>
specifically naming the Borrower or any of the Guarantors or
specifically applicable to their respective property, (vii) that, to
the best of such counsel's knowledge, there is no action, suit or
proceeding, pending or threatened against the Borrower or any of the
Guarantors, which, if adversely determined, would impair the
validity or enforceability of the Loan Documents, and (viii) that
except for the filing of the Financing Statements with the
applicable filing offices, (and except as may be required in
connection with any Blue Sky or other securities laws, codes, rules
or regulations applicable to the issuance of the Collateral to the
Guarantors by Lender) no approval, consent, order or authorization
of or filing with any governmental authorities is required in
connection with the valid execution and delivery of the Loan
Documents by Borrower or the Guarantors.
(e) Reaffirmation. Borrower shall have delivered a certificate to Lender
reaffirming the representations and warranties of Borrower set forth
herein as of the Closing Date.
(f) BankBoston, N.A. and Mellon Bank, N.A. Approvals. If BankBoston,
N.A. and Mellon Bank, N.A. shall fail to deliver written approval of
the Loan prior to September 15, 1997, Lender and Borrower shall each
have the right to terminate this Agreement effective as of the
Closing Date hereunder, 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.
3.02 Borrower's Right To Termination. In the event that Lender shall fail to
make the Loan on or before the Closing Date for any reason other than a default
by Borrower hereunder or under any Related Agreement, Borrower shall have the
right to terminate this Agreement effective as of the Closing Date hereunder,
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.
ARTICLE IV
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Borrower. Borrower hereby represents
and warrants to Lender that as of the date of this Agreement:
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<PAGE>
(a) This Loan Agreement has been validly executed, is now binding on
Borrower and is in full force and effect, and that Borrower has faithfully
performed all of its obligations hereunder to the extent accrued as of the date
hereof;
(b) Borrower has been duly formed and is validly existing and in good
standing as a limited liability company under the laws of the State of Maryland
and has the right, power and lawful authority to enter into this Agreement and
the Loan Documents and to consummate the transactions contemplated hereby;
(c) Borrower has duly executed and delivered this Agreement, and all
necessary action has been taken by Borrower to authorize the execution and
delivery thereof, and of the other Loan Documents;
(d) The execution and performance of this Agreement and the consummation
of the transactions hereby contemplated will not result in any breach of, or
constitute a default under, any mortgage, lease, bank loan or credit agreement,
trust indenture, or other instrument to which Borrower is a party or by which
Borrower may be bound or affected; and
(e) There are no actions, suits or proceedings pending or threatened
against or affecting Borrower which may involve or affect the validity or
enforceability of this Agreement or any of the Loan Documents, at law or in
equity, and Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority which
may involve or affect the validity or enforceability of this Agreement or any of
the Loan Documents.
4.02 Representations and Warranties of Lender. Lender hereby represents and
warrants to Borrower as of the date of this Agreement:
(a) This Loan Agreement has been validly executed, is now binding on
Lender and is in full force and effect, and that Lender has faithfully performed
all of its obligations hereunder to the extent accrued as of the date hereof;
(b) Lender has been duly formed and is validly existing and in good
standing as a limited partnership under the laws of the State of Delaware and
has the right, power and lawful authority to enter into this Agreement and the
Loan Documents and to consummate the transactions contemplated hereby;
(c) Lender has duly executed and delivered this Agreement, and all
necessary action has been taken by Lender to authorize the execution and
delivery hereof and of the other Loan Documents, subject to satisfaction of the
condition precedent set forth in Section 3.01(f) hereof;
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<PAGE>
(d) The execution and performance of this Agreement and the consummation
of the transactions hereby contemplated will not result in any breach of, or
constitute a default under, any mortgage, lease, bank loan or credit agreement,
trust, indenture or other instrument to which Lender is a party or by which
Lender may be bound or affected, subject to satisfaction of the condition
precedent set forth in Section 3.01(f) hereof; and
(e) There are no actions, suits or proceedings pending or threatened
against or affecting Lender which may involve or affect the validity or
enforceability of this Agreement or any of the Loan Documents, at law or in
equity, and Lender is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority which
may involve or affect the validity or enforceability of this Agreement or any of
the Loan Documents.
ARTICLE V
COVENANTS OF BORROWER
5.01 Priority of Pledge. Borrower hereby covenants and agrees at all times to
keep the Collateral free from any attachments, encumbrances or other liens of
any kind or nature, whether any such liens or encumbrances be prior to or
subject and subordinate to the Pledge.
5.02 Restrictions on Transfers, Distributions and Borrowings. Borrower hereby
covenants and agrees not without the prior written approval of Lender in each
instance obtained to convey, assign, transfer, dispose of or encumber, or permit
the conveyance, assignment, transfer, disposal or encumbrance of, any part or
all of any legal or beneficial interest in the Collateral (subject to the
provisions of the Pledge Agreement) or in Borrower (provided, however, that any
member of Borrower may, without the prior approval of Lender, transfer any of
its membership interest in Borrower to any member of its immediate family).
ARTICLE VI
EVENTS OF DEFAULT
6.01 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Borrower shall fail to make any payment due to Lender under this
Agreement, the Note or any other Loan Document, and such failure remains uncured
ten (10) days after written notice from Lender, or Borrower shall fail to
perform any other obligation of Borrower under this Agreement, the Note or any
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<PAGE>
other Loan Document, and such failure remains uncured thirty (30) days after
written notice from Lender;
(b) Any Guarantor shall fail to make any payment due to Lender under the
Guaranty or the Pledge Agreement, and such failure remains uncured ten (10) days
after written notice from Lender; or any Guarantor shall fail to perform any
other obligation of Guarantor under the Guaranty or the Pledge Agreement, and
such failure remains uncured thirty (30) days after written notice from Lender;
or
(c) any statement, representation or warranty made in this Agreement or
any other Loan Document or in any other instrument securing the Loan, shall
prove to be false, misleading or erroneous in any material respect.
ARTICLE VII
LENDER'S REMEDIES IN EVENT OF DEFAULT
7.01 Remedies. Upon the occurrence of any Event of Default, Lender may at any
time or times thereafter declare the unpaid principal of and accrued interest
and other charges on the Note to be immediately due and payable, whereupon the
same shall become due and payable without any notice or demand.
ARTICLE VIII
MISCELLANEOUS
8.01 Time of Essence. Time is of the essence of this Agreement and each of
the Loan Documents.
8.02 Further Assurances. At Lender's request and at Borrower's expense,
Borrower shall execute, acknowledge and deliver any other instruments and
perform any other acts necessary, desirable or proper (as reasonably determined
by Lender) to carry out the purposes of the Loan Documents or to perfect or
preserve any liens or security interests created by the Loan Documents.
8.03 No Third Parties Benefited. No person other than Lender and Borrower and
their permitted successors and assigns shall have any right of action under any
of the Loan Documents.
8.04 Authority to File Notices. Borrower irrevocably appoints and authorizes
Lender, as Borrower's attorney in fact which agency is coupled with an interest,
to execute and/or record in Lender's or Borrower's name any notices, instruments
or documents that Lender deems appropriate to protect or perfect Lender's
interest under any of the Loan Documents.
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<PAGE>
8.05 Relationship of Parties. The relationship of Borrower and Lender under
the Loan Documents is, and shall at all times remain, solely that of Borrower
and Lender. Lender neither undertakes nor assumes any responsibility or duty to
Borrower or to any third party with respect to the Collateral, except as
expressly provided in the Loan Documents.
8.06 Attorneys' Fees; Enforcement. If any attorney is engaged by Lender to
enforce or defend any provision of this Agreement or any of the other Loan
Documents, or as a consequence of any Event of Default under the Loan Documents,
with or without the filing of any legal action or proceeding, Borrower shall pay
to Lender, immediately upon demand, the amount of all reasonable attorneys' fees
and costs incurred by Lender in connection therewith, together with interest
thereon from the date of such demand until paid at the rate of interest
applicable to the principal balance of the Note as specified therein.
8.07 Assignment. Borrower shall not assign Borrower's interest under any of
the Loan Documents, or in any monies due or to become due thereunder, without
Lender's prior written consent. Any assignment made without Lender's prior
written consent shall be void.
8.08 Integration; Interpretation. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect to the
matters contemplated herein and supersede all prior negotiations. Any reference
to the Loan Documents in any of the Loan Documents includes any amendments,
renewals or extensions approved by Lender. Any reference in this Agreement to
the Loan Documents shall include all or any of the provisions of the Agreement
and the Loan Documents unless otherwise specified.
8.09 Joint and Several Liability. The liability of all persons or entities
who are in any manner obligated under the Note or any other Loan Document shall
be joint and several.
8.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.11 Paragraph Headings. The paragraph headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.12 No Waiver; Cumulative Remedies. Lender shall not by any act (except by a
written instrument pursuant to Section 8.13 hereof), delay, indulgence, omission
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<PAGE>
or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Lender would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
8.13 Waivers and Amendments; Successors and Assigns; Governing Law. None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Lender and
Borrower, provided that any provision of this Agreement may be waived by Lender
in a letter or agreement executed by Lender or by facsimile transmission from
Lender. This Agreement shall be binding upon the successors and assigns of the
Borrower and shall inure to the benefit of Lender and its successors and
assigns. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland; provided, however, that any suit in
connection with any dispute arising out of or relating to this Agreement shall
be brought only in the federal and state courts of the Commonwealth of
Massachusetts. Borrower and Lender consent to the personal jurisdiction of the
federal and state courts of the Commonwealth of Massachusetts 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.
8.14 Notices. Whenever notice, demand or a request under this Agreement may
properly be given to Lender or Borrower, the same shall be in writing and shall
be (a) hand delivered to the party intended to receive the same, or (b) sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed to the parties at their respective addresses as set forth below:
If to Borrower:
GGC, L.L.C.
c/o Questar Properties, Inc.
124 Slade Avenue; Suite 200
Baltimore, Maryland 21208
Attention: Stephen M. Gorn
With a copy to:
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<PAGE>
James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Signet Tower, 9th Floor
Seven St. Paul Street
Baltimore, MD 21202-1626
If to Lender:
BRI OP Limited Partnership
c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, Massachusetts 02110
Any party hereto may change its address for purposes of this Agreement by
notice to the other party given in accordance with the provisions of this
Section. Any notice, demand or request given in accordance with this Section
shall be treated as having been given when so delivered, or if mailed, when
deposited with the U.S. Postal Service.
8.15 Non-Recourse. Notwithstanding anything to the contrary contained herein,
in any action brought to enforce the obligation of any Borrower to pay the
indebtedness secured hereby, the judgment or decree shall be enforceable against
such Borrower only to the extent of its interest in the Collateral, and any such
judgment shall not be subject to execution on, nor be a lien on, any assets of
such Borrower other than Borrower's interest in the Collateral;
[This Space Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as a sealed instrument by their respective authorized officers as of
the day and year first above written.
GGC, L.L.C.
By: ________________________________________
Name:
Title: Authorized Member
LENDER:
BRI OP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Berkshire Apartments, Inc.,
its general partner
By: _______________________________
Name:
Title:
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<PAGE>
SCHEDULES
Schedule Description
-------- -----------
1 Sample Calculation of BRI OP
Cost of Equity
2 Form of Promissory Note
3 Form of Pledge Agreement
4 Related Transactions
5 Form of Guaranty
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===============================================================================
STOCK PURCHASE AGREEMENT
by and among
BERKSHIRE REALTY COMPANY, INC.
WESTBROOK REAL ESTATE FUND II, L.P.
and
WESTBROOK BERKSHIRE HOLDINGS, L.L.C.
dated as of
September 19, 1997
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE 1
Definitions
<S> <C> <C>
Section 1.1 "Action"..................................................................... 1
Section 1.2 "ADA"........................................................................ 1
Section 1.3 "Advancing Party"............................................................ 1
Section 1.4 "Affiliate".................................................................. 1
Section 1.5 "Agreement".................................................................. 1
Section 1.6 "Amended Company By-laws".................................................... 1
Section 1.7 "Benefit Arrangements"....................................................... 1
Section 1.8 "Blue Sky Laws".............................................................. 1
Section 1.9 "Board of Directors"......................................................... 2
Section 1.10 "Business Day"............................................................... 2
Section 1.11 "Buyer"...................................................................... 2
Section 1.12 "Buyer Counsel".............................................................. 2
Section 1.13 "Capital Expenditure Budget and Schedule".................................... 2
Section 1.14 "CERCLA"..................................................................... 2
Section 1.15 "Certificate of Designation"................................................. 2
Section 1.16 "Claim"...................................................................... 2
Section 1.17 "Closing".................................................................... 2
Section 1.18 "Closing Date"............................................................... 2
Section 1.19 "Code"....................................................................... 2
Section 1.20 "Commitment"................................................................. 2
Section 1.21 "Company".................................................................... 2
Section 1.22 "Company Charter"............................................................ 2
Section 1.23 "Company Common Stock"....................................................... 2
Section 1.24 "Company Environmental Reports".............................................. 2
Section 1.25 "Company Leases"............................................................. 2
Section 1.26 "Company Plans".............................................................. 2
Section 1.27 "Company Preferred Stock".................................................... 2
Section 1.28 "Company Properties"......................................................... 2
Section 1.29 "Company Registration Statement"............................................. 2
Section 1.30 "Company Reports"............................................................ 3
Section 1.31 "Company Stock".............................................................. 3
Section 1.32 "Company Units".............................................................. 3
Section 1.33 "Controlled Group Liability"................................................. 3
Section 1.34 "Debt Instruments"........................................................... 3
Section 1.35 "Development Properties"..................................................... 3
Section 1.36 "Development Budget and Schedule"............................................ 3
Section 1.37 "Employee Benefit Plans"..................................................... 3
Section 1.38 "Employees".................................................................. 3
Section 1.39 "Environmental Claim"........................................................ 3
Section 1.40 "Environmental Laws"......................................................... 3
Section 1.41 "Environmental Permits"...................................................... 3
Section 1.42 "ERISA"...................................................................... 3
Section 1.43 "ERISA Affiliates"........................................................... 3
Section 1.44 "Exchange Act"............................................................... 3
Section 1.45 "Execution Closing".......................................................... 3
Section 1.46 "Executive Summaries of the Company Environmental Reports"................... 3
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Section 1.47 "GAAP"....................................................................... 3
Section 1.48 "General Partner"............................................................ 3
Section 1.49 "Government Authority"....................................................... 3
Section 1.50 "HQ Space"................................................................... 3
Section 1.51 "HSR Act".................................................................... 3
Section 1.52 "Indemnified Party".......................................................... 4
Section 1.53 "Initial Closing"............................................................ 4
Section 1.54 "Initial Purchase Price"..................................................... 4
Section 1.55 "Insurance Policies"......................................................... 4
Section 1.56 "IRS"........................................................................ 4
Section 1.57 "Knowledge".................................................................. 4
Section 1.58 "Liabilities"................................................................ 4
Section 1.59 "Liens"...................................................................... 4
Section 1.60 "Loss and Expenses".......................................................... 4
Section 1.61 "Material Adverse Effect".................................................... 4
Section 1.62 "NYSE"....................................................................... 4
Section 1.63 "Operating Partnership"...................................................... 4
Section 1.64 "Operating Partnership Units"................................................ 4
Section 1.65 "Partnership Affiliate"...................................................... 5
Section 1.66 "Partnership Agreement"...................................................... 5
Section 1.67 "Pension Plans".............................................................. 5
Section 1.68 "Per Share Purchase Price"................................................... 5
Section 1.69 "Permitted Liens"............................................................ 5
Section 1.70 "Person"..................................................................... 5
Section 1.71 "Project".................................................................... 5
Section 1.72 "Property Restrictions"...................................................... 5
Section 1.73 "Purchase Price"............................................................. 5
Section 1.74 "Purchased Shares"........................................................... 5
Section 1.75 "Registration Rights Agreement".............................................. 5
Section 1.76 "Regulatory Filings"......................................................... 5
Section 1.77 "REIT"....................................................................... 5
Section 1.78 "Release".................................................................... 5
Section 1.79 "Remaining Equity Commitment"................................................ 5
Section 1.80 "Rent Roll".................................................................. 6
Section 1.81 "SEC"........................................................................ 6
Section 1.82 "Securities Act"............................................................. 6
Section 1.83 "Securities Laws"............................................................ 6
Section 1.84 "Stock Purchase"............................................................. 6
Section 1.85 "Subsequent Funding Minimum"................................................. 6
Section 1.86 "Subsequent Purchase Price".................................................. 6
Section 1.87 "Subsequent Purchase"........................................................ 6
Section 1.88 "Subsidiaries"............................................................... 6
Section 1.89 "Tax"........................................................................ 6
Section 1.90 "Tax Return"................................................................. 6
Section 1.91 "Tenancy Leases"............................................................. 6
Section 1.92 "The Berkshire Group"........................................................ 6
Section 1.93 "Total Equity Commitment".................................................... 6
Section 1.94 "Warrants"................................................................... 7
Section 1.95 "Welfare Plans".............................................................. 7
ARTICLE 2
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Purchase and Sale of Shares; Closing
Section 2.1 "Purchase and Sale."......................................................... 7
Section 2.2 "Consideration."............................................................. 7
Section 2.3 "Initial Closing."........................................................... 7
Section 2.4 "Subsequent Purchase and Sale.".............................................. 7
Section 2.5 "Additional Agreements and Closing Deliveries.".............................. 8
Section 2.6 "Time and Place of Closing."................................................. 8
Section 2.7 "Right to Assign."........................................................... 8
Section 2.8 "Advances to Buyer."......................................................... 8
ARTICLE 3
Representations and Warranties of the Company
Section 3.1 "Organization and Qualification, Subsidiaries.".............................. 8
Section 3.2 "Authority Relative to Agreements; Board Approval.".......................... 9
Section 3.3 "Capital Stock and Units."................................................... 10
Section 3.4 "No Conflicts; No Defaults, Required Filings and Consents.".................. 11
Section 3.5 "SEC and Other Documents, Financial Statements; Undisclosed Liabilities." ... 11
Section 3.6 "Litigation, Compliance With Law."........................................... 12
Section 3.7 "Absence of Certain Changes or Events."...................................... 12
Section 3.8 "Tax Matters; REIT and Partnership Status.".................................. 12
Section 3.9 "Compliance with Agreements."................................................ 13
Section 3.10 "Financial Records; Company Charter and By-laws; Corporate Records."......... 15
Section 3.11 "Properties."................................................................ 15
Section 3.12 "Environmental Matters."..................................................... 18
Section 3.13 "Employees and Employee Benefit Plans."...................................... 20
Section 3.14 "Labor Matters."............................................................. 22
Section 3.15 "Affiliate Transactions.".................................................... 22
Section 3.16 "Insurance."................................................................. 22
Section 3.17 "Delaware Takeover Law."..................................................... 22
Section 3.18 "Brokers or Finders."........................................................ 22
Section 3.19 "Disclosure of Facts."....................................................... 22
Section 3.20 "REOC Status."............................................................... 22
Section 3.21 "Knowledge Defined."......................................................... 23
Section 3.22 "Construction of Material Adverse Effect."................................... 23
ARTICLE 4
Representations and Warranties of Buyer
Section 4.1 "Organization.".............................................................. 24
Section 4.2 "Due Authorization."......................................................... 24
Section 4.3 "Conflicting Agreements and Other Matters.".................................. 24
Section 4.4 "Acquisition for Investment, Sophistication, Source of Funds."............... 24
Section 4.5 "Brokers or Finders."........................................................ 24
Section 4.6 "REIT Qualification Matters."................................................ 24
Section 4.7 "Investment Company Matters."................................................ 25
ARTICLE 5
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Representations and Covenants Relating to Closings
Section 5.1 "Taking of Necessary Action."................................................ 25
Section 5.2 "Company Preferred Stock, Certificate of Designation; By-laws.".............. 25
Section 5.3 "Public Announcements; Confidentiality."..................................... 25
Section 5.4 "Conduct of the Business."................................................... 25
Section 5.5 "No Solicitation of Transactions."........................................... 26
Section 5.6 "Information and Access.".................................................... 26
Section 5.7 "Notification of Certain Matters."........................................... 26
ARTICLE 6
Certain Additional Covenants
Section 6.1 "Resale.".................................................................... 26
Section 6.2 "Use of Funds.".............................................................. 26
Section 6.3 "REIT Status."............................................................... 26
Section 6.4 "Payments.".................................................................. 27
Section 6.5 "Preemptive Rights."......................................................... 27
Section 6.6 "Board of Directors"......................................................... 29
Section 6.7 "Transactions with Affiliates.".............................................. 29
Section 6.8 "Company Stock Authorized, Issued and Outstanding............................ 29
ARTICLE 7
Conditions to Closings
Section 7.1 "Conditions of Purchase at Initial Closing."................................. 29
Section 7.2 "Conditions of Purchase at All Closings.".................................... 30
Section 7.3 "Conditions of Sale."........................................................ 31
ARTICLE 8
Survival; Indemnification
Section 8.1 "Survival.".................................................................. 32
Section 8.2 "Indemnification by Buyer or the Company."................................... 32
Section 8.3 "Third-Party Claims."........................................................ 33
ARTICLE 9
Termination
Section 9.1 "Termination."............................................................... 33
Section 9.2 "Procedure and Effect of Termination."....................................... 34
Section 9.3 "Expenses.".................................................................. 34
ARTICLE 10
Miscellaneous
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Section 10.1 "Counterparts.".............................................................. 34
Section 10.2 "Governing Law."............................................................. 34
Section 10.3 "Entire Agreement.".......................................................... 34
Section 10.4 "Notices."................................................................... 34
Section 10.5 "Successors and Assigns.".................................................... 35
Section 10.6 "Headings.".................................................................. 36
Section 10.7 "Amendments and Waivers.".................................................... 36
Section 10.8 "Interpretation; Absence of Presumption.".................................... 36
Section 10.9 "Severability.".............................................................. 36
Section 10.10 "Further Assurances."........................................................ 36
Section 10.11 "Specific Performance."...................................................... 36
Section 10.12 "Schedules."................................................................. 36
</TABLE>
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SCHEDULES
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Schedule 3.1(e) Jurisdictions Not Qualified To Do Business
Schedule 3.1(f) Subsidiaries
Schedule 3.3(a) Capital Stock
Schedule 3.3(b) Operating Partnership Unit Options, Warrants, Etc.
Schedule 3.3(d) Individual Ownership
Schedule 3.4(b) Company Plans
Schedule 3.4(d) Statutory; Regulatory Compliance
Schedule 3.4(e) Contract Compliance
Schedule 3.4(f) Company Filings; Consent
Schedule 3.5(a) Company Registration Statements and Company Reports
Schedule 3.5(b) Company Financials
Schedule 3.6(a) Pending Litigation
Schedule 3.6(b) Company Compliance
Schedule 3.7 Absence of Certain Changes or Events
Schedule 3.8(a) Tax Matters
Schedule 3.9(a) Company Defaults; Charter or By-Laws Compliance
Schedule 3.9(b) Company Filings; Fees
Schedule 3.9(c) Indebtedness; Joint Venture and Partnership Agreements
Schedule 3.9(d) Development, Construction, Management and Leasing Arrangements
Schedule 3.9(e) Other Material Agreements
Schedule 3.9(f) Conflict Policies & Agreements; Waivers
Schedule 3.10(a) Financial Records; Company Charter and By-Laws; Corporate Records
Schedule 3.10(b) Corporate Records
Schedule 3.10(c) Corporate Proceedings
Schedule 3.11(a) Property Addresses; Title Summary
Schedule 3.11(b) Permits; Licenses; Zoning
Schedule 3.11(c) Road Changes; Condemnation Proceedings
Schedule 3.11(e) ADA Status
Schedule 3.11(g) Letters of Intent or Similar Understandings
Schedule 3.11(h) Property Rights; Rights of First Refusal
Schedule 3.11(i) Non-Compliance and Capital Expenditure Budget and Schedule; Insurance
Schedule 3.11(j) Developed, Undeveloped, or Rehabilitated Land of Company Property
Schedule 3.11(k) Company Properties; HQ Space
Schedule 3.11(l) Tenancy Leases
Schedule 3.11(m) Permitted Liens
Schedule 3.12(a) Environmental Permits
Schedule 3.12(e) Environmental Concerns
Schedule 3.12(f) Environmental Reports
Schedule 3.13(a) Employment Agreements
Schedule 3.13(b) Employee Benefit Plans
Schedule 3.13(c) Company Plans Compliance
Schedule 3.13(g) COBRA Participants
Schedule 3.13(k) Vesting; Acceleration of Payments
Schedule 3.14 Collective Bargaining; Labor Union Agreements
Schedule 3.15 Affiliate Transactions
Schedule 3.20 Individuals for Knowledge Test
Schedule 6.4 Form of Detailed Statement
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EXHIBITS
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Exhibit A Form of Certificate of Designation
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Amended Company Bylaws
Exhibit D Form of Amendment to the Operating Partnership Agreement
</TABLE>
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<PAGE>
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September 19, 1997,
is made by and among Berkshire Realty Company, Inc., a Delaware corporation (the
"Company"), Westbrook Real Estate Fund II, L.P., a Delaware limited partnership
(the "Advancing Party"), and Westbrook Berkshire Holdings, L.L.C., a Delaware
limited liability company and an affiliate of the Advancing Party ("Buyer").
RECITALS:
WHEREAS, Buyer wishes to purchase from the Company, and the Company wishes to
sell to Buyer, an aggregate of 2,737,000 shares of a newly designated and
authorized series of convertible preferred stock of the Company, convertible
into shares of the Company's common stock, par value $0.01 per share
(respectively, the "Company Preferred Stock" and the "Company Common Stock", and
such stock of such series and class, and all other series of preferred stock of
the Company outstanding from time to time, collectively, the "Company Stock"),
having the terms set forth in the form of Certificate of Designation,
Preferences and Rights attached as Exhibit A (the "Certificate of Designation"),
which designates the Company Preferred Stock pursuant to the Company's Restated
Certificate of Incorporation dated November 1, 1990, as amended by the
Certificate of Amendment dated December 7, 1990 (as so amended to the date
hereof, the "Company Charter"), in each case at a price of $25.00 per share;
WHEREAS, Buyer and the Company are entering into this Agreement to provide
for such purchase and sale and to establish various rights and obligations in
connection therewith;
WHEREAS, in consideration for the rights to be granted to it, the Advancing
Party has agreed to advance to Buyer all funds for any and all purchases of
Company Preferred Stock pursuant hereto; and
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
Section 1.1 "Action" shall mean any actual or threatened action, suit,
arbitration, inquiry, proceeding or investigation by or before any Government
Authority.
Section 1.2 "ADA" shall have the meaning set forth in Section 3.11(e).
Section 1.3 "Advancing Party" shall have the meaning set forth in the first
paragraph hereof.
Section 1.4 "Affiliate" shall have the meaning ascribed thereto in Rule 12b-2
promulgated under the Exchange Act, and as in effect on the date hereof, and
including, with respect to Buyer, Westbrook Real Estate Fund II, L.P., Westbrook
Real Estate Co-Investment Partnership II, L.P., and their Affiliates and
investors.
Section 1.5 "Agreement" shall have the meaning set forth in the first
paragraph hereof.
Section 1.6 "Amended Company By-laws" shall have the meaning set forth in
Section 7.1(c).
Section 1.7 "Benefit Arrangements" shall have the meaning set forth in
Section 3.13(h).
Section 1.8 "Blue Sky Laws" have the meaning set forth in Section 3.4(f).
<PAGE>
Section 1.9 "Board of Directors" shall mean the board of directors of the
Company.
Section 1.10 "Business Day" shall mean any day other than a Saturday, a
Sunday or a bank holiday in New York, New York.
Section 1.11 "Buyer" shall have the meaning set forth in the first paragraph
hereof.
Section 1.12 "Buyer Counsel" shall mean the General Counsel of Westbrook
Partners, L.L.C., or such counsel to Buyer and the Advancing Party as such
General Counsel shall have determined shall render any opinion to the Company in
connection with this Agreement.
Section 1.13 "Capital Expenditure Budget and Schedule" shall have the meaning
set forth in Section 3.11(i).
Section 1.14 "CERCLA" shall have the meaning set forth in Section 3.12(e).
Section 1.15 "Certificate of Designation" shall have the meaning set forth in
the second paragraph hereof.
Section 1.16 "Claim" shall have the meaning set forth in Section 3.12(g)(i).
Section 1.17 "Closing" shall mean the Execution Closing or the consummation
of the Subsequent Stock Purchase.
Section 1.18 "Closing Date" shall mean, with respect to the consummation of
any Stock Purchase, three (3) Business Days after the date on which the
conditions set forth herein with respect thereto shall be satisfied or duly
waived, or if the Company and Buyer mutually agree on a different date, the date
upon which they have mutually agreed.
Section 1.19 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and any successor thereto, including all of the rules and regulations
promulgated thereunder.
Section 1.20 "Commitment" shall have the meaning set forth in Section 3.7.
Section 1.21 "Company" shall have the meaning set forth in the first
paragraph hereof.
Section 1.22 "Company Charter" shall have the meaning set forth in the second
paragraph hereof.
Section 1.23 "Company Common Stock" shall have the meaning set forth in the
second paragraph hereof.
Section 1.24 "Company Environmental Reports" shall have the meaning set forth
in Section 3.12(f).
Section 1.25 "Company Leases" shall have the meaning set forth in Section
3.11(f).
Section 1.26 "Company Plans" shall have the meaning set forth in Section
3.13(b).
Section 1.27 "Company Preferred Stock" shall have the meaning set forth in
the second paragraph hereof.
Section 1.28 "Company Properties" shall have the meaning set forth in Section
3.11(a).
Section 1.29 "Company Registration Statement" shall have the meaning set
forth in Section 3.5(a).
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Section 1.30 "Company Reports" shall have the meaning set forth in Section
3.5(a).
Section 1.31 "Company Stock" shall have the meaning set forth in the second
paragraph hereof.
Section 1.32 "Company Units" shall have the meaning set forth in Section
3.3(b).
Section 1.33 "Controlled Group Liability" shall have the meaning set forth in
Section 3.13(h).
Section 1.34 "Debt Instruments" shall mean all notes, mortgages, deeds of
trust or similar instruments which evidence or secure any indebtedness owing to
the Company or any Subsidiary.
Section 1.35 "Development Properties" shall have the meaning set forth in
Section 3.11(j).
Section 1.36 "Development Budget and Schedule" shall have the meaning set
forth in Section 3.11(j).
Section 1.37 "Employee Benefit Plans" shall have the meaning set forth in
Section 3.13(h).
Section 1.38 "Employees" shall have the meaning set forth in Section 3.13(h).
Section 1.39 "Environmental Claim" shall have the meaning set forth in
Section 3.12(g)(ii).
Section 1.40 "Environmental Laws" shall have the meaning set forth in Section
3.12(g)(iii).
Section 1.41 "Environmental Permits" shall have the meaning set forth in
Section 3.12(a).
Section 1.42 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor thereto.
Section 1.43 "ERISA Affiliates" shall mean, with respect to any entity, trade
or business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
Section 1.44 "Exchange Act" shall have the meaning set forth in Section
3.4(f).
Section 1.45 "Execution Closing" shall mean the date of execution and
delivery of this Agreement.
Section 1.46 "Executive Summaries of the Company Environmental Reports" shall
have the meaning set forth in Section 3.12(f).
Section 1.47 "GAAP" shall have the meaning set forth in Section 3.5(b).
Section 1.48 "General Partner" shall mean Berkshire Apartments, Inc., a
Delaware corporation, a wholly-owned subsidiary of the Company and the general
partner of the Operating Partnership, or any successor thereto or any successor
general partner of the Operating Partnership.
Section 1.49 "Government Authority" shall mean any government or state (or
any subdivision thereof) of or in the United States, or any agency, authority,
bureau, commission, department or similar body or instrumentality thereof, or
any governmental court or tribunal.
Section 1.50 "HQ Space" shall have the meaning set forth in Section 3.11(a).
Section 1.51 "HSR Act" shall have the meaning set forth in Section 3.4(f).
3
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Section 1.52 "Indemnified Party" shall mean Buyer or the Company, as the
context may require.
Section 1.53 "Initial Closing" shall mean that date on which the first Stock
Purchase occurs.
Section 1.54 "Initial Purchase Price" shall mean the Purchase Price to be
paid at the Initial Closing, and shall be either an amount not in excess of
$15,000,000 or an amount not less than the Total Equity Commitment.
Section 1.55 "Insurance Policies" shall have the meaning set forth in Section
3.16.
Section 1.56 "IRS" shall mean the Internal Revenue Service.
Section 1.57 "Knowledge" shall have the meaning set forth in Section 3.20.
Section 1.58 "Liabilities" shall mean, as to any person, all debts, adverse
claims, liabilities and obligations, direct, indirect, absolute or contingent of
such person, whether accrued, vested or otherwise, whether in contract, tort,
strict liability or otherwise and whether or not actually reflected or required
by GAAP to be reflected and any off-balance sheet actual or contingent claims
which exceed in the aggregate $2,000,000 in such person's or entity's balance
sheets or other books and records, including (i) obligations arising from
non-compliance with any law, rule or regulation of any Government Authority or
imposed by any court or any arbitrator of any kind, (ii) all indebtedness or
liability of such person for borrowed money, or for the purchase price of
property or services (including trade obligations), (iii) all obligations of
such person as lessee under leases, capital or other, (iv) liabilities of such
person in respect of plans covered by Title IV of ERISA, or otherwise arising in
respect of plans for employees or former employees or their respective families
or beneficiaries, (v) reimbursement obligations of such person in respect of
letters of credit, (vi) all obligations of such person arising under acceptance
facilities, (vii) all liabilities of other persons or entities, directly or
indirectly, guaranteed, endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse by such person or with
respect to which the person in question is otherwise directly or indirectly
liable, (viii) all obligations secured by any Lien on property of such person,
whether or not the obligations have been assumed, and (ix) all other items which
have been, or in accordance with GAAP would be, included in determining total
liabilities on the liability side of the balance sheet, and in all events
excluding litigation matters involving tenants that arise and are dealt with in
the ordinary course of business and operating equipment leases.
Section 1.59 "Liens" shall mean all liens, mortgages, deeds of trust, deeds
to secure debt, security interests, pledges, claims, charges, easements and
other encumbrances of any nature whatsoever.
Section 1.60 "Loss and Expenses" shall have the meaning set forth in Section
8.2(a).
Section 1.61 "Material Adverse Effect" shall mean a material adverse effect,
or more than one effect if more than one shall be in existence at the same time
or times, on the financial condition, results of operations or business of the
Company and its Subsidiaries (to the extent of the Company's interests therein)
taken as a whole. For the purposes hereof, an effect shall be material (a) if
the aggregate dollar amount of any loss or Liability of, or, diminution in value
or other cost or expense to the Company, is in excess of $2,000,000, or (b) if
the aggregate dollar amount of revenue lost, not received, or reduced, or any
charge to earnings, is in excess of $200,000, or in the event that the
thresholds established in both clause (a) and (b) are met, then both.
Section 1.62 "NYSE" shall mean The New York Stock Exchange, Inc.
Section 1.63 "Operating Partnership" shall mean BRI OP Limited Partnership, a
Delaware limited partnership, or any successor thereto.
Section 1.64 "Operating Partnership Units" shall mean the class of
partnership units representing shares of partnership interests in the Operating
Partnership.
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Section 1.65 "Partnership Affiliate" shall have the meaning set forth in
Section 3.9(f).
Section 1.66 "Partnership Agreement" shall mean that certain Amended and
Restated Agreement of Limited Partnership of BRI OP Limited Partnership dated as
of May 1, 1995.
Section 1.67 "Pension Plans" shall have the meaning set forth in Section
3.13(h).
Section 1.68 "Per Share Purchase Price" shall mean the price of $25.00 per
share for the Company Preferred Stock.
Section 1.69 "Permitted Liens" shall mean (i) Liens (other than liens imposed
under ERISA or any Environmental Law or in connection with any Environmental
Claim) for taxes or other assessments or charges of Governmental Authorities
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings, in each case, with respect to which adequate reserves
or other appropriate provisions are being maintained by the Company or its
Subsidiaries to the extent required by GAAP, (ii) statutory liens of landlords,
carriers, warehousemen, mechanics, materialmen and other Liens (other than Liens
imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) imposed by law and created in the ordinary course of
business for amounts not yet overdue or which are being contested in good faith
by appropriate proceedings, in each case, with respect to which adequate
reserves or other appropriate provisions are being maintained by the Company or
its Subsidiaries to the extent required by GAAP and which do not exceed $100,000
in the aggregate, (iii) the Company Leases, (iv) easements, rights-of-way,
covenants and restrictions which are customary and typical for office properties
similar to the Company Properties and which do not (x) interfere materially with
the ordinary conduct of any Company Property or the business of the Company and
its Subsidiaries as a whole or (y) detract materially from the value or
usefulness of the Company Property to which they apply, (v) the Liens which were
granted by the Company or any of its Subsidiaries to lenders pursuant to credit
agreements in existence on the date hereof which are described in Schedule
3.9(c), (vi) the other Liens, if any, described in Schedule 3.11(m), and (vii)
such imperfections of title and encumbrances.
Section 1.70 "Person" shall mean any individual, partnership, corporation,
limited liability company, business trust, joint stock company, unincorporated
association, joint venture, other entity of whatever nature or Government
Authority.
Section 1.71 "Project" shall have the meaning set forth in Section 3.11(j).
Section 1.72 "Property Restrictions" shall have the meaning set forth in
Section 3.11(a).
Section 1.73 "Purchase Price" shall mean the Per Share Purchase Price
multiplied by the number of shares of Company Preferred Stock to be purchased
and sold at a particular Closing.
Section 1.74 "Purchased Shares" shall have the meaning set forth in Section
2.1.
Section 1.75 "Registration Rights Agreement" shall have the meaning set forth
in Section 2.5(a).
Section 1.76 "Regulatory Filings" shall have the meaning set forth in Section
3.4(f).
Section 1.77 "REIT" shall have the meaning set forth in Section 3.8(b).
Section 1.78 "Release" shall have the meaning set forth in Section
3.12(g)(v).
Section 1.79 "Remaining Equity Commitment" shall mean, on any given date
after the Initial Closing, the Total Equity Commitment minus the Initial
Purchase Price. The Remaining Equity Commitment shall be deemed to be zero on
the earlier of (i) the date that the Remaining Equity Commitment actually equals
zero or (ii) the later of (A) September 19, 1998 or (B) if Buyer notifies the
Company by March 19, 1999 that it is, pursuant
5
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to Section 2.4(b), exercising its right to make the Subsequent Purchase equal to
the then amount of the Remaining Equity Commitment, then, the date as soon
thereafter as (x) Buyer shall be permitted to effect such purchase under Article
V of the Amended Company Charter, (y) all conditions to Buyer's obligations to
effect such purchase shall have been satisfied or waived, and (z) such purchase
shall have been effected.
Section 1.80 "Rent Roll" shall have the meaning set forth in Section 3.11(f).
Section 1.81 "SEC" shall have the meaning set forth in Section 3.5(a).
Section 1.82 "Securities Act" shall have the meaning set forth in Section
3.4(f).
Section 1.83 "Securities Laws" shall have the meaning set forth in Section
3.5(a).
Section 1.84 "Stock Purchase" shall have the meaning set forth in Section
2.1.
Section 1.85 "Subsequent Funding Minimum" shall mean the amount of the Total
Equity Commitment minus the Initial Purchase Price.
Section 1.86 "Subsequent Purchase Price" shall have the meaning set forth in
Section 2.4(a), and shall be the amount of the Total Equity Commitment minus the
Initial Purchase Price.
Section 1.87 "Subsequent Purchase" shall have the meaning set forth in
Section 2.4(a).
Section 1.88 "Subsidiaries" shall mean, collectively, the General Partner and
the Operating Partnership, and any other Person in which the Company owns a
direct or indirect equity interest and of which the Company is the direct or
indirect general partner or managing members or as to which the Company has the
right to elect a majority of the board of directors or other governing body, or
otherwise direct the management of its business and affairs.
Section 1.89 "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not. The term "Tax" also
includes any amounts payable pursuant to any tax sharing agreement to which any
relevant entity is liable as a successor or pursuant to contract.
Section 1.90 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
Section 1.91 "Tenancy Leases" shall have the meaning set forth in Section
3.11(l).
Section 1.92 "The Berkshire Group" shall mean that group of Persons who with
George and Douglas Krupp and their Affiliates own substantial equity interests
or with respect to which they act as general partner or manager or otherwise
exert a substantial influence over management, and includes without limitation,
the past and present Affiliates of Berkshire Realty Company, Inc., the BRI OP
Limited Partnership, Berkshire Apartments, Inc., Douglas Krupp, George Krupp, or
David Marshall, or any Person with whom any of them was affiliated or employed,
or any predecessor of any such Persons.
Section 1.93 "Total Equity Commitment" shall mean the amount of $68,425,000.
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Section 1.94 "Warrants" shall mean the not more than 2,664,629 outstanding
warrants issued by the Company in connection with its September 6, 1994
effective settlement of a class action litigation.
Section 1.95 "Welfare Plans" shall have the meaning set forth in Section
3.13(h).
ARTICLE 2
Purchase and Sale of Shares; Closing
Section 2.1 "Purchase and Sale." Subject to the terms and conditions hereof,
from time to time after the date hereof, at one or more Closings, the Company
will sell, convey, assign, transfer, and deliver, and Buyer will purchase and
acquire from the Company, an aggregate of 2,737,000 shares of Company Preferred
Stock (the "Purchased Shares"). Each Closing at which Buyer purchases any
Purchased Shares is herein referred to as a "Stock Purchase."
Section 2.2 "Consideration." Subject to the terms and conditions hereof, at
each Closing, Buyer shall deliver to the Company the relevant Purchase Price
with respect to the number of shares of Company Preferred Stock to be purchased
and sold at such Closing by wire transfer of immediately available funds in U.S.
dollars to the account or accounts specified by the Company.
Section 2.3 "Initial Closing." Subject to the terms and conditions hereof, at
a mutually agreeable time promptly following the date on which the conditions
set forth herein shall have been satisfied or duly waived, the Company will
sell, convey, assign, transfer and deliver, and Buyer will purchase and acquire
(and the Advancing Party shall advance to Buyer sufficient funds for such
purchase) from the Company, either (a) not more than 600,000 shares of Company
Preferred Stock or (b) 2,737,000 shares of Company Preferred Stock, as the
Company and Buyer shall indicate on the signature page hereto, and Buyer will
pay to the Company the Initial Purchase Price for such shares of Company
Preferred Stock.
Section 2.4 "Subsequent Purchase and Sale." (a) On notice as set forth in
this Section 2.4 (which notice, in the event of a Subsequent Purchase to be
accomplished in September, 1998, must be provided as set forth below in August,
1998), during the 12-month period immediately following the Initial Closing, but
on not more than one occasion, the Company shall have the right to require Buyer
to purchase (and the Advancing Party to advance to Buyer sufficient funds for
such purchase) from the Company additional shares of Company Preferred Stock
(the "Subsequent Purchase"), the number of shares of which shall be determined
by the Company; provided, however, that the Subsequent Purchase shall be made at
the Per Share Purchase Price and shall consist of a sufficient number of shares
of Company Preferred Stock so that the aggregate purchase price of the
Subsequent Purchase (each a "Subsequent Purchase Price") is not less than the
Subsequent Funding Minimum, and provided further that the Subsequent Purchase
Price to be paid at the Closing is not greater than the Remaining Equity
Commitment immediately prior to such Closing. In no event shall Buyer be
required to purchase shares of Company Preferred Stock pursuant hereto so that
it shall have expended more than the Total Equity Commitment. Subject to the
terms and conditions hereof, the Closing of the Subsequent Purchase shall be on
the first Business Day following the 15th day of the month following any month
in which the Company provides Buyer with written notice of its desire to effect
the Closing in the following month, if such written notice is given to Buyer at
least five Business Days prior to the end of such preceding month.
(b) If the Remaining Equity Commitment on September 19, 1998 is greater than
zero, then Buyer shall have the right to make a single Subsequent Purchase from
the Company of a sufficient number of shares of Company Preferred Stock at the
Per Share Purchase Price so that the Remaining Equity Commitment equals zero by
March 19, 1999, or as soon thereafter as all conditions to Buyer's obligation to
effect any purchase of Company Preferred Stock hereunder shall have been
satisfied or waived.
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Section 2.5 "Additional Agreements and Closing Deliveries." (a) At the
Initial Closing, and as a condition to the parties' obligations hereunder to
effect the transactions contemplated hereby at the Closing, the Company and
Buyer shall enter into a registration rights agreement that is satisfactory in
form and substance to the Buyer (the "Registration Rights Agreement").
(b) In addition to the other things required to be done hereby, at each
Closing, the Company shall deliver, or cause to be delivered, to Buyer the
following: (i) certificates representing the number of shares of Company
Preferred Stock to be issued and delivered at such Closing, free and clear of
all liens (unless created by Buyer or any of its Affiliates), with all necessary
stock transfer and other documentary stamps attached, (ii) a certificate, dated
the relevant Closing Date and validly executed on behalf of the Company, as
contemplated by Section 7.1(a), as to the Initial Closing only, and by Section
7.2(a), as to all Closing, (iii) evidence or copies of any consents, approvals,
orders, qualifications or waivers required pursuant to Section 7.1, as to the
Initial Closing only, and to Section 7.2, as to all Closings, (iv) all
certificates and other instruments and documents required by this Agreement to
be delivered by the Company to Buyer at or prior to each Closing, and (v) such
other instruments reasonably requested by Buyer, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
(c) In addition to the delivery of the Purchase Price and the other things
required to be done hereby, at each Closing, Buyer shall deliver, or cause to be
delivered, to the Company the following: (i) a certificate, dated the relevant
Closing Date and validly executed by Buyer, to the effect that the "Conditions
to Sale" as contemplated by Section 7.3(a) shall have been satisfied, (ii) if
not previously delivered to the Company, all other certificates, documents,
instruments and writings required pursuant hereto to be delivered by or on
behalf of Buyer at or before each Closing, and (iii) such other instruments
reasonably requested by the Company, as may be necessary or appropriate to
confirm or carry out the provisions of this Agreement.
Section 2.6 "Time and Place of Closing." Each Closing shall take place on the
relevant Closing Date at such place and time as the Company and Buyer shall
mutually agree.
Section 2.7 "Right to Assign." Buyer may assign its rights and delegate its
obligations created hereby to purchase Company Preferred Stock in accordance
with the provisions of Section 10.5.
Section 2.8 "Advances to Buyer." At the Initial Closing and at the subsequent
Closing, the Advancing Party shall have available and shall advance to Buyer all
of the funds necessary to satisfy Buyer's obligations hereunder and to pay any
related fees and expenses in connection with the foregoing. The Advancing Party
has, and at each Closing will have, written, enforceable subscriptions from its
investors sufficient to advance the necessary funds to Buyer as will enable
Buyer to purchase the requisite Purchased Shares at each Closing, in accordance
with this Agreement.
ARTICLE 3
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyer as follows:
Section 3.1 "Organization and Qualification, Subsidiaries." (a) The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware. The Company has all requisite corporate power
and authority to own, operate, lease and encumber its properties and carry on
its business as now conducted, and to enter into this Agreement and the
Registration Rights Agreement, and to perform its obligations hereunder and
thereunder.
(b) The General Partner is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. The General
Partner has all requisite corporate power and authority to own,
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operate, lease and encumber its properties and carry on its business, and to
cause the Operating Partnership to carry on its business, as now conducted.
(c) The Operating Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Operating Partnership has all requisite partnership power and authority to
own, operate, lease and encumber its properties and carry on its business as now
conducted.
(d) Each of the Subsidiaries of the Company is a corporation or partnership
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has the corporate or
partnership power and authority to own its properties and carry on its business
as it is now being conducted.
(e) Each of the Company and its Subsidiaries is duly qualified to do business
and in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except as set forth
in Schedule 3.1(e).
(f) Schedule 3.1(f) sets forth the name of each Subsidiary of the Company or
the Operating Partnership (whether owned directly or indirectly through one or
more intermediaries). All of the outstanding shares of capital stock of, or
other equity interest in, each of the Subsidiaries owned by the Company or the
Operating Partnership are duly authorized, validly issued, fully paid and
nonassessable, and are owned, directly or indirectly, by the Company or the
Operating Partnership free and clear of all Liens, except as set forth in
Schedule 3.1(f). The following information for each Subsidiary is set forth in
Schedule 3.1(f), if applicable: (i) its name and jurisdiction of incorporation
or organization, (ii) the type of and percentage interest held by the Company or
Operating Partnership in the Subsidiary and, in the case of Subsidiaries, the
names of and percentage interest held by the other interest holders, if any, in
the Subsidiary, and the partnership agreement or other organizational documents
of the Subsidiary, and (iii) any loans from the Company or the Operating
Partnership to, or priority payments due to the Company or the Operating
Partnership from, the Subsidiary, and the rate of return thereon. Except as set
forth in Schedule 3.1(f), there are no existing options, warrants, calls,
subscriptions, convertible securities or other rights, agreements or commitments
which obligate the Company or any of the Subsidiaries to issue, transfer or sell
any shares of capital stock or equity interests in any of the Subsidiaries.
Section 3.2 "Authority Relative to Agreements; Board Approval." (a) The
execution, delivery and performance of this Agreement, the Registration Rights
Agreement, and the Certificate of Designation, the issuance of shares of Company
Preferred Stock in accordance herewith and the Certificate of Designation, and
the issuance and delivery of shares of Company Common Stock upon conversion of
shares of Company Preferred Stock in accordance with the provisions of the
Certificate of Designation, have been duly and validly authorized by all
necessary corporate action on the part of the Company and all necessary
partnership action on the part of the Operating Partnership. This Agreement has
been duly executed and delivered by the Company for itself and constitutes the
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity. Upon the issuance of shares of Company Preferred
Stock, the Certificate of Designation will constitute a valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights or general principles of
equity.
(b) The Board of Directors of the Company has, as of the date hereof,
approved this Agreement, the Registration Rights Agreement, the Amended Company
By-laws and the transactions contemplated hereby and thereby. Not by way of
limitation of the foregoing, the Board of Directors has, as of the date hereof,
determined that the provisions of Article V, including the first paragraph
thereof and the paragraphs lettered A, B, C and E of the Company Charter, do not
apply to the Company Stock held or to be held by Buyer or the Advancing Party,
and the Company has declined, now and for all times in the future, any offer
deemed to have been made by Buyer or the Advancing Party pursuant to said
paragraph B, and agreed that Buyer and the Advancing Party will for no purpose
be deemed to be a "Group Acting in Concert," or portion thereof, or "Interested
Shareholder," in each case
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as set forth in the Company Charter; provided, however, that no assignee of
Buyer hereunder or purchaser from Buyer of shares of Company Stock shall be
entitled, as to itself, to the benefits of such Board of Directors' action
without a subsequent action specifically referencing such assignee or purchaser
of Company Stock.
(c) The shares of Company Preferred Stock to be acquired pursuant to this
Agreement have been duly authorized for issuance, and upon issuance will be duly
and validly issued, fully paid and nonassessable, and will be shares of "Voting
Stock" (as defined in the Company Charter) and do not and will not constitute
Excess Shares (as defined in the Company Charter). The shares of Company Common
Stock issuable upon conversion of the Company Preferred Stock to be acquired
pursuant to this Agreement will, upon issuance upon such conversion, be duly and
validly issued, fully paid and nonassessable, and will be shares of "Voting
Stock" (as defined in the Company Charter) and do not and will not constitute
"Excess Shares" (as defined in the Company Charter).
(d) The Board of Directors of the Company has authorized the creation and
issuance of the Company Preferred Stock. As of the Initial Closing, the
Certificate of Designation will have been duly authorized, and filed with the
Office of the Secretary of State of the State of Delaware such that no further
actions are required for the due and valid issuance of Company Preferred Stock
in accordance herewith and therewith.
Section 3.3 "Capital Stock and Units." (a) The authorized capital stock of
the Company on the date hereof consists of 140,000,000 shares of Company Common
Stock, and 60,000,000 shares of Company Preferred Stock, par value $0.01 per
share. As of August 31, 1997, there were 25,813,752 shares of Company Common
Stock issued and outstanding, and no shares of such Company Preferred Stock
issued and outstanding, and as of the date hereof, there is no change except for
an immaterial change in the number of Company Stock outstanding. All such issued
and outstanding shares of Company Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. The Company has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote) with the stockholders of
the Company on any matter. Other than (i) Operating Partnership Units which may
be redeemed by the holders thereof for Company Common Stock or the cash
equivalent thereof (at the option of the General Partner), or (ii) as set forth
in Schedule 3.3(a) to this Agreement, there are no existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock or other equity interests of the Company.
(b) As of August 31, 1997, 31,905,298 Operating Partnership Units of the
Operating Partnership were validly issued and outstanding, fully paid and
nonassessable, of which 25,501,147 Operating Partnership Units are owned by the
Company and 312,605 Operating Partnership Units are owned by the General Partner
(collectively, the "Company Units"). There are no other classes of units, or any
other form of general or limited partnership interest, of the Operating
Partnership issued or outstanding as of the date hereof. Except as set forth in
Schedule 3.3(b), the Operating Partnership has not issued or granted securities
convertible into interests in the Operating Partnership, and is not a party to
any outstanding commitments of any kind relating to, or any presently effective
agreements or understandings with respect to, interests in Operating
Partnership, whether issued or unissued. Since August 31, 1997, there have been
no changes to the number of Operating Partnership Units outstanding. On
September 22, 1997, the Operating Partnership anticipates it will issue 95,620
Operating Partnership Units in connection with a previously approved acquisition
transaction.
(c) Except for interests in the General Partner, the Subsidiaries of the
Company, the Operating Partnership, and its joint venture interest in the Spring
Valley Joint Venture, none of the Company or any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than investments in short-term investment securities).
(d) The direct or indirect, beneficial or record, ownership of Douglas Krupp
and David F. Marshall, respectively, in Company Common Stock or Operating
Partnership Units is as set forth in Schedule 3.3(d).
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Section 3.4 "No Conflicts; No Defaults, Required Filings and Consents."
Except as contemplated hereby, neither the execution and delivery by the Company
hereof nor the consummation by the Company of the transactions contemplated
hereby in accordance with the terms hereof, will:
(a) conflict with or result in a breach of any provisions of the Company
Charter or By-laws of the Company;
(b) except as set forth in Schedule 3.4(b), result in a breach or violation
of, a default under, or the triggering of any payment or other obligations
pursuant to, or accelerate vesting under, any of the Company stock option plans
or Operating Partnership Unit option plans or similar compensation plan or any
grant or award made under any of the foregoing;
(c) violate or conflict with any regulation, rule, order, or administrative
position of NYSE, or any other national securities exchange on which the Company
Common Stock is listed;
(d) except as set forth in Schedule 3.4(d), violate or conflict with any
statute, regulation, judgment, order, writ, decree or injunction applicable to
the Company or its Subsidiaries;
(e) except as set forth in Schedule 3.4(e), violate or conflict with or
result in a breach of any provision of, or constitute a default (or any event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any Lien
upon any of the properties of the Company or its Subsidiaries under, or result
in being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or its Subsidiaries is
a party, or by which the Company or its Subsidiaries or any of their properties
is bound or affected; or
(f) except as set forth in Schedule 3.4(f), require any consent, approval or
authorization of, or declaration, filing or registration with, any Government
Authority, other than any filings required under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act"), state securities laws ("Blue Sky Laws") (collectively, the
"Regulatory Filings"), and any filings required to be made with the Office of
the Secretary of the State of Delaware and NYSE or any other national securities
exchange on which the Company Common Stock is listed.
Section 3.5 "SEC and Other Documents, Financial Statements; Undisclosed
Liabilities." (a) The Company has delivered or made available to Buyer, or there
are commercially available to Buyer in the ordinary course, the registration
statement of the Company filed with the Securities and Exchange Commission
("SEC") in connection with the Company's exchange offering of Company Common
Stock for all the assets and liabilities of certain limited partnerships and the
subsequent distribution of such Company Common Stock to the limited partners
thereof, and all exhibits, amendments and supplements thereto (collectively, the
"Company Registration Statement"), and each registration statement, report,
proxy statement or information statement and all exhibits thereto prepared by it
or relating to its properties since the effective date of the Company
Registration Statement, which are set forth in Schedule 3.5(a), each in the form
(including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). The Company Reports were filed with the
SEC in a timely manner and constitute all forms, reports and documents required
to be filed by the Company under the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder (the "Securities Laws"). As of
their respective dates, the Company Reports (i) complied as to form in all
material respects with the applicable requirements of the Securities Laws and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that as to the compliance of the Company Reports
with the requirements of the Securities Laws, insofar as such representation is
made as to matters of form established in the Securities Laws, and assuming that
such Company Reports were prepared under the direction of
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and with the advice of independent counsel and auditors to the Company, it is a
representation made to the company's Knowledge. There is no unresolved violation
or position asserted by any Government Authority with respect to any of the
Company Reports except as set forth in Schedule 3.5(a) with respect to the
Company's intended position in response to that certain letter of August 14,
1997, from the SEC (but excluding comments 9 and 11 therein, as to which the
Company has reached resolution as set forth in Schedule 3.5(a)). No such
unresolved violation or position (again, excluding comments 9 and 11 referred to
above) is or could be material to the Company or its business, operations or
financial position, nor could it reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect.
(b) Except as set forth in Schedule 3.5(b), each of the balance sheets
included in or incorporated by reference into the Company Reports (including the
related notes and schedules) fairly presented the financial position of the
entity or entities to which it relates as of its date and each of the statements
of operations, stockholders' equity (deficit) and cash flows included in or
incorporated by reference into the Company Reports (including any related notes
and schedules) fairly presented the results of operations, retained earnings or
cash flows, as the case may be, of the entity or entities to which it relates
for the periods set forth therein, in each case in accordance with United States
generally accepted accounting principles ("GAAP") consistently applied during
the periods involved except as may be noted therein and except, in, the case of
the unaudited statements, normal recurring year-end adjustments.
(c) Except as and to the extent set forth in the Company Reports or any
Schedule hereto, none of the Company or any of its Subsidiaries has any
Liabilities (nor do there exist any circumstances that would result in any
Liabilities).
Section 3.6 "Litigation, Compliance With Law." (a) Except as disclosed in
Schedule 3.6(a), there are no Actions pending or threatened against the Company
or any of its Subsidiaries which question the validity hereof or any action
taken or to be taken in connection herewith, and there are no continuing orders,
injunctions or decrees of any Government Authority to which the Company or any
of its Subsidiaries is a party or by which any of its properties or assets are
bound.
(b) To the Company's Knowledge, none of the Company or its Subsidiaries is in
violation of any statute, rule, regulation, order, writ, decree or injunction of
any Government Authority or any body having jurisdiction over them or any of
their respective properties, except as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, and except
as set forth in Schedule 3.6(b).
Section 3.7 "Absence of Certain Changes or Events." Except as disclosed in
the Company Reports filed with the SEC prior to the date hereof or in Schedule
3.7, since December 31, 1996, the Company and each of its Subsidiaries has
conducted its business only in the ordinary course of such business and has not
acquired any real estate or entered into any financing arrangements in
connection therewith, and there has not been (a) any change, circumstance or
event that would reasonably be expected to result in an adverse effect on the
business, operations or condition (financial or otherwise) of the Company, the
Operating Partnership and the Subsidiaries, considered as a whole, (b) any
declaration, setting aside or payment of any dividend or other distribution with
respect to the Company Common Stock, except in accordance with Section 5.5, (c)
any commitment, contractual obligation, borrowing, capital expenditure or
transaction (each, a "Commitment") entered into by the Company or any of its
Subsidiaries, or (d) any change in the Company's accounting principles,
practices or methods. The Company is not now contemplating entering into any
Commitment which, had it occurred on or before the date hereof would be required
to be disclosed in the Company Reports or in Schedule 3.7.
Section 3.8 "Tax Matters; REIT and Partnership Status." (a) The Company and
each of its Subsidiaries has timely filed with the appropriate taxing authority
all Tax Returns required to be filed by it or has timely requested extensions
and any such request has been granted and has not expired. Each such Tax Return
is complete and accurate in all respects. All Taxes shown as owed by the Company
or any of its Subsidiaries on any Tax Return have been paid or accrued, except
for Taxes being contested in good faith and for which adequate reserves have
been taken. The Company and each of its Subsidiaries has properly accrued all
Taxes for such periods subsequent to the periods covered by such Tax Returns as
required by GAAP. None of the Company or
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any of its Subsidiaries has executed or filed with the IRS or any other taxing
authority any agreement now in effect extending the period for assessment or
collection of any Tax. Except as set forth in Schedule 3.8(a), none of the
Company or any of its Subsidiaries is a party to any pending action or
proceedings by any taxing authority for assessment or collection of any Tax, and
no claim for assessment or collection of any Tax has been asserted against it.
True and complete copies of all federal, state and local income and franchise
Tax Returns, or any extensions applicable thereto, filed by the Company and each
of its Subsidiaries for the taxable years 1994 to the present and all
communications relating thereto, have been delivered to Buyer or have been made
available to its representatives. To the Company's Knowledge, no claim has been
made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. Except as set forth in Schedule 3.8(a), there is no
dispute or claim concerning any Tax liability of the Company or any of its
Subsidiaries claimed or raised by any taxing authority in writing. As of the
date hereof, (i) the Company is a "domestically-controlled" REIT within the
meaning of Code Section 897(h)(4)(B), and (ii) all non-domestic beneficial
owners of Company Common Stock are set forth in Schedule 3.8(a). Except as set
forth in Schedule 3.8(a), no person or entity which would be treated as an
"individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in the Company. The Company is not "Pension-Held
REIT" within the meaning of Section 856(h)(3)(D) of the Code.
(b) The Company (i) intends in its federal income tax return for the tax year
ended December 31, 1997 and for the tax year that will end on December 31, 1998
to elect to be taxed as a real estate investment trust within the meaning of
Section 856 of the Code ("REIT") and has complied (or will comply) with all
applicable provisions of the Code relating to a REIT, (ii) has operated, and
intends to continue to operate, in such a manner as to qualify as a REIT, (iii)
has not taken or omitted to take any action which would reasonably be expected
to result in a challenge to its status as a REIT, and no such challenge is
pending or threatened, and (iv) assuming the accuracy of Buyer's representation
in Section 4.7, will not be rendered unable to qualify as a REIT for federal
income tax purposes as a consequence of the transactions contemplated hereby.
(c) Any amount or other entitlement that could be received (whether in cash
or property or the vesting of property) as a result of any of the transactions
contemplated hereby by any employee, officer, or director of the Company or the
Operating Partnership or any of their Affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or plan currently in effect would not be characterized
as an "excess parachute payment" (as such term is defined in Section 280G(b)(1)
of the Code).
(d) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries under any contract, stock plan, program,
arrangement or understanding currently in effect.
(e) The Company was eligible to and did validly elect to be taxed as a REIT
for federal income tax purposes for calendar year 1991 and all subsequent
taxable periods. The Operating Partnership and each Subsidiary of the Company
and the Operating Partnership organized as a partnership (and any other
Subsidiary that files Tax Returns as a partnership for federal income tax
purposes) was and continues to be classified as a partnership for federal income
tax purposes.
Section 3.9 "Compliance with Agreements." (a) Neither the Company nor any of
its Subsidiaries is in default under or in violation of any provision of the
Company Charter, the By-laws of the Company or the Partnership Agreement (or
equivalent documents), except as set forth in Schedule 3.9(a).
(b) The Company and each of its Subsidiaries have filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to be with any Government
Authority and all other material reports and statements required to be filed by
them, including any report or statement required to be filed pursuant to the
laws, rules or regulations of the United States, and have
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paid all fees or assessments due and payable in connection therewith, except as
set forth in Schedule 3.9(b). There is no unresolved violation asserted by any
regulatory agency, nor has the Company received notice from any regulatory
agency with respect to any report or statement relating to an examination of the
Company or any of its Subsidiaries.
(c) The Company Reports or Schedule 3.9(c) set forth (i) a description of all
material indebtedness of the Company and each of its Subsidiaries, whether
unsecured, secured or collateralized by mortgages, deeds of trust or other
security interests in the Company Properties or any other assets of the Company
and each of its Subsidiaries, or otherwise and (ii) each Commitment entered into
by the Company or any of its Subsidiaries (including any guarantees of any third
party's debt or any obligations in respect of letters of credit issued for the
Company's or any Subsidiary's account) which may result in total payments or
liability in excess of $250,000, excluding Commitments made in the ordinary
course of business with a maturity of less than one year or that are terminable
on 30 days or less notice. True and complete copies of the foregoing have been
delivered or made available to Buyer or to its representatives. Neither the
Company nor any of its Subsidiaries is in default and no event has occurred
which, with the giving of notice or the lapse of time or both, would constitute
a default, under any of the documents described in clause (i) or (ii) of this
paragraph or in respect of any payment obligations thereunder. All joint venture
and partnership agreements to which the Company or any of its Subsidiaries is a
party as of the date hereof are set forth in Schedule 3.9(c), all of which are
in full force and effect as against the Company or such Subsidiary and as
against the other parties thereto, and none of the Company or any of its
Subsidiaries is in default and no event has occurred which, with the giving of
notice or the lapse of time or both, would constitute a default, with respect to
any obligations thereunder. The other parties to such agreements are not in
breach of any of their respective obligations thereunder.
(d) Except as disclosed in the Company Reports or any other Schedule hereto,
and except as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, Schedule 3.9(d) sets forth a
complete and accurate list of all agreements entered into by the Company or any
of its Subsidiaries as of the date hereof relating to the development or
construction of, additions or expansions to, or management or leasing services
for real properties which are currently in effect and under which the Company or
any of its Subsidiaries currently has, or expects to incur, any material
obligation. True and complete copies of such agreements will be delivered or
made available to Buyer within five Business Days from the date hereof.
(e) Except as disclosed in the Company Reports, and except for agreements
made in the ordinary course of business with a maturity of less than one year or
that are terminable on 30 days or less notice, and except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, Schedule 3.9(e) sets forth a complete and accurate list of all
agreements entered into by the Company as of the date hereof which are not
listed in any other Schedule hereto, including the material Debt Instruments.
Each agreement set forth in Schedule 3.9(e) is in full force and effect as
against the Company and, as against the other parties thereto, no payments, if
any, thereunder are delinquent, and no notice of default thereunder has been
sent or received by the Company or any of its Subsidiaries. There does not exist
under any agreement set forth in Schedule 3.9(e) any default, and no event has
occurred which, with notice or lapse of time or both, would constitute such a
default. True and complete copies of each such agreement have been delivered or
made available to Buyer.
(f) Schedule 3.9(f) sets forth a complete and accurate list of all
agreements, with their respective costing in spread sheet form, and policies (in
the case of policies which are not manifested by written agreement, Schedule
3.9(f) shall include a correct and complete written summary thereof) of the
Company in effect on the date hereof relating to transactions with affiliates
and potential conflicts of interest, excluding agreements with Partnership
Affiliates (defined below), but including such agreements with and such policies
relating to all Affiliates of the Company, including but not limited to The
Berkshire Group, and Affiliates of The Berkshire Group, Laurence Gerber, Douglas
Krupp, George Krupp, David Marshall, and any Affiliate of a predecessor
organization of The Berkshire Group, or any of such Persons. Each agreement or
policy set forth in Schedule 3.9(f) is in full force and effect, and the
Company, each of its Subsidiaries, and the other parties thereto are in
compliance with such agreements and policies, or such compliance has been waived
by the Board of Directors as set forth in Schedule 3.9(f). True and complete
copies of each such agreement or policy have been delivered to Buyer or to its
representatives. As used herein, "Partnership Affiliate" means any limited
partnership in which a predecessor
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organization of The Berkshire Group, Douglas Krupp, George Krupp, or any of them
or their Affiliates, directly or indirectly, hold a general or limited partner
interest which is in no event less than or equal to 1% of the effective economic
interest in any such partnership, nor will any partnership interest in any such
partnership now or in the future held, directly or indirectly, by The Berkshire
Group, Douglas Krupp, George Krupp, or any of them or their Affiliates, with the
passage of time or the occurrence of any event, or both, exceed 1% of any such
effective economic interest.
Section 3.10 "Financial Records; Company Charter and By-laws; Corporate
Records." (a) The books of account and other financial records of the Company
and each of its Subsidiaries are in all respects true and complete, have been
maintained in accordance with good business practices, and are accurately
reflected in all respects in the financial statements included in the Company
Reports, except as set forth in Schedule 3.10(a).
(b) The Company has previously delivered or made available to Buyer true and
complete copies of the Company Charter and the By-laws of the Company, as
amended to date, the Partnership Agreement, and the charter, by-laws,
organization documents, partnership agreements and joint venture agreements of
the Subsidiaries, and all amendments thereto. All such documents are listed in
Schedule 3.10(b). A chart of the Company, the Operating Partnership, and the
Subsidiaries showing ownership, voting or general partner rights and contractual
relationships is set forth in Schedule 3.10(b).
(c) The minute books and other records of corporate or partnership
proceedings of the Company and each of its Subsidiaries have been made available
to Buyer, contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
stockholders and directors and any committees of the Board of Directors of the
Company and their Subsidiaries which are corporations and all actions of the
partners of the Operating Partnership and Subsidiaries which are partnerships,
except for documentation of discussions relating to or in connection with the
transactions contemplated hereby or matters related hereto, except as set forth
in Schedule 3.10(c).
Section 3.11 "Properties." (a) Schedule 3.11(a) sets forth a complete and
accurate list and the address of all real property directly or indirectly owned,
all or in part, or leased by the Company or any of its Subsidiaries or otherwise
used by the Company or its Subsidiaries in the conduct of their business or
operations (collectively, and together with the land at each address referenced
in Schedule 3.11(a) and all buildings, structures and other improvements and
fixtures located on or under such land and all easements, rights and other
appurtenances to such land, the "Company Properties"), other than the office
space leased by the Company from which the Company operates its business which
is listed separately on Schedule 3.11(a) as HQ Space (the "HQ Space"). The
Operating Partnership or, in the case of Company Properties owned by
Subsidiaries, certain of the Subsidiaries, owns good and marketable fee simple
title (or, if so indicated in Schedule 3.11(a), leasehold title) to each of the
Company Properties, in each case free and clear of any Liens, title defects,
contractual restrictions or covenants, laws, ordinances or regulations affecting
use or occupancy (including zoning regulations and building codes) or
reservations of interests in title (collectively, "Property Restrictions"),
except for (i) Permitted Liens and (ii) Property Restrictions imposed or
promulgated by law or by any Government Authority which are customary and
typical for similar multi-family residential or commercial properties. None of
the matters described in clauses (i) and (ii) of the immediately preceding
sentence materially interferes with, impairs, or is violated by, the existence
of any building or other structure or improvement which constitutes a part of,
or the present use, occupancy or operation (or, if applicable, development) of
the Company Properties taken as a whole. Except as set forth in Schedule 3.11(a)
and as to the Development Properties for which application for title policies
have been or are being made in the ordinary course and as to which the Company
has no reason to believe will not issue on customary terms and in customary and
marketable form (without exceptions which would render the subject Development
Properties unfinanceable), policies of title insurance (issued on customary
American Land Title Association forms) have been issued by national title
insurance companies insuring the fee simple or leasehold, as applicable, title
of the Operating Partnership or its Subsidiaries, as applicable, to each of the
Company Properties in amounts at least equal to the original cost thereof
subject only to Permitted Liens; such policies are valid and in full force and
effect and no claim has been made under any such policy, and the Company is not
aware of any fact or information which would constitute a defense by the issuer
of any such policy or an exclusion from coverage. True and complete
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copies of all such policies together with all exceptions referenced therein and
the most recent title reports for and surveys of each of the Company Properties
available to the Company or any of its Subsidiaries have been made available by
the Company to Buyer or to its representatives.
(b) Except as set forth in Schedule 3.11(b), and except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the use or occupancy (or, if applicable, development or
maintenance) of the Company Properties, any currently required certificate,
permit or license (including building permits and certificates of occupancy for
tenant spaces) from any Government Authority having jurisdiction over any
Company Property or any agreement, easement or other right which is necessary to
permit the lawful use, occupancy or operation of the existing buildings,
structures or other improvements which constitute a part of any of the Company
Properties or which are necessary to permit the lawful use and operation of
utility service to any Company Property or of any existing driveways, roads or
other means of egress and ingress to and from any of the Company Properties has
been obtained and is in full force and effect, and there are no pending threat
of modification or cancellation of any of same, and there is no violation by any
Company Property of any federal, state or municipal law, ordinance, order,
regulation or requirement, including any applicable zoning law or building code,
as a result of the use or occupancy of such Company Property or otherwise.
Except as set forth in Schedule 3.11(b), there is no uninsured physical damage
to any Company Property in excess of $100,000. Except for repairs identified in
the Capital Expenditure Budget and Schedule, each Company Property, (i) is in
good or better operating condition and repair and is structurally sound and free
of defects, with no material alterations or repairs being required thereto under
applicable law or insurance company requirements, and (ii) consists of
sufficient land, parking areas, driveways and other improvements and lawful
means of access and utility service and capacity to permit the use thereof in
the manner and for the purposes to which it is presently devoted (or, in the
case of the Development Property, for the development and operation thereon of
the applicable Project), except, in each such case, to the extent that failure
to meet such standards would adversely affect the use or occupancy of the
Company Properties taken as a whole (or, in the case of the Development
Property, the development and operation thereon of the applicable Project). The
Company has made available to Buyer or to its representatives true and complete
copies of all engineering reports, inspection reports, maintenance plans and
other documents relating to the condition of any Company Property prepared for
the Company or otherwise in the Company's or any Subsidiary's possession.
(c) Except as set forth in Schedule 3.11(c), and, except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) no condemnation, eminent domain or rezoning proceedings are
pending or threatened with respect to any of the Company Properties, (ii) no
road widening or change of grade of any road adjacent to any Company Property is
underway or has been proposed, (iii) no proposed change in the assessed
valuation of any Company Property, (iv) no special assessment has been made or
threatened against any Company Property, and (v) no Company Properties are
subject to any so-called "impact fee" or to any agreement with any Government
Authority to pay for sewer extension, oversizing utilities, lighting or like
expenses or charges for work or services by such Government Authority.
(d) Each of the Company Properties is an independent unit which does not rely
on any facilities located on any property not included in such Company Property
to fulfill any municipal or governmental requirement or for the furnishing to
such Company Property of any essential building systems, utilities or customary
amenities, other than facilities the benefit of which inures to the Company
Properties pursuant to one or more valid easements, or facilities which are
located on or abutting Company Properties and are sufficient to serve more than
one property adequately and lawfully. Each of the Company Properties is served
by public water and sanitary systems and all other utilities, and each of the
Company Properties has lawful access to public roads, in all cases sufficient
for the current use and occupancy of each Company Property (or, in the case of
the Development Property, for the development and operation thereon of the
applicable Project). All parcels of land included in each Company Property that
purport to be contiguous are contiguous and are not separated by strips, gaps or
gores. No portion of any Company Property lies in any flood plain area (as
defined by the U.S. Army Corps of Engineers or otherwise) or includes wetlands
or vegetation or species protected by any applicable laws. No improvements
constituting a part of any Company Property encroach on real property not
constituting a part of such Company Property or an abutting Company Property.
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(e) The Company has supplied or made available to Buyer each survey, study or
report prepared by or for the Company or any of the Subsidiaries in connection
with any Company Property's compliance or non-compliance with the requirements
of the Americans with Disabilities Act (the "ADA"), other than routine
correspondence or memoranda. Except as set forth in Schedule 3.11(e), and except
as could not, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect, no Company Property fails to comply with the
Requirements of the ADA.
(f) The Company has provided to Buyer an accurate rent roll for each Company
Property (collectively, the "Rent Rolls") as of the month ended July 31, 1997
all of which remain true, correct and complete as of the date hereof, except for
immaterial variations in the ordinary course of business, which identifies and
accurately describes each lease of space in each Company Property (collectively,
the "Company Leases") and sets forth the vacancy for each.
(g) Schedule 3.11(g) sets forth a complete and accurate list of all material
commitments, letters of intent or similar written understandings made or entered
into by the Company or any of its Subsidiaries as of the date hereof (x) to
lease any space larger than 25,000 rentable square feet at any of the Company
Properties, (y) to sell, mortgage, pledge, hypothecate any Company Property or
to otherwise enter into a material transaction in respect of the ownership or
financing of any Company Property, or (z) to purchase or acquire an option,
right of first refusal or similar right in respect of any real property, which,
in any such case, has not yet been reduced to a written lease or contract, and
sets forth with respect to each such commitment, letter of intent or other
understanding the principal terms thereof. The Company has previously delivered
or made available to Buyer a true and complete copy of each such commitment,
letter of intent or other understanding.
(h) Except as set forth in Schedule 3.11(h), the Company, the Operating
Partnership and all the Subsidiaries have the right, including, but not limited
to, to sell, transfer, lease, finance, without limitation, all of the Company
Properties. Except for certain rights of first refusal which are set forth in
the sections of the partnership agreements referenced in Schedule 3.1(e) and
which relate to partnerships in which the Company, directly or indirectly, owns
less than a 100% interest, none of the Company or any of its Subsidiaries has
granted any outstanding options or has entered into any outstanding contracts
with others for the sale, mortgage, pledge, hypothecation, assignment, sublease,
lease or other transfer of all or any part of any Company Property, and no
person has any right or option to acquire, or right of first refusal with
respect to, the Company's or any of its Subsidiaries' interest in any Company
Property or any part thereof. Except as set forth in Schedule 3.11(h) none of
the Company or any of its Subsidiaries has any outstanding options or rights of
first refusal or has entered into any outstanding contracts with others for the
purchase of any real property.
(i) Schedule 3.11(i) contains a complete and accurate description of any
noncompliance by any Company Property, with any law, ordinance, code, health and
safety regulation or insurance requirement (except for the ADA, which is
addressed in this respect in Section 3.11(e) above), except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has provided the Company's or any Subsidiary's
capital expenditure budget and schedule for each Company Property (the "Capital
Expenditure Budget and Schedule"), which describes the capital expenditures
which the Company or any Subsidiary has budgeted for such Company Property for
the period running through at least December 31, 2002, and such other capital
expenditures as are necessary in order to bring such Company Property into
compliance with applicable laws, ordinances, codes, health and safety
regulations and insurance requirements (including fire sprinklers, compliance
with the ADA abatement or maintenance of asbestos containing material, and
mitigation for radon) or which the Company otherwise plans or expects to make in
order to cure or remedy any construction, electrical, mechanical or other
defects, to renovate, maintain, rehabilitate or modernize such Company Property,
or otherwise, excluding, however, any tenant improvements required to be made
under any Company Lease. The costs and time schedules for 1997 and subsequent
years set forth in each Capital Expenditure Budget and Schedule are reasonable
estimates and projections. The Capital Expenditure Budget and Schedule for each
Company Property (i) has been established and timely implemented since each
Company Property was acquired by the Company (whether by purchase or as a result
of initial formation transactions), (ii) has a time period of not less than five
years, and (iii) has been provided to Buyer in a true, correct and complete form
as in effect on the date hereof and the amounts set forth
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therein represents the good faith business judgment of the Company as to all
known maintenance and capital expenditure items for such Company Property.
Except as set forth in Schedule 3.11(i), there are no outstanding or threatened
requirements by any insurance company which has issued an insurance policy
covering any Company Property, or by any board of fire underwriters or other
body exercising similar functions, requiring any repairs or alterations to be
made to any Company Property.
(j) Schedule 3.11(j) contains a list of each Company Property, or property
which the Company has under letter of intent or option, which consists of or
includes undeveloped land or which is intended to be or is in the process of
being developed or rehabilitated (collectively, the "Development Properties")
and a brief description of the development or rehabilitation intended by the
Company or any Subsidiary to be carried out or completed thereon (collectively,
the "Projects"), including any budget and development or rehabilitation schedule
therefor prepared by or for the Company or any Subsidiary (collectively, the
"Development Budget and Schedule"). Each Development Property is zoned for the
lawful development thereon of the applicable Project, and the Company or its
Subsidiaries have obtained all permits, licenses, consents and authorizations
required for the lawful development or rehabilitation thereon of such Project.
Except as set forth in Schedule 3.11(j), there are no material impediments to or
constraints on the development or rehabilitation of any Project within the time
frame and for the cost set forth in the Development Budget and Schedule
applicable thereto. In the case of each Project the development of which has
commenced, the costs and expenses incurred in connection with such Project and
the progress thereof are, except as set forth in Schedule 3.11(j), consistent
and in compliance in all material respects with all aspects of the Development
Budget and Schedule applicable thereto. The Company has made available to Buyer
or to its representatives all feasibility studies, soil tests, due diligence
reports and other studies, tests or reports performed by or for the Company, or
otherwise in the possession of the Company, which relate to the Development
Properties or the Projects.
(k) Except as set forth in Schedule 3.11(k), and except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, the Company has disclosed to Buyer all adverse matters known to
the Company with respect to or in connection with the Company Properties and the
HQ Space (including the Company Leases and the Tenancy Leases).
(l) The leases for the HQ Space and the ground leases underlying the leased
Company Properties referenced in Schedule 3.11(a), if any (collectively, the
"Tenancy Leases"), are accurately described in Schedule 3.11(l). Each of the
Tenancy Leases is valid, binding and in full force and effect as against the
Subsidiary and as against the other party thereto. Except as indicated in
Schedule 3.11(l), none of the Tenancy Leases is subject to any pledge, lien,
sublease, assignment, license or other agreement granting to any third party any
interest therein or any right to the use or occupancy of any premises leased
thereunder. True and complete copies of the Tenancy Leases (including all
amendments, modifications and supplements thereto) will be delivered to Buyer
within five Business Days from the date hereof. Except as set forth in Schedule
3.11(l), there is no pending or threatened proceeding which is reasonably likely
to interfere with the quiet enjoyment of the tenant under any of the Tenancy
Leases. Except as set forth in Schedule 3.11(l), no payments under any Tenancy
Lease are delinquent and no notice of default thereunder has been sent or
received by the Company or any of its Subsidiaries, and there does not exist
under any of the Tenancy Leases any default, and no event has occurred which,
with notice or lapse of time or both, would constitute such a default.
(m) The Company and each of its Subsidiaries have good and sufficient title
to all the personal and non-real properties and assets reflected in their books
and records as being owned by them (including those reflected in the balance
sheets of the Company and its Subsidiaries as of June 30, 1997, except as since
sold or otherwise disposed of in the ordinary course of business), free and
clear of all Liens, except for Permitted Liens, as set forth in Schedule
3.11(m).
Section 3.12 "Environmental Matters." (a) Each of the Company and its
Subsidiaries has obtained, and now maintains as currently valid and effective,
all permits required under the Environmental Laws (the "Environmental Permits")
in connection with the operation of its businesses and properties, all of which
are listed in Schedule 3.12(a). Except as disclosed in the Executive Summaries
of the Company Environmental Reports and
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except for any Company Property non-compliance as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, each of
the Company and its Subsidiaries, and each Company Property is, has been, and
will be in compliance with all terms and conditions of the Environmental Permits
and all Environmental Laws.
(b) To the Company's Knowledge, each of the Company and its Subsidiaries has
provided to Buyer all written information and written communications (whether
from a Government Authority, citizens' group, employee or other person) in its
possession or control regarding (x) alleged or suspected noncompliance of any of
the Company Properties with any Environmental Laws or Environmental Permits or
(y) alleged or suspected liability of the Company or its Subsidiaries under any
Environmental Law.
(c) There are no environmental liens or encumbrances on any of the Company
Properties and no government actions have been taken or are in process which are
reasonably likely to subject any Company Property to such liens or other
encumbrances.
(d) No Environmental Claim with respect to the operations or the businesses
of the Company or its Subsidiaries, or with respect to any of the Company
Properties, has been asserted or, to the Company's Knowledge, threatened, and no
circumstances exist with respect to the Company or its Subsidiaries or the
Company Properties that would reasonably be expected to result in any
Environmental Claim being asserted, in any such case, against (i) the Company or
its Subsidiaries, or (ii) any person whose liability for any Environmental
Claims the Company or its Subsidiaries has or may have retained or assumed
either contractually or by operation of law.
(e) Except as disclosed in Schedule 3.12(e) or set forth in the Executive
Summaries of the Company Environmental Reports and, except as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, (i) none of the Company or its Subsidiaries has been notified or
anticipates being notified of potential responsibility in connection with any
site that has been placed on, or proposed to be placed on, the National
Priorities List or its state or foreign equivalents pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., or analogous state or foreign laws, (ii) no
Materials of Environmental Concern are present on, in or under any Company
Property in a manner or condition that is reasonably likely to give rise to an
Environmental Claim, (iii) none of the Company or its Subsidiaries has Released
or arranged for the Release of any Materials of Environmental Concern at any
location, (iv) no underground storage tanks, surface impoundments, disposal
areas, pits, ponds, lagoons, open trenches or disused industrial equipment is
present at any Company Property, (v) no transformers, capacitors, ballasts or
other equipment containing fluid with more than 50 parts per million
polychlorinated biphenyls are present at any Company Property, except for any
such transformers, capacitators, ballasts or other equipment owned by any
utility company, and (vi) no asbestos or asbestos-containing material is present
at any Company Property or at the HQ Space and no employee, agent, contractor or
subcontractor of the Company or its Subsidiaries is now or has in the past been
exposed to friable asbestos or asbestos-containing material at any Company
Property or at the HQ Space.
(f) The Company has provided the most recent Phase I environmental report
prepared for the Company or its Subsidiaries or otherwise in the possession of
any of them with respect to the environmental condition of any Company Property
(collectively, the "Company Environmental Reports"). True and complete copies of
the executive summaries or conclusions included in the Company Environmental
Reports (collectively, the "Executive Summaries of the Company Environmental
Reports") have previously been delivered by the Company to Buyer. True and
complete copies of each of the Company Environmental Reports have been delivered
or made available to Buyer or to its representatives. The Executive Summaries of
the Company Environmental Reports disclose all matters known to the Company in
respect of the environmental condition (including violations of Environmental
Laws, Environmental Claims and the presence or Release of any Materials of
Environmental Concern) of the Company Properties (it being understood, however,
that reference in the Executive Summaries of the Company Environmental Reports
to other environmental reports, investigations, assessments or other documents
shall not constitute disclosure of the contents thereof except to the extent
such contents are fully in the Executive Summaries of the Company Environmental
Reports).
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(g) For purposes hereof, the terms listed below shall have the following
meanings:
(i) "Claim" shall mean all actions, causes of action, suits, debts,
dues, accounts, reckonings, bonds, bills, covenants, contracts,
controversies, promises, trespasses, damages, judgments, executions,
claims, liabilities and demands whatsoever, in law or equity.
(ii) "Environmental Claim" shall mean any Claim, investigation or
notice (written or oral) by any person alleging potential liability
(including potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or fatalities, or penalties) arising out of, based on
or resulting from (A) the presence, generation, transportation,
treatment, use, storage, disposal or Release of Materials of
Environmental Concern or the threatened Release of Materials of
Environmental Concern at any location, or (B) activities or conditions
forming the basis of any violation, or alleged violation of, or liability
or alleged liability under, any Environmental Law.
(iii) "Environmental Laws" shall mean federal, state, local,
provincial, municipal and foreign laws, ordinances, principles of common
law, rules, by-laws, orders, governmental policies, statutes,
regulations, agreements, treaties, customary law, and international
principles relating to the pollution or protection of the environment or
of flora or fauna or their habitat or of human health and safety, or to
the cleanup or restoration of the environment, including, but not limited
to, any laws relating to (A) generation, treatment, storage, disposal or
transportation of wastes, emissions or discharges or protection of the
environment from the same, (B) exposure of persons to, or Release or
threat of Release of, Materials of Environmental Concern, (C) noise, (D)
repetitive motion, and (E) the safety and health of workers and
employees.
(iv) "Materials of Environmental Concern" shall mean all chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum or any
fraction thereof, petroleum products and hazardous substances (as defined
in Section 101(14) of CERCLA, 42 U.S.C. ss. 6601(14)), or solid or
hazardous wastes as now defined and regulated under any Environmental
Laws.
(v) "Release" shall mean any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration.
Section 3.13 "Employees and Employee Benefit Plans." (a) Schedule 3.13(a).
sets forth a complete and accurate list of all employment agreements with
employees of the Company or any of its Subsidiaries. Except for the employees
who are parties to such employment agreements, all of the employees of the
Company and each of its Subsidiaries are employed on an at-will basis (except
for restrictions or limitations on the at-will basis of such employees imposed
by general principles of law or equity).
(b) The Company Reports or Schedule 3.13(b) sets forth a complete and
accurate list of all Employee Benefit Plans and all material Benefit
Arrangements which affect Employees of the Company or any of its Subsidiaries
(the "Company Plans"). With respect to each Company Plan, the Company has made
available to Buyer or to its representatives, true and complete copies of. (i)
the plans and related trust documents and amendments thereto, (ii) the most
recent summary plan descriptions, if any, and the most recent annual report, if
any, and (iii) the most recent actuarial valuation (to the extent applicable).
(c) With respect to each Company Plan, (i) the Company and each of its
Subsidiaries is in compliance in all material respects with the terms of each
Company Plan and with the requirements prescribed by all applicable statutes,
orders or governmental rules or regulations, (ii) the Company and each of its
Subsidiaries has contributed to each Pension Plan included in the Company Plans
not less than the amounts accrued for such plan for all plan periods for which
payment is due, and (iii) none of the Company or any of its Subsidiaries has any
funding commitment or other liabilities except as reserved for in the financial
statements in or incorporated by reference into the Company Reports, and, in the
case of clause (i) through (iii), as is set forth in Schedule 3.13(c).
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(d) None of the Company or any of its Subsidiaries has made any commitment to
establish any new Employee Benefit Plan, to modify any Employee Benefit Plan, or
to increase benefits or compensation of Employees of the Company or any of its
Subsidiaries (except for normal increases in compensation consistent with past
practices), and no intention to do so has been communicated to Employees of the
Company or any of its Subsidiaries.
(e) There are no pending or anticipated claims against or otherwise involving
any of the Company Plans or any fiduciaries thereof with respect to their duties
to the Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Company Plan activities) has been
brought against or with respect to any such Company Plans.
(f) Neither the Company, the Operating Partnership or any entity under
"common control" with the Company or the Operating Partnership within the
meaning of Section 4001 of ERISA has contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Section 3(37) and
4001(a)(3) of ERISA).
(g) Except as set forth on Schedule 3.13(g), the Company and its Subsidiaries
do not maintain or contribute to any plan or arrangement which provides or has
any liability to provide life insurance, medical or other employee welfare
benefits to any Employee or former Employee upon his retirement or termination
of employment and the Company and its Subsidiaries have never represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided.
(h) For purposes hereof, "Employee Benefit Plans" means each and all
"employee benefit plans" as defined in Section 3(3) of ERISA maintained or
contributed to by a party hereto or in which a party hereto participates or
participated and which provides benefits to Employees, including (i) any such
plan that are "employee welfare benefit plans" as defined in Section 3(l) of
ERISA, including retiree medical and life insurance plans ("Welfare Plans"), and
(ii) any such plans that constitute "employee pension benefit plans" as defined
in Section 3(2) of ERISA ("Pension Plans"). "Benefit Arrangements" means life
and health insurance, hospitalization, savings, bonus, deferred compensation,
incentive compensation, holiday, vacation, severance pay, sick pay, sick leave,
disability, tuition refund, service award, company car, scholarship, relocation,
patent award, fringe benefit, individual employment, consultancy or severance
contracts and other polices or practices of a party hereto providing employee or
executive compensation or benefits to Employees, other than Employee Benefit
Plans. "Employees" mean all current employees, former employees and retired
employees of a party hereto or any of its Subsidiaries, including employees on
disability, layoff or leave status. "Controlled Group Liability" means any and
all liabilities under (i) Title IV of ERISA, (H) Section 302 of ERISA, (iii)
Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements
of Section 601 et seq, of ERISA and Section 4980B of the Code, and (v)
corresponding or similar provisions of foreign laws or regulations, other than
such liabilities that arise solely out of, or relate solely to, the Plans.
(i) With respect to each plan that is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of Section 412 of the Code or
Section 302 of ERISA, whether or not waived, (ii) the fair market value of the
assets of such plan equals or exceeds the actuarial present value of all accrued
benefits under plan (whether or not vested), on a termination basis, (iii) no
reportable event within the meaning of Section 4043(c) of ERISA has occurred,
and the consummation of the transactions contemplated by this agreement will not
result in the occurrence of any such reportable event, and (iv) all premiums to
the Pension Benefit Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist that could
result in, any Controlled Group liability that would be a liability of the
Company following the Closing. Without limiting the generality of the foregoing,
neither the Company nor any ERISA Affiliate has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
(k) Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will (either alone or in conjunction
with any other event) result in, cause the accelerated vesting
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or delivery of, or increase the amount or value of, any payment or benefit to
any employee of the Company, except as set forth in Schedule 3.13 (k).
Section 3.14 "Labor Matters." Except as set forth in Schedule 3.14, none of
the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. Except for the matters set forth
in Schedule 3.14, there is no unfair labor practice or labor arbitration
proceeding pending or threatened against the Company or any of its Subsidiaries.
There are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of the Company or any of its Subsidiaries.
Section 3.15 "Affiliate Transactions." Schedule 3.15 sets forth a complete
and accurate list of all transactions, series of related transactions or
currently proposed transactions or series of related transactions entered into
by the Company or any of its Subsidiaries since January 1, 1991 which are of the
type required to be disclosed by the Company pursuant to Item 404 of Regulation
S-K of the Securities Laws or, if not of such type, are of a nature referenced
in Section 3.9(f) hereof. A true and complete copy of all agreements or
contracts relating to any such transaction has been made available to Buyer.
Schedule 3.15 sets forth an accounting of such transactions regarding
participatory interests, the allocation of overhead and expenses thereunder, and
all other matters material to each of such agreements or contracts.
Section 3.16 "Insurance." The Company and the Operating Partnership maintain
insurance policies covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company and each of its
Subsidiaries (collectively, the "Insurance Policies") which are of a type and in
amounts customarily carried by persons conducting businesses similar to those of
the Company and the Operating Partnership. There is no material claim by the
Company or any of its Subsidiaries pending under any of the material Insurance
Policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies.
Section 3.17 "Delaware Takeover Law." The terms of Section 203 of the General
Corporation Law of the State of Delaware will not apply to Buyer, any Stock
Purchase or any other transaction contemplated hereby.
Section 3.18 "Brokers or Finders." No agent, broker, investment banker or
other firm or person, including any of the foregoing that is an Affiliate of the
Company with which the Company dealt, is or will be entitled to any broker's or
finder's fee or any other commission or similar fee from the Company in
connection with this Agreement or any of the transactions contemplated hereby
for which Buyer will be responsible.
Section 3.19 "Disclosure of Facts." There are no facts peculiar to the
Company or the Operating Partnership that the Company has not disclosed to
Buyer, nor, is there a reasonable likelihood that there will occur any event
that could, individually or in the aggregate, reasonably to be expected to have
a Material Adverse Effect on the business, financial condition, assets, results
of operations or prospects of the Company, the Subsidiaries, or the Operating
Partnership.
Section 3.20 "REOC Status." (a) The Company was incorporated as a Delaware
corporation in November, 1990 and from its date of incorporation until July 1,
1991, the Company conducted no business and owned no assets.
(b) As of the date of the Company's first long-term investment that was not a
short-term investment of funds pending long-term commitment, i.e., July 1, 1991
(the "REOC Qualification Date"), and continuously thereafter to and including
the Initial Closing, at least 50 percent of the assets of the Company (other
than short-term investments pending long-term commitment or distribution to
investors), valued at cost, have been invested in real estate which has been
under active development or management by the Company.
(c) The Company has been actively engaged in the management or development of
real estate in the ordinary course of its business at all times from the REOC
Qualification Date to and including the Initial Closing.
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(d) The "real estate" referenced above which was purchased on the REOC
Qualification Date and thereafter includes the Company Properties. To the extent
any of the Company Properties are subject to tenant leases (the "Leases"), the
Company has substantial responsibilities under each of the Leases, and none of
the Leases provides that substantially all management and maintenance activities
with respect to the Company Property in question or any portion thereof are the
responsibility of the tenant lessees.
(e) The Company has not merely passively assumed the risks of its real estate
ownership, but the return to its stockholders from its investment in the Company
Properties has been and is based in part on the cash flow and capital
appreciation of the Company Properties, and such return depends in substantial
part on the success of the Company's management and development efforts with
respect to the Company Properties.
(f) The employees of the Company perform most of the development and
management functions of the real estate business described herein, except that
the Company has employed independent contractors, each of which is terminable
without cause and without substantial penalty upon reasonably short notice, to
perform certain of the day-to-day management activities associated with the
Company Properties. In any event, the Company represents and warrants that it
has devoted substantial resources to such management and development activities
and to the oversight of its independent contractors who perform such activities
from the REOC Qualification Date to and including the Initial Closing.
(g) The Company covenants and warrants that it will comply with all
requirements, and take all actions and cause its subsidiaries to take all
actions necessary, to maintain its status as a "real estate operating company"
as such term is defined in 29 C.F.R. ss. 2510.3-101. Specifically, but without
limitation, the Company covenants that it has or it will establish an "annual
valuation period", which will be an annual period of no more than 90 days that
will begin no later than the anniversary of the REOC Qualification Date, and
that on at least one day within each annual valuation period, the Company will
maintain the investment of at least 50 percent of its assets (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, in real estate which is under active development or
management by the Company as described above. The Company also covenants to
devote substantial resources to the management of the real estate it owns, and
continuously to remain actively engaged in the management or development of real
estate in the ordinary course of its business. The Company agrees to cooperate
with Buyer and to furnish such additional information as may be reasonably
requested by Buyer to evidence the actions indicated above.
Section 3.21 "Knowledge Defined." As used herein, the phrase "to the
Company's Knowledge" (or words of similar import) means actual knowledge of
those individuals identified in Schedule 3.21, and includes any facts, matters
or circumstances set forth in any written notice from any Government Authority
or any other material written notice received by the Company or any Subsidiary,
and also includes any matter of which Buyer informs the Company in writing.
Section 3.22 "Construction of Material Adverse Effect." For purposes of the
construction of any representation and warranty in this Section 3, and as to the
accuracy thereof, the term "Material Adverse Effect" shall be considered in each
and every event on an aggregate basis with all other representations and
warranties which contain an exception for Material Adverse Effect such that, if
and when one or more of such representations and warranties, considered in the
aggregate, prove to be inaccurate to the extent that an aggregate of $3,000,000
in Loss or Liability is exceeded, then all such representations and warranties
which are subject to exception based on Material Adverse Effect shall, if
inaccurate in any respect, be deemed to be inaccurate without regard to an
exception for Material Adverse Effect and the amount or amounts involved in each
such inaccuracy shall be determined as if no such exception was present.
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ARTICLE 4
Representations and Warranties of Buyer
Buyer hereby represents and warrants to the Company as follows:
Section 4.1 "Organization." Buyer is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has all requisite power and authority to own, operate, lease and
encumber its properties and carry on its business as now conducted, and to enter
into this Agreement and the Registration Rights Agreement, and to perform its
obligations hereunder and thereunder.
Section 4.2 "Due Authorization." The execution, delivery and performance of
this Agreement and the Registration Rights Agreement have been duly and validly
authorized by all necessary action on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer for itself and constitutes the valid and
legally binding obligations of Buyer, enforceable against Buyer, in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights or general principles of
equity.
Section 4.3 "Conflicting Agreements and Other Matters." Neither the execution
and delivery of this Agreement, nor the performance by Buyer of its obligations
hereunder, will conflict with, result in a breach of the terms, conditions or
provisions of, constitute a default under, result in the creation of any
mortgage, security interest, encumbrance, lien or charge of any kind upon any of
the properties or assets of Buyer, pursuant to, or require any consent, approval
or other action by or any notice to or filing with any Government Authority
pursuant to, the organizational documents or agreements of Buyer, or any
agreement, instrument, order, judgment, decree, statute, law, rule or regulation
by which Buyer is bound, except for filings after any Closing under Section
13(d) of the Exchange Act.
Section 4.4 "Acquisition for Investment, Sophistication, Source of Funds."
Buyer is acquiring the Company Preferred Stock being purchased by it for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, and (except for the possible
contemplated sale by Buyer of shares of Company Preferred Stock to Morgan
Stanley Real Estate Special Situations, Inc., affiliated partnerships and funds
advanced by Morgan Stanley Asset Management, Inc., or by its Affiliates) Buyer
has no present intention or plan to effect any distribution of shares of Company
Preferred Stock, provided that the disposition of Company Preferred Stock owned
by Buyer shall at all times be and remain within its control, subject to the
provisions of this Agreement and the Registration Rights Agreement. Buyer is
able to bear the economic risk, and will be supplied with the funds for, the
acquisition of Company Preferred Stock pursuant hereto and can afford to sustain
a total loss on such investment, and has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of the proposed investment, and therefore has the capacity to protect its
own interests in connection with the acquisition of Company Preferred Stock
pursuant hereto.
Section 4.5 "Brokers or Finders." Except for the fees of Triton Pacific,
L.L.C. (which the Company has represented to Buyer has been retained by the
Company as its sole broker and the fees of which will be paid by the Company at
the Initial Closing), no agent, broker, investment banker or other firm or
person, including any of the foregoing that is an Affiliate of Buyer with which
the Buyer dealt, is or will be entitled to any broker's or finder's fee or any
other commission or similar fee from Buyer in connection with this Agreement or
any of the transactions contemplated hereby for which the Company will be
responsible.
Section 4.6 "REIT Qualification Matters." No person which would be treated as
an "individual" for purposes of Section 542(a)(2) of the Code (as modified by
Section 856(h) of the Code) owns or would be considered to own (taking into
account the ownership attribution rules under Section 544 of the Code, as
modified by Section 856(h) of the Code) in excess of 9.8% of the value of the
outstanding equity interest in Buyer.
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Section 4.7 "Investment Company Matters." Buyer is, and after giving effect
to the purchase of Company Preferred Stock contemplated hereby, will not be, an
"investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
ARTICLE 5
Representations and Covenants Relating to Closings
Section 5.1 "Taking of Necessary Action." Each of Buyer and the Company
agrees to use its commercially reasonable best efforts promptly to take, or
cause to be taken, all action and promptly to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Registration Rights Agreement, subject to the terms and conditions
hereof and thereof.
Section 5.2 "Company Preferred Stock, Certificate of Designation; By-laws."
At or before the Initial Closing, the Company shall cause to be duly executed
and filed with the Office of the Secretary of the State of Delaware, the
Certificate of Designation in the form attached as Exhibit A.
Section 5.3 "Public Announcements; Confidentiality." (a) Subject to each
party's disclosure obligations imposed by law and any stock exchange or similar
rules and the confidentiality provisions contained in Section 5.5(b), the Buyer
shall have the right to review the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
and the Registration Rights Agreement, and any of the transactions contemplated
hereby or thereby. Buyer shall also have the right to review and, before filing
or other public dissemination, approve (which approval will not be unreasonably
withheld or delayed) any statements made or information provided with respect to
it, the Advancing Party or to the transactions contemplated by this Agreement,
including, without limitation, such statements intended to be included in any
future Regulatory Filing prepared by or on behalf of the Company.
(b) Buyer agrees that all information provided to Buyer or any of its
representatives pursuant to this Agreement shall be kept confidential, and Buyer
shall not disclose such information to any persons other than the directors,
officers, employees, financial advisors, legal advisors, accountants,
consultants and affiliates of Buyer who reasonably need to have access to the
confidential information and who are advised of the confidential nature of such
information; provided, however, the foregoing obligation of Buyer shall not (i)
relate to any information that (1) is or becomes generally available other than
as a result of unauthorized disclosure by Buyer or by persons to whom Buyer has
made such information available, or (2) is or becomes available to Buyer on a
non-confidential basis from a third party that is not bound by any other
confidentiality agreement with the Company, or (ii) prohibit disclosure of any
information if required by law, rule, regulation, court order or other legal or
governmental process.
(c) The Company agrees that all information provided to the Company or any of
its representatives pursuant to this Agreement shall be kept confidential, and
the Company shall not disclose such information to any persons other than the
directors, officers, employees, financial advisors, legal advisors, accountants,
consultants and affiliates of the Company who reasonably need to have access to
the confidential information and who are advised of the confidential nature of
such information; provided, however, the foregoing obligation of the Company
shall not (i) relate to any information that (1) is or becomes generally
available other than as a result of unauthorized disclosure by the Company or by
persons to whom the Company has made such information available, or (2) is or
becomes available to the Company on a non-confidential basis from a third party
that is not bound by any other confidentiality agreement with the Company, or
(ii) prohibit disclosure of any information if required by law, rule,
regulation, court order or other legal or governmental process.
Section 5.4 "Conduct of the Business." Except for transactions contemplated
hereby, during the period from the date hereof to the date of the Initial
Closing, the Company will, except as otherwise consented to or
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approved by Buyer in writing or as permitted or required hereby, conduct the
business of the Company and its Subsidiaries and engage in transactions only in
the ordinary course, and during the period from the date hereof to the date on
which there shall be outstanding no shares of Company Preferred Stock, the
Company will not, except as otherwise consented to or approved by Buyer in
writing or as permitted or required hereby, (i) change or fail to change any
provision of the Company Charter or the Amended Company By-laws in a manner that
would be adverse to Buyer, or (ii) conduct the business of the Company and its
Subsidiaries and engage in transactions except in the ordinary course, except as
is permitted by the Certificate of Designation.
Section 5.5 "No Solicitation of Transactions." Until the Remaining Equity
Commitment shall be zero, the Company and the Operating Partnership will not
issue Common Stock or securities of either the Company or the Operating
Partnership in any transaction other than a publicly underwritten, widely
distributed offering of Company Common Stock or the acquisition by the Operating
Partnership of interests in real estate in consideration for Operating
Partnership Units, except for the exercise of outstanding Warrants or stock
options, or the conversion of outstanding Operating Partnership Units.
Section 5.6 "Information and Access." From the date hereof to the date on
which there shall remain outstanding no Company Preferred Stock, the Company and
its Subsidiaries shall afford to Buyer and Buyer's accountants, counsel and
other representatives full and reasonable access during normal business hours
(and at such other times as the parties may mutually agree) to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Buyer (1) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of the Securities
Laws, and (2) all other information concerning their businesses, personnel and
the Company Properties as Buyer may reasonably request. Buyer and its
accountants, counsel and other representatives shall, in the exercise of the
rights described in this Section, not unduly interfere with the operation of the
businesses of the Company or its Subsidiaries.
Section 5.7 "Notification of Certain Matters." Until all of the Company
Preferred Stock has been issued or if all of the Company Preferred stock has not
been issued until March 19, 1999, each of Buyer and the Company shall use its
good faith efforts to notify the other party in writing of its discovery of any
matter that would render any of such party's or the other party's
representations and warranties contained herein untrue or incorrect in any
material respect, but the failure of either party to so notify the other party
shall not be deemed a breach of this Agreement.
ARTICLE 6
Certain Additional Covenants
Section 6.1 "Resale." Buyer acknowledges and agrees that the Company
Preferred Stock that Buyer will acquire in any Stock Purchase will not, as of
the relevant Closing thereof, be registered under the Securities Act or the
securities laws of any state and that it may be sold or otherwise disposed of
only in one or more transactions registered under the Securities Act and, where
applicable, such state securities laws or as to which an exemption from the
registration requirements of the Securities Act and, where applicable, such
state securities laws is available.
Section 6.2 "Use of Funds." The Company shall use the funds received from
Stock Purchases for the repayment of debt (of either the Company or the
Operating Partnership) or for the acquisition, rehabilitation, development or
refinancing by the Company or the Subsidiaries of properties, and for the
payment to Triton Pacific, L.L.C., referred to in the parenthetical in Section
4.5 hereof.
Section 6.3 "REIT Status." From and after the date hereof, the Company will
elect to be taxed as a REIT in its federal income tax returns, will comply with
all applicable laws, rules and regulations of the Code relating to a REIT, and
will not take any action or fail to take any action which would reasonably be
expected to,
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alone or in conjunction with any other factors, result in the loss of its status
as a REIT for federal income tax purposes or the failure of the representations
in Section 3.8 hereof to be true and correct.
Section 6.4 "Payments." The Company acknowledges and agrees to pay or
reimburse from time to time upon the direction of Buyer, at and after the
Execution Closing, reasonable third-party transaction costs to Buyer, up to an
aggregate amount equal to $300,000, incurred or paid by Buyer and the Advancing
Party in completing this transaction (as invoiced by reasonably detailed
statements or invoices of the nature attached as Schedule 6.4, with appropriate
insertions), as well as with respect to expenses of Buyer and the Advancing
Party incurred or paid in connection with any amendment or modification of, or
waiver of, the transaction documents. It is understood that Buyer will share the
results of its due diligence review, and that of its counsel, with Lehman
Brothers, Inc., as representative of the several underwriters, so as to enable
Lehman Brothers, Inc., to reduce any out-of-pocket expenses it might incur
associated with an anticipated subsequent public offering of Company Common
Stock.
The Company shall have paid Buyer's expense in an amount equal to $100,000
which shall have been funded into Buyer's bank account as contemplated by the
letter of intent dated as of August 22, 1997. The Company acknowledges and
agrees that, at the Execution Closing, the $100,000 so paid to Buyer shall be
credited towards transaction costs incurred by the Buyer and payable by the
Company. At the Execution Closing, the Company acknowledges and agrees to pay
the amount of $750,000 to Buyer, as a holdback allowance, which Buyer may, at
its option, deduct from the amount of Purchase Price which would otherwise be
payable at the Initial Closing.
Notwithstanding any termination of this Agreement by Buyer pursuant to
Section 9.1(b) or 9.1(d), the Company acknowledges and agrees to make the
payments as set forth above.
Section 6.5 "Preemptive Rights." (a) Buyer shall have the rights set forth in
this Section 6.5 as the holder of record and beneficially of shares of Company
Stock. The rights set forth herein are in favor of Buyer and its successors and
assigns, provided that any exercise procedures to be accomplished hereunder
shall be performed by Buyer or its nominee and no other person may accomplish
such procedures or seek to exercise the preemptive right set forth in this
Section 6.5. Absent an express assignment of the rights of Buyer under this
Section 6.5, no transfer by Buyer of shares of Company Preferred Stock or
Company Common Stock shall affect the rights of Buyer hereunder.
(b) Buyer shall have, at any time and from time to time, the preemptive right
to purchase, in the case of the proposed issuance by the Company of, or the
proposed granting by the Company of shares of, any class of Company Stock, or
any rights to subscribe for or to purchase, or any options for the purchase of,
Company Stock or any stock or securities convertible into or exchangeable for
Company Stock (including, without limitation, interests in the Operating
Partnership) (such rights or options being hereinafter referred to as "Options"
and such convertible or exchangeable stock or securities being hereinafter
referred to as "convertible securities"). Except upon the occurrence on or
before November 31, 1997, of an underwritten widely distributed offering of
Company Common Stock at a price per share to the public of not less than
$11.3125, with not more than $150,000,000 in gross offering proceeds, on each
occasion that the Company proposes to issue Company Stock, options, warrants or
convertible securities, or any of the foregoing, the Company shall give to Buyer
prior written notice (the "Company Notice") of its intention, by first class
mail, postage prepaid, addressed at its last address as shown by the records of
the Company describing the same, the price and the specific terms (or in the
context of an offering of Company Stock, convertible securities, warrants or
options to the public, a range of price and terms) upon which the Company
proposes to issue the same. Buyer shall have 15 Business Days from the date of
the receipt by Buyer of the Company Notice to deliver a notice (the "Rights
Exercise Notice") notifying the Company of Buyer's intention to purchase all or
a part of its pro rata share of shares or other securities represented by
Company Stock, convertible securities, warrants or options, or any of the
foregoing, in accordance herewith, for the price and upon the terms specified by
the Company Notice, such pro rata share to be 19.9% (or, in the event of the
widely distributed public offering on the schedule, at the price and in the
amount of gross offering proceeds noted above, such lesser percentage as Buyer
shall hold immediately after such offering assuming no purchase by Buyer in such
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offering or hereunder in connection with such offering) reduced after completion
of the public offering of Company Common Stock by Lehman Bros., Inc. (or such
lesser percentage as may reflect the beneficial ownership of Buyer of such
shares or securities or Company Stock, options, warrants or convertible
securities, warrants or any of the foregoing, but assuming until March 19, 1999,
that Buyer has purchased as at the Execution Closing all 2,737,000 shares of
Company Preferred Stock the sale and purchase of which is the object of this
Agreement, and assuming thereafter that Buyer is the holder of each and every
outstanding share of Company Preferred Stock), and at a price or prices no less
favorable to Buyer than the price or prices at which such Company Stock,
convertible securities, options or warrants are proposed to be offered for sale
to others, less, in the event of any sale other than a public offering, the per
unit amount of any placement fees or commissions, and provided, however, that
the purchase of such Company Stock, convertible securities, warrants or options
shall be consummated prior to the later of (i) 30 days after the date of the
Rights Exercise Notice and (ii) the date that the Company consummates the
issuance of the Company Stock, convertible securities, warrants or options
described in the Company Notice. If, in connection with any proposed issue of
Company Stock, convertible securities, warrants or options, the Buyer fails to
exercise in full its preemptive right as set forth in this Section 6.5, then
subject to the next following sentence, the Company may sell the unsold Company
Stock, convertible securities, warrants or options at any time within 180 days
(60 days in the case of a public offering) thereafter at a price and upon terms
no more favorable to the purchasers thereof than specified in the Company
Notice; provided, that the Company shall not sell or grant, or permit conversion
under, any Company Stock, convertible securities, warrants or Options, or any of
the foregoing, after such 180-day period (or 60-day period in the case of a
public offering) without renewed compliance with this Section 6.5; provided,
further, that in the case of a widely distributed underwritten public offering
of Company Stock, convertible securities, warrants or options, if in the good
faith opinion of the Company and the underwriter, such renewed compliance by the
Company with the procedural requirements hereunder (i.e., timing of notices,
etc.) would otherwise materially impede the consummation of such public
offering, the parties agree to take such further action as may be reasonably
necessary to effectuate such offering while preserving Buyer's substantive
preemptive right hereunder.
(c) The provisions of this Section 6.5 shall not apply to any shares of any
class of the Company Stock or convertible securities, warrants, options, or any
of them, (i) issuable upon redemption of Operating Partnership Units, the
conversion of any Company Preferred Stock, or upon exercise of the Warrants;
(ii) issuable upon conversion of convertible securities or the exercise of
options or warrants, or both, if Buyer was offered the opportunity to purchase
such shares or securities, or convertible securities, warrants or options, or
both, pursuant to this Section 6.5, and declined the same, or as to which Buyer
was not given such opportunity by reason of the application of this Section 6.5;
(iii) issuable in connection with stock splits, stock dividends or
recapitalizations as to the effects of which adjustment will be made as provided
elsewhere herein, or in the Certificate of Designation pertaining to the Company
Preferred Stock; (iv) issuable to employees and prospective employees, directors
and prospective directors, pursuant to any plan or pattern of employee or
director equity participation set forth in Schedule 3.3(a); and (v) issuable
upon acquisition of assets by the Operating Partnership in consideration for the
issuance of Operating Partnership Units.
(d) Notwithstanding the foregoing, if and to the extent that Buyer is
prevented or prohibited from the exercise in full or in part of its preemptive
right to purchase any Company Stock, convertible securities, warrants or
options, due to restrictions on the ownership by Buyer (or any group of holders
with which such Buyer may be affiliated or may be deemed to be affiliated) of
any thereof, whether under applicable Delaware law, or the Amended Company
By-laws, or by reason of restrictions applicable for purposes of the Company's
continued qualification as a REIT for purposes of the Code (the "Exercise
Restriction"), such number of Company Stock, convertible securities, warrants or
options required to be purchased pursuant to such preemptive right shall
automatically be reduced to such amount as to not exceed the Exercise
Restriction, and Buyer from time to time thereafter may exercise such right up
to an aggregate number of Company Stock, convertible securities, warrants or
options as is equal to such reduction, subject always to the restrictions as
aforesaid.
(e) The rights of Buyer set forth in this Section 6.5 shall commence on the
date hereof and shall expire on the fifth anniversary of the date hereof, except
as to purchases as to which Buyer may make on a deferred basis under Section
6.5(d) which shall continue without time restriction.
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Section 6.6 "Board of Directors". On or before October 31, 1997, Buyer or any
Affiliate of Buyer designated by Buyer and the Company will have consulted
concerning the election of an additional individual to serve on the Board of
Directors, the Board of Directors will have considered the views and advice of
Buyer or any Affiliate of Buyer designated by Buyer with respect to the
background and experience it is desirable that such an individual possess and as
to specific individuals to be considered for such a position, and an additional
director to the Board of Directors, subject to this Section 6.6, will have been
elected and will have agreed so to serve. The consent of Buyer or any Affiliate
of Buyer designated by Buyer as to any such election or appointment will not be
sought or required. However, except as provided in the Certificate of
Designation, in no event will any individual who is an employee or independent
contractor of, or employee, independent contractor, consultant or member of a
firm which on an ongoing basis is rendering professional services to, the
Company, The Berkshire Group, or any Affiliate of The Berkshire Group, or of the
Company, be considered by the Company or elected or appointed as such an
additional director or to fill any vacancy on the Board of Directors which might
otherwise occur.
Section 6.7 "Transactions with Affiliates." Except as to matters as set forth
in Schedule 3.9(f) as in effect on the date hereof (but not including any
renewal, extension, amendment, alteration or other continuation of the same
except a renewal of any thereof year by year on the same terms), Buyer shall
have the right, and the Company, the Operating Partnership and the Subsidiaries
shall be bound by such right, to approve or disapprove in its sole and absolute
discretion any proposed transaction involving Affiliates of the Company,
including but not limited to The Berkshire Group, and Affiliates of The
Berkshire Group, Laurence Gerber, Douglas Krupp, George Krupp, David Marshall,
and any Affiliate of a predecessor organization of The Berkshire Group, or any
of such Persons, but excluding from the prohibition in this Section 6.7
transactions involving Partnership Affiliates. Without having previously secured
in writing such approval of Buyer as to any such transaction, the Company, the
Operating Partnership and the Subsidiaries, or any of such Persons, will not
incur any obligation or liability as to any such transaction, nor make any
announcement thereto.
Section 6.8 "Company Stock Authorized, Issued and Outstanding." As of the
date seven days after the Initial Closing, Company shall inform Buyer of the
number of shares of Company Stock authorized, issued and outstanding, as of the
date thereof.
ARTICLE 7
Conditions to Closings
Section 7.1 "Conditions of Purchase at Initial Closing." The obligations of
Buyer to purchase and pay for the Purchased Shares at the Initial Closing are
subject to satisfaction or waiver of each of the following conditions precedent:
(a) "Representations and Warranties; Covenants." The representations and
warranties of the Company contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the date of the Initial Closing with the same effect as
though such representations and warranties had been made on and as of the date
of the Initial Closing (except for representations and warranties that speak as
of a specific date or time other than the date of the Initial Closing (which
need only be true and correct in all respects as of such date or time)). The
covenants and agreements of the Company to be performed on or before the date of
the Initial Closing in accordance with this Agreement shall have been duly
performed in all respects (except for the Company's obligation to deliver the
relevant shares of Company Preferred Stock at the Initial Closing). The Company
shall have delivered to Buyer at the Initial Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to Buyer dated
the date of the Initial Closing to such effect.
(b) "Company Preferred Stock; Certificate of Designation." The Certificate of
Designation shall have been duly filed with the office of the Secretary of State
of Delaware, any other Government Authority or NYSE and shall be in full force
and effect.
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(c) "Company By-laws; Modification of Ownership Limit; Rights of Holder of
Company Preferred Stock; Modification of Partnership Agreement." The amendment
to the Company By-laws in the form attached as Exhibit C (subject to
modification satisfactory to both the Company and Buyer prior to the Initial
Closing) (the "Amended Company By-laws") shall have been approved by the Board
of Directors, all as required or permitted by and in accordance with the Company
Charter, duly filed if any filing thereof shall be required by any Government
Authority or NYSE, and shall be in full force and effect. The Board of Directors
resolutions pertaining to this Agreement, and the procedures, findings and
transactions contemplated hereby, shall have been presented at a meeting at
which a quorum of the Board of Directors was present and acting throughout,
shall have been duly approved and adopted by the Board of Directors, the
Secretary shall have been instructed to place the record of such action of the
Board of Directors in the records of the meetings of the Board of Directors, and
the Secretary shall have placed the record of such action in such records and
shall be in form and substance satisfactory to Buyer. The Partnership Agreement
shall have been modified, if necessary, (i) so as to create a primary
distribution to the Company in order to assure that the Company will receive, on
a priority basis, before the Operating Partnership makes other distributions,
amounts sufficient to pay all amounts due from time to time upon the Company
Preferred Stock, and (ii) in all other respects necessary to permit ERISA
counsel to the Buyer to confirm to the Buyer that its investment in the Company
Preferred Stock is in compliance with the rules and regulations promulgated
under and the provisions of ERISA.
(d) "HSR Act." Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or the Company and
Buyer shall have mutually concluded that no filing under the HSR Act is required
with respect to the transactions contemplated hereby and counsel to the Company
shall have rendered to both its opinion to such effect.
(e) "Consents." The Company shall have obtained the consents set forth in
Schedule 3.4(f).
(f) "Accountants." The Company shall have caused to be supplied to Buyer a
letter, satisfactory to Buyer in scope, form and substance, as to financial
statement matters referenced in Section 3.5(a) of this Agreement.
(g) "Disclosure Schedules." All schedules to this Agreement shall have been
amended or modified, if necessary, to reflect completion of Buyer's review
thereof and shall otherwise be satisfactory in scope and content to the Buyer in
all respects.
(h) "Registration Rights Agreement." The parties shall have executed and
delivered the Registration Rights Agreement.
Section 7.2 "Conditions of Purchase at All Closings." The obligations of
Buyer to purchase and pay for the Purchased Shares at each Closing (including
the Initial Closing) are subject to satisfaction or waiver of each of the
following conditions precedent:
(a) "Representations and Warranties; Covenants." The representations and
warranties of the Company contained herein shall have been true and correct in
all respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the relevant Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time other than such Closing Date (which need only be true and correct in all
respects as of such date or time)). The covenants and agreements of the Company
to be performed on or before the relevant Closing Date in accordance with this
Agreement shall have been duly performed in all respects except for the
Company's obligation to deliver the relevant shares of Company Preferred Stock
at the relevant Closing. The terms and conditions of the Certificate of
Designation shall have been observed in all respects by the Company on and as of
the relevant Closing Date. As to each Closing other than the Initial Closing, no
condition to the obligations
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of Buyer to purchase and pay for the Purchased Shares at the Initial Closing,
and that was not duly waived by Buyer, shall have failed to be satisfied as of
the Initial Closing. The Company shall have delivered to Buyer at the relevant
Closing a certificate of an appropriate officer in form and substance reasonably
satisfactory to Buyer dated the relevant Closing Date to such effect.
(b) "No Injunction." There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions which would reasonably be expected to have a material
adverse effect on the ability of the Company to consummate the transactions
contemplated hereby or to issue the Purchased Shares.
(c) "Proceedings." All corporate and other proceedings to be taken by the
Company in connection with the transactions contemplated hereby and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Buyer and Buyer shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(d) "REIT Status." The Company shall have elected to be taxed as a REIT in
its most recent federal income tax return, and shall be in compliance with all
applicable laws, rules and regulations, including the Code, necessary to permit
it to be taxed as a REIT. The Company shall not have taken any action or have
failed to take any action which would reasonably be expected to, alone or in
conjunction with any other factors, result in the loss of its status as a REIT
for federal income tax purposes.
(e) "Opinion of Counsel." Buyer shall have received an opinion from Peabody &
Brown, counsel to the Company, in form and substance reasonably satisfactory to
Buyer.
(f) "Certain Conditions Still True." The conditions precedent set forth in
Section 7.1 shall continue to be satisfied or waived in all respects on and as
of each relevant Closing Date.
Section 7.3 "Conditions of Sale." The obligation of the Company to issue and
sell any Purchased Shares at any Closing (including the Initial Closing) is
subject to satisfaction or waiver of each of the following conditions precedent:
(a) "Representations and Warranties, Covenants." The representations and
warranties of Buyer contained herein shall have been true and correct in all
respects on and as of the date hereof, and shall be true and correct in all
respects on and as of the relevant Closing Date with the same effect as though
such representations and warranties had been made on and as of the Closing Date
(except for representations and warranties that speak as of a specific date or
time other than such Closing Date (which need only be true and correct in all
respects as of such date or time)). The covenants and agreements of Buyer to be
performed on or before the relevant Closing Date in accordance with this
Agreement shall have been duly performed in all respects (except for Buyer's
obligation to pay the relevant Purchase Price at the relevant Closing). Buyer
shall have delivered to the Company at the relevant Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to the Company
dated the relevant Closing Date to such effect.
(b) "HSR Act." Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated, and no action shall have been instituted by the United States
Department of Justice or the United States Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby,
which action shall not have been withdrawn or terminated, or the Company and
Buyer shall have mutually concluded that no filing under the HSR Act is required
with respect to the transactions contemplated hereby.
(c) "No Injunction." There shall not be in effect any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits consummation of the transactions contemplated hereby and there shall
be no pending Actions which would reasonably be expected to have a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or to acquire the Purchased Shares.
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(d) "Consents." The Company shall have obtained the consents set forth in
Schedule 3.4(d).
(e) "Proceedings." All corporate and other proceedings to be taken by Buyer
in connection with the transactions contemplated hereby and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Company and the Company shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
(f) "Opinion of Counsel." The Company shall have received an opinion from
Buyer Counsel in form and substance reasonably satisfactory to the Company.
ARTICLE 8
Survival; Indemnification
Section 8.1 "Survival." All representations, warranties and (except as
provided by the last sentence of this Section 8.1) covenants and agreements of
the parties contained herein, including indemnity or indemnification agreements
contained herein, or in any Schedule or Exhibit hereto, or any certificate,
document or other instrument delivered in connection herewith shall survive the
Initial Closing until the third anniversary of the final Subsequent Purchase. No
Action or proceeding may be brought with respect to any of the representations
and warranties, or any of the covenants or agreements which survive until the
third anniversary of the final Subsequent Purchase, unless written notice
thereof, setting forth in reasonable detail the claimed misrepresentation or
breach of warranty or breach of covenant or agreement, shall have been delivered
to the party alleged to have breached such representation or warranty or such
covenant or agreement prior to the first anniversary of the Initial Closing.
Those covenants or agreements that contemplate or may involve actions to be
taken or obligations in effect after the Initial Closing shall survive in
accordance with their terms, and the indemnification described in Section 6.4
shall survive until the running of the applicable statutes of limitations.
Section 8.2 "Indemnification by Buyer or the Company." (a) Subject to Section
8.1, from and after any Closing Date, Buyer shall indemnify and hold harmless
the Company, its successors and assigns, from and against any and all damages,
claims, losses, expenses, costs, obligations, and liabilities, including
liabilities for all reasonable attorneys' fees and expenses (including attorney
and expert fees and expenses incurred to enforce the terms of this Agreement)
and Liabilities (collectively, "Loss and Expenses") suffered, directly or
indirectly, by the Company by reason of, or arising out of, (i) any breach as of
the date made or deemed made or required to be true of any representation or
warranty made by Buyer in or pursuant to this Agreement, or (ii) any failure by
Buyer to perform or fulfill any of its covenants or agreements set forth herein.
Notwithstanding any other provision of this Agreement to the contrary, in no
event shall Loss and Expenses include a party's incidental or consequential
damages.
(b) Subject to Section 8.1, from and after any Closing Date, the Company
shall indemnify and hold harmless Buyer, its successors and assigns, from and
against any and all Loss and Expenses, suffered, directly or indirectly, by
Buyer by reason of, or arising out of, (i) any breach as of the date made or
deemed made or required to be true of any representation or warranty made by the
Company in or pursuant to this Agreement and any statements made in any
certificate delivered pursuant to this Agreement, or (ii) any failure by the
Company to perform or fulfill any of its covenants or agreements set forth
herein. Notwithstanding any other provision of this Agreement to the contrary,
in no event shall Loss and Expenses include a party's incidental or
consequential damages.
Loss and Expenses of Buyer as to which Buyer shall be indemnified by the
Company in accordance with this Section 8.2(b) shall include amounts measured as
provided in the next two following sentences. Any breach or inaccuracy of any
sort referred to in clause (i) of the first sentence of this Section 8.2(b) (any
such, an "Inaccuracy") shall create Loss and Expenses of Buyer in an amount
equal to the product of the Buyer Portion (as defined below) multiplied by the
amount or amounts of (i) any Loss or Expenses of the Company or any Subsidiary
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and (ii) any failure to receive, loss of or reduction in revenue of the Company
or any Subsidiary, in either case misstated in or omitted from the Agreement or
any certificate in an Inaccuracy. In all cases, Loss and Expenses of Buyer shall
be adjusted upwards to reflect payment, when made by the Company to Buyer, of
indemnity pursuant to this Section 8.2(b), such that Buyer receives indemnity
from the Company with respect to the Liability represented by any payment to
Buyer pursuant to this Section 8.2(b).
As used in this Section 8.2(b), "Buyer Portion" shall mean a fraction (i) the
numerator of which is the sum of (A) the number of shares of Company Common
Stock held by Buyer plus (B) the number of shares of Company Common Stock which
Buyer would at any time be entitled to receive on conversion of Company
Preferred Stock purchased by Buyer (at the then applicable Conversion Price, and
otherwise as set forth in and established pursuant to Article FIRST, Section 5
of the Certificate of Designation, and assuming until March 19, 1999, that Buyer
has purchased at the Execution Closing all 2,737,000 shares of Company Preferred
Stock the sale and purchase of which is the object of this Agreement, and
assuming thereafter that Buyer is the holder of each and every outstanding share
of Company Preferred Stock), and (ii) the denominator of which is a number equal
to (A) the number of all shares of Company Common Stock then outstanding or
which would be outstanding after giving effect to rights to receive shares of
Company Common Stock pursuant to the exercise of conversion privileges under
then outstanding, fully paid and non-assessable securities of the Company,
including the Company Preferred Stock, minus (B) the number of shares
established in clause (i) as the numerator of the fraction.
(c) Notwithstanding the foregoing, (i) neither Buyer nor the Company shall be
responsible for any Loss and Expenses as provided by paragraphs (a) and (b),
respectively, of this Section 8.2, until the cumulative aggregate amount of such
Loss and Expenses suffered by Buyer or the Company, as the case may be, exceeds
$400,000, in which case Buyer or the Company, as the case may be, shall then be
liable for such Loss and Expenses exceeding such amount, and (ii) the cumulative
aggregate indemnity obligation of each of Buyer and the Company under this
Section 8.2 shall in no event exceed the Total Equity Commitment. Except with
respect to third-party claims being defended in good faith or claims for
indemnification with respect to which there exists a good faith dispute, the
indemnifying party shall satisfy its obligations hereunder within 30 days of
receipt of a notice of claim under this Article 8.
Section 8.3 "Third-Party Claims." If a claim by a third party is made against
an Indemnified Party and if such Indemnified Party intends to seek indemnity
with respect thereto under this Article, such Indemnified Party shall promptly
notify the indemnifying party in writing of such claims setting forth such
claims in reasonable detail. The indemnifying party shall have 20 days after
receipt of such notice to undertake, through counsel of its own choosing and at
its own expense, the settlement or defense thereof, and the Indemnified Party
shall cooperate with it in connection therewith, provided, however, that the
Indemnified Party may participate in such settlement or defense through counsel
chosen by such Indemnified Party, provided that the fees and expenses of such
counsel shall be borne by such Indemnified Party. The Indemnified Party shall
not pay or settle any claim which the indemnifying party is contesting.
Notwithstanding the foregoing, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
to indemnity therefor by the indemnifying party. If the indemnifying party does
not notify the Indemnified Party within 20 days after the receipt of the
Indemnified Party's notice of a claim of indemnity hereunder that it elects to
undertake the defense thereof, the Indemnified Party shall have the right to
contest, settle or compromise the claim but shall not thereby waive any right to
indemnity therefor pursuant to this Agreement.
ARTICLE 9
Termination
Section 9.1 "Termination." This Agreement may be terminated at any time prior
to the Initial Closing by:
(a) the mutual consent of the Company and Buyer;
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(b) Buyer (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by the Company that is material
in the context of the transactions contemplated hereby of any representation,
warranty, covenant or agreement by the Company contained herein which has not
been, or cannot be, cured within 30 Business Days after written notice of such
breach is given to the Company;
(c) the Company (if it is not in breach of any of its material obligations
hereunder) in the event of a breach or failure by Buyer that is material in the
context of the transactions contemplated hereby of any representation, warranty,
covenant or agreement by Buyer contained herein which has not been, or cannot
be, cured within 30 Business Days after written notice of such breach is given
to Buyer; or
(d) Buyer if the Initial Closing shall not have occurred on or prior to
December 19, 1997, unless the failure of such occurrence shall be due to the
failure of Buyer to perform or observe any material covenant or agreement set
forth herein required to be performed or observed by Buyer on or before the date
of the Initial Closing.
Section 9.2 "Procedure and Effect of Termination." In the event of
termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto, and this Agreement shall thereupon
terminate and become void and have no effect, and the transactions contemplated
hereby shall be abandoned without further action by the parties hereto, except
that the provisions of Sections 5.4 (Public Announcements), 6.4 (Payments), 9.3
(Expenses), 10.2 (Governing Law), and 10.4 (Notices) shall survive the
termination of this Agreement; provided, however, that such termination shall
not relieve any party hereto of any liability for any breach of this Agreement.
Section 9.3 "Expenses." Except as set forth in this Agreement, whether or not
any Stock Purchase is consummated, all legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.
ARTICLE 10
Miscellaneous
Section 10.1 "Counterparts." This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. Copies of executed counterparts
transmitted by telecopy, telefax or other electronic transmission service shall
be considered original executed counterparts for purposes of this Section,
provided receipt of copies of such counterparts is confirmed.
Section 10.2 "Governing Law." THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 10.3 "Entire Agreement." This Agreement (including agreements
incorporated herein) and the Schedules and Exhibits hereto contain the entire
agreement between the parties with respect to the subject matter hereof and
there are no agreements, understandings, representations or warranties between
the parties other than those set forth or referred to herein. This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder.
Section 10.4 "Notices." All notices and other communications hereunder shall
be sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
shall be addressed to:
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Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attention: David Marshall
Marianne Pritchard
Telecopy Number: 617-556-8171
with a copy to:
Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attention: Scott D. Spelfogel, Esq.
Telecopy Number: 617-556-8171
and a copy to:
Peabody & Brown
101 Federal Street
Boston, MA
Attention: Alexander J. Jordan, Jr.
Telecopy Number: 617-345-1300
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
Westbrook Partners, L.L.C.
599 Lexington Avenue
New York, NY 10022
Attention: Michael Barr
Telecopy Number: 212-849-8801
with a copy to:
Westbrook Partners, L.L.C.
13155 Noel Road, LB 54, Suite 2300
Dallas, TX 75240
Attention: Patrick Fox
Telecopy Number: 972-934-8333
and a copy to:
Rogers & Wells
200 Park Avenue
New York, NY 10166
Attention: Allen Curtis Greer, II
Telecopy Number: 212-878-8375
Section 10.5 "Successors and Assigns." This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors. Except as specifically provided hereby, Buyer shall not be permitted
to assign any of its rights hereunder to any third party, other than to one or
more Affiliates of Buyer or the Advancing Party of which Buyer and the Advancing
Party collectively, directly or indirectly, own a majority of the voting power,
provided that such Affiliates agree to be bound hereby, and provided that any
bona fide
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financial institution to which any Buyer, or any permitted transferee has
transferred (including upon foreclosure of a pledge) shares of Company Stock for
the purpose of securing bona fide indebtedness of any Buyer and which has agreed
to be bound by this Agreement shall also be entitled to enforce the rights of
Buyer hereunder.
Section 10.6 "Headings." The Section, Article and other headings contained in
this Agreement are inserted for convenience of reference only and will not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 10.7 "Amendments and Waivers." This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Either
party hereto may, only by an instrument in writing, waive compliance by the
other party hereto with any term or provision hereof on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision hereof shall not be construed as a waiver of
any subsequent breach.
Section 10.8 "Interpretation; Absence of Presumption." (a) For the purposes
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits hereto) and
not to any particular provision of this Agreement, and Article, Section,
paragraph, Exhibit and Schedule references are to the Articles, Sections,
paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified,
(iii) the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (iv) the word "or" shall not
be exclusive, and (v) provisions shall apply, when appropriate, to successive
events and transactions.
(b) This Agreement shall be construed without regard to any presumption or
rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.
Section 10.9 "Severability." Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
The obligations and liabilities of Buyer and the Advancing Party under or in
connection with this Agreement are several.
Section 10.10 "Further Assurances." The Company and Buyer agree that, from
time to time, whether before, at or after any Closing Date, each of them will
execute and deliver such further instruments of conveyance and transfer and take
such other action as may be necessary to carry out the purposes and intents
hereof.
Section 10.11 "Specific Performance." Buyer and the Company each acknowledge
that, in view of the uniqueness of the parties hereto, the parties hereto would
not have an adequate remedy at law for money damages in the event that this
Agreement were not performed in accordance with its terms, and therefore agree
that the parties hereto shall be entitled to specific enforcement of the terms
hereof in addition to any other remedy to which the parties hereto may be
entitled at law or in equity.
Section 10.12 "Schedules." Any matter set forth on any Schedule shall be
deemed to be referred to on all other Schedules to which such matter logically
relates and where such reference would be appropriate and can reasonably be
inferred from the matters disclosed on the first Schedule as if set forth on
such other Schedules.
36
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties hereto as of the day first above written.
BERKSHIRE REALTY COMPANY, INC.
By: _______________________________________
President
WESTBROOK BERKSHIRE HOLDINGS, L.L.C.
By: _______________________________________
Managing Member
Initial Closing Number of Shares of Company
Preferred Stock: 2,737,000
________________ Berkshire Realty Company, Inc.
(initials)
________________ Westbrook Berkshire Holdings, L.L.C.
(initials)
37
<PAGE>
Advancing Party
Westbrook Real Estate Fund II, L.P. hereby joins in the foregoing Agreement
for purposes of Section 2.8 thereof.
WESTBROOK REAL ESTATE FUND II, L.P.
General Partner
By: Westbrook Real Estate Partners Management II, L.L.C.,
General Partner
By: Westbrook Real Estate Partners, L.L.C., Managing
Member
By: ______________________________________________
Jeffrey M. Kaplan, Managing Member
38
EXCHANGE AND AMENDMENT AGREEMENT (the "Agreement") dated as of
September 30, 1997, by and among Berkshire Realty Company, Inc., a Delaware
corporation (the "Company"), Westbrook Berkshire Holdings, L.L.C., a Delaware
limited liability company ("Holdings"), and Morgan Stanley Asset Management,
Inc., as attorney-in-fact for certain clients ("MSAM").
WHEREAS, the Company, Holdings and the Advancing Party have entered
into a Stock Purchase Agreement dated as of September 19, 1997 (the "Stock
Purchase Agreement"), pursuant to which Holdings agreed to purchase 2,737,000
shares, and has purchased 2,337,000 shares, of Series A Convertible Preferred
Stock, par value $.01 per share (the "Series A Convertible Preferred Stock"), of
the Company on September 25, 1997 (the "Closing Date"), and the Company and
Holdings have entered into a Registration Rights Agreement dated as of September
25, 1997 (the "Registration Rights Agreement"), which provides for the
registration rights set forth therein:
WHEREAS, Holdings caused to be issued an aggregate of 400,000 shares of
Series A Convertible Preferred Stock to certain clients (the "Transferees") of
MSAM who were identified in a letter agreement dated September 25, 1997, among
the Company, Holdings and MSAM;
WHEREAS, on the Closing Date, the Company filed a Certificate of
Designation (the "Series A Certificate of Designation") designating 2,737,000
shares of preferred stock of the Company as 2,737,000 shares of Series A
Convertible Preferred Stock;
WHEREAS, on October , 1997, the Company filed a Certificate of
Designation (the "Series 1997-A Certificate of Designation") designating
2,737,000 shares of preferred stock of the Company as 2,737,000 shares of Series
1997-A Convertible Preferred Stock, par value $.01 per share (the "Series 1997-A
Convertible Preferred Stock");
WHEREAS, the Series 1997-A Convertible Preferred Stock is identical in
all material respects to the Series A Convertible Preferred Stock, except that
Dividend Payment Dates with respect to the Series 1997-A Convertible Preferred
Stock are February 15, May 15, August 15 and November 15, and the dividend
payable to a holder of a share of Series 1997-A Convertible Preferred Stock on
the first Dividend Payment Date after such share is issued will be the accrued
dividend calculated from September 25, 1997 to such Dividend Payment Date;
WHEREAS, the holders of the Series A Convertible Preferred Stock have
agreed to exchange (the "Exchange") their shares of Series A Convertible
Preferred Stock for a like number of Series 1997-a Convertible Preferred Stock,
and the Company has agreed to cancel the Series A Convertible Preferred Stock
immediately after the Exchange and promptly cause the elimination of the Series
A Certificate of Designation from the Company's Restated Certificate of
Incorporation; and
WHEREAS, on the Closing Date BRI OP Limited Partnership, a Delaware
limited partnership ("BRI OP"), issued a promissory note (the "Note") payable to
the Company
<PAGE>
in the principal amount of $68,425,000 (or such lesser amount as shall
be equal to the aggregate unpaid principal amount of the loan(s) to be made by
the Company to BRI OP from the proceeds from the sale of the Series A
Convertible Preferred Stock);
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
SECTION 1. Capitalized terms not defined in this Agreement shall have
the respective meanings set forth in the Stock Purchase Agreement or the
Registration Rights Agreement, as the case may be.
SECTION 2. On the date hereof, and subject to the terms of this
Agreement, (i) Holdings and MSAM, on behalf of certain of its clients, shall
deliver to the Company certificates evidencing all outstanding shares of Series
A Convertible Preferred STock held by them, such certificates to be duly
endorsed, or accompanied by stock powers duly executed, in such manner as is
necessary to transfer such certificates to the Company in accordance with
Article 8 of the Uniform Commercial Code of the State of Delaware (6 Del. Code
ss.ss. 8-101 et. seq.): (ii) the Company shall deliver to Holdings and MSAM
certificates representing Series 1997-A Convertible Preferred Stock in the same
denominations and registered in the same names as set forth on the certificates
being delivered to the Company under the preceding clause (i), and such shares
of Series 1997-A Convertible Preferred Stock shall be delivered to Holdings and
MSAM free and clear of all liens (unless created by Holdings or MSAM or any of
their affiliates, as the case may be); and (iii) upon the delivery to the
Company of the shares of Series A Convertible Preferred Stock referred to in
clause (i) above, such shares of Series A Convertible Preferred Stock shall be
cancelled, and (iv) the Company shall promptly take all such steps as are
necessary to eliminate from the Company's Restated Certificate of Incorporation
all matters set forth in the Series A Certificate of Designation.
SECTION 3. (a) The representations and warranties of the Company set
forth in Article 3 of the Stock Purchase Agreement are hereby incorporated by
reference in this Agreement and made a part hereof to the same extent as if set
forth in full in their entirety in this Agreement.
(b) As incorporated by reference herein and made a part hereof, the
representations and warranties referred to in clause (A) are hereby amended, as
of the date of the Exchange, as follows: (i) all references to "Company
Preferred Stock" shall be deemed to be references to Series 1997-A Convertible
Preferred Stock; (ii) all references to "Certificate of Designation" shall be
deemed to be references to the Series 1997-A Certificate of Designation attached
as Exhibit A hereto; (iii) all references to the "Amended Company By-laws" shall
be deemed to be references to the By-laws attached hereto as Exhibit B; and (iv)
all references to "this Agreement" or "This Agreement" shall be deemed to be
references to this Agreement, and all references to "the Registration Rights
Agreement" shall be deemed to be references to the Registration Rights
Agreement, as amended by this Agreement.
-2-
<PAGE>
(c) Holdings represents and warrants that the execution, delivery and
performance of this Agreement and the consummation of the Exchange have been
duly and validly authorized by all necessary action on the part of Holdings.
(d) Section 5.6 of the Stock Purchase Agreement is hereby incorporated
by reference in this Agreement and made a part hereof to the same extent as if
set forth in full in its entirety in this Agreement. All references in such
Section 5.6, as incorporated herein are made a part hereof, to "Company
Preferred Stock" shall be deemed to be references to the Series 1997-A
Convertible Preferred Stock.
(e) The Stock Purchase Agreement is hereby amended as follows: (i) The
definition of "Company Stock" is hereby amended to include the Series 1997-A
Convertible Preferred Stock; (ii) all references to "Company Preferred Stock"
and "Certificate of Designation" in Section 6.5 of the Stock Purchase Agreement
shall be deemed to be references to the Series 1997-A Convertible Preferred
Stock and the Series 1997-A Certificate of Designation, respectively; and (iii)
all references to "Certificate of Designation" in Section 6.6 of the Stock
Purchase Agreement shall be deemed to be references to the Series 1997-a
Certificate of Designation.
(f) Article 8 of the Stock Purchase Agreement is hereby incorporated by
reference in this Agreement and made a part hereof as if set forth in full in
its entirety in this Agreement. All references in such Article 8, as
incorporated herein and made a part hereof, to "this Agreement" shall be deemed
to be references to this Agreement. The parties agree that the provisions of
such Article 8, as incorporated herein and made a part hereof, shall apply with
the same effect as if the Series 1997-A Convertible Preferred Stock had been
purchased at the Initial Closing. Notwithstanding the foregoing, each of the
Transferees shall be entitled to the benefits of Article 8 without regard to the
definition of "Buyer Portion."
(g) Section 10.4 of the Stock Purchase Agreement is hereby incorporated
by reference in this Agreement and made a part hereof as if set forth in full in
its entirety in this Agreement. Such Section 10.4, as incorporated herein and
made a part hereof, is hereby amended by adding thereto the following sentence:
"Notices to any Transferee or to MSAM shall be addressed to: Morgan Stanley
Asset Management, Inc., 1221 Avenue of the Americas, New York, New York 10020,
Attention: , Telecopy Number: ."
(h) The Registration Rights Agreement is hereby amended as follows: All
references to "Company Common Stock" in the definition of "Registrable
Securities" in the Registration Rights Agreement shall be deemed to be
references to the Company's common stock, par value $.01 per share, issuable
upon conversion of the Series 1997-A Convertible Preferred Stock.
(i) Not by limitation of the foregoing, all references to the Series A
Convertible Preferred Stock in other instruments and agreements delivered in
connection with the purchase and issuance of the Series A Convertible Preferred
Stock shall, when is necessary or convenient for a proper reading, be deemed to
be references to Series 1997-A Convertible Preferred Stock.
-3-
<PAGE>
SECTION 4. The obligations of Holdings and MSAM to consummate the
Exchange are subject to satisfaction or waiver of each of the following
conditions precedent:
(a) The representations and warranties of the Company contained in this
Agreement shall have been true and correct in all respects on and as of the date
hereof, and shall be true and correct in all respects on and as of the date of
the Exchange with the same effect as though such representations and warranties
had been made on and as of the date of the Exchange (except for representations
and warranties that speak as of a specific date or time other than the date of
the Exchange (which need only be true and correct in all respects as of such
date or time)). The covenants and agreements of the Company to be performed on
or before the date of the Exchange in accordance with this Agreement shall have
been duly performed in all respects. The Company shall have delivered to
Holdings and MSAM at the Exchange a certificate of an appropriate officer in
form and substances reasonably satisfactory to Holdings dated the date of the
Exchange to such effect.
(b) The Series 1997-A Certificate of Designation shall have been duly
filed with the office of the Secretary of State of Delaware, any other necessary
Government Authority or the NYSE and shall be in full force and effect.
(c) The amendment to the Company By-laws in the form attached as
Exhibit C hereto shall have been approved by the Board of Directors, all as
required or permitted by and in accordance with the Company Charter, duly filed
if any filing thereof shall be required by any Government Authority or NYSE, and
shall be in full force and effect. The Board of Directors resolutions pertaining
to this Agreement, and the procedures, findings and transactions contemplated
hereby, shall have been duly approved and adopted by the Board of Directors, the
Secretary shall have been instructed to place the record of such action of the
Board of Directors in the records of the meetings of the Board of Directors and
the Secretary shall have placed the record of such action in such records and
shall be in form and substance satisfactory to Holdings.
(d) There shall not be in effect any order, decree or injunction of a
court or agency of competent jurisdiction which cojoins or prohibits
consummation of the transactions contemplated hereby and there shall be no
pending Actions which would reasonably be expected to have a Material Adverse
Effect on the ability of the Company to consummate the transactions contemplated
hereby or to issue the Series 1997-A Convertible Preferred Stock.
(e) All corporate and other proceedings to be taken by the Company in
connection with the transactions contemplated hereby and all documents incident
thereto shall be reasonably satisfactory in form and substance to Holdings and
Holdings and MSAM shall have received all such counterpart originals or
certified or other copies of such documents as they may reasonably request.
(f) The Company shall have elected to be taxed as a REIT in its most
recent federal income tax return, and shall be in compliance with all applicable
laws, rules and regulations, including the Code, necessary to permit it to be
taxed as a REIT. The Company shall not have taken any action or have failed to
take any action which would reasonably be
-4-
<PAGE>
expected to, alone or in conjunction with any other factors, result in the loss
of its status as a REIT for federal income tax purposes.
(g) Holdings and MSAM shall have received opinions, dated the date of
the Exchange, of Peabody & Brown, counsel to the Company, and of Morris Nichols
Arsht & Tunnell, special Delaware counsel to the Company, in form and substance
reasonably satisfactory to Holdings.
SECTION 5. Holdings hereby consents to the amendment and restatement of
the Note in the form attached as Exhibit D hereto.
SECTION 6. Each of the Transferees hereby agrees to be subject to the
terms of the Registration Rights Agreement, as amended hereby, to the same
extent as if each such Transferee were the Buyer (as defined in the Registration
Rights Agreement, as amended hereby) thereunder, provided, however nothing in
this Section 6 shall alter or affect any of Holdings' rights under clause (A) of
the proviso contained in Section 11(c) of the Registration Rights Agreement, as
amended hereby.
SECTION 7. Except as otherwise set forth in this Agreement, all terms,
provisions and conditions of the Stock Purchase Agreement and the Registration
Rights Agreement shall remain in full force and effect. As amended hereby, each
of the Stock Purchase Agreement and the Registration Rights Agreement is hereby
ratified and confirmed in all respects.
SECTION 8. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party. Copies of executed counterparts transmitted by
telecopy, telefax or other electronic transmission service shall be considered
original executed counterparts for purposes of this Section, provided receipt of
copies of such counterparts is confirmed.
SECTION 9. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF.
SECTION 10. This Agreement contains the entire agreement among the
parties with respect to the subject matter hereof, and there are no agreements,
understandings, representations or warranties between the parties other than
those set forth or referred to herein.
SECTION 11. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
SECTION 12. The Section headings contained in this Agreement are
inserted for convenience of reference only and will not affect the meaning or
interpretations of this Agreement.
-5-
<PAGE>
SECTION 13. This Agreement may not be modified or amended except by an
instrument or instruments in writing signed by the party against whom
enforcement of any such modification or amendment is sought. Either party hereto
may, only by an instrument in writing, waive compliance by the other party
hereto with any term or provision hereof on the part of such other party hereto
to be performed or complied with. The Waiver by any party hereto of a breach of
any term or provision hereof shall not be construed as a waiver of any
subsequent breach.
SECTION 14. For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be held
to include the other gender as the context requires, (h) the terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to the
Sections of this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and transactions.
This Agreement shall be constructed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing
any instrument to be drafted.
SECTION 15. Any provision hereof which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
SECTION 16. The Company agrees that, from time to time, whether before,
at or after the date hereof, the Company will execute and deliver such further
instruments and take such other action as may be necessary to carry out the
purposes and terms hereof.
SECTION 17. The parties acknowledge that, in view of the uniqueness of
the parties hereto, the parties hereto would not have an adequate remedy at law
for money damages in the event that this Agreement were not performed in
accordance with its terms, and therefore agree that the parties hereto shall be
entitled to specific enforcement of the terms hereof in addition to any other
remedy to which the parties hereto may be entitled at law or in equity.
-6-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties hereto as of the day first above written.
BERKSHIRE REALTY COMPANY, INC.
By: ________________________________________
Name:
Title:
WESTBROOK BERKSHIRE HOLDINGS, L.L.C.
By: ________________________________________
Name:
Title:
MORGAN STANLEY ASSET MANAGEMENT, INC.,
as Attorney-in-Fact for Certain Clients
Who Own Shares of Series A Convertible
Preferred Stock of Berkshire Realty
Company, Inc.
By: ________________________________________
Name:
Title:
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
by and between
BERKSHIRE REALTY COMPANY, INC.,
and
WESTBROOK BERKSHIRE HOLDINGS, L.L.C.
dated as of
September 25, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.............................................. 1
(a) "Agreement".............................................. 1
(b) "Buyer".................................................. 1
(c) "Company"................................................ 1
(d) "Company Registration Expenses".......................... 1
(e) "Commission"............................................. 1
(f) "Exchange Act"........................................... 1
(g) "Exercise Notice"........................................ 1
(h) "Extraordinary Transaction".............................. 1
(i) "Extraordinary Transaction Shares"....................... 1
(j) "Holdings"............................................... 1
(k) "NASD"................................................... 2
(l) "Person"................................................. 2
(m) "Public Offering"........................................ 2
(n) "Registrable Securities"................................. 2
(o) "Registration Expenses".................................. 2
(p) "Registration Suspension Period"......................... 2
(q) "Securities Act"......................................... 2
(r) "Shelf Registration"..................................... 2
(s) "Stock Purchase Agreement"............................... 2
(t) "Suspension Notice"...................................... 2
(u) "Tag-Along Notice"....................................... 2
(v) "Tag-Along Shares"....................................... 2
(w) "Third Party"............................................ 2
(x) "Underwritten/Placed Offering"........................... 2
Section 2. Shelf Registration....................................... 3
(a) Obligation to File and Maintain.......................... 3
(b) Black-Out Periods of Buyer............................... 3
(c) Black-Out Periods of the Company......................... 3
(d) Shelf Registrations...................................... 4
(e) Notice................................................... 4
(f) Expenses................................................. 4
(g) Selection of Underwriters................................ 4
(h) Company Right to Purchase................................ 4
Section 3. Requested Registration................................... 4
(a) Obligation to File....................................... 4
(b) Underwriting............................................. 5
(c) Black-Out Periods of Buyer............................... 5
(d) Black-Out Periods of the Company......................... 5
(e) Expenses................................................. 6
Section 4. Incidental Registrations................................. 6
(a) Notification and Inclusion............................... 6
(b) Cut-back Provisions...................................... 6
(c) Expenses................................................. 6
(d) Duration of Effectiveness................................ 6
<PAGE>
Page
Section 5. Registration Procedures.................................. 7
Section 6. Underwritten Offerings................................... 9
Section 7. Preparation, Reasonable Investigation.................... 9
Section 8. Tag-Along Rights......................................... 9
(a) Rights and Notice........................................ 9
(b) Number of Shares to be Included.......................... 9
(c) Abandonment of Sale...................................... 10
(d) Terms of Sale............................................ 10
(e) Timing of Sale........................................... 10
Section 9. Indemnification.......................................... 10
(a) Indemnification by the Company........................... 10
(b) Indemnification by Buyer................................. 11
(c) Notices of Claims, etc................................... 11
(d) Other Indemnification.................................... 11
(e) Indemnification Payments................................. 12
(f) Contribution............................................. 12
Section 10. Covenants Relating to Rule 144, etc...................... 12
Section 11. Miscellaneous............................................ 12
(a) Counterparts............................................. 12
(b) Governing Law............................................ 13
(c) Entire Agreement......................................... 13
(d) Notices.................................................. 13
(e) Successors and Assigns................................... 14
(f) Headings................................................. 14
(g) Amendments and Waivers................................... 14
(h) Interpretation; Absence of Presumption................... 14
(i) Severability............................................. 15
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of September 25, 1997,
by and between Berkshire Realty Company, Inc., a Delaware corporation (the
"Company"), and Westbrook Berkshire Holdings, L.L.C., a Delaware limited
liability company ("Holdings"). Capitalized terms not otherwise defined herein
have the meaning ascribed to them in the Stock Purchase Agreement (as
hereinafter defined).
WHEREAS, the Company, Holdings and others have entered into a Stock Purchase
Agreement, dated as of even date herewith (the "Stock Purchase Agreement")
provides for the purchase by Holdings and sale by the Company to Holdings of
shares of Company Preferred Stock; and
WHEREAS, in order to induce Buyer and others to enter into the Stock Purchase
Agreement, the Company has agreed to provide the registration rights set forth
herein;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
Section 1. Definitions. As used herein, the following terms shall have the
following meanings:
(a) "Agreement" shall have the meaning set forth in the first paragraph
hereof.
(b) "Buyer" shall mean, collectively, as the context may require, Westbrook
Real Estate Fund II, L.P. and Holdings, and shall also include any Affiliate of
Holdings of which such partners and/or Holdings collectively, directly or
indirectly, Beneficially Own a majority or more of the voting power and of the
economic interests, or any bona fide financial institution to which any Buyer
has Transferred (including upon foreclosure of a pledge) shares of Company Stock
for the purpose of securing bona fide indebtedness of any Buyer.
(c) "Company" shall having the meaning set forth in the first paragraph
hereof.
(d) "Company Registration Expenses" means the fees and disbursements of
counsel and independent public accountants for the Company incurred in
connection with Company's performance of or compliance with this Agreement,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, and any premiums and other
costs of policies of insurance obtained by the Company against liabilities
arising out of the sale of any securities.
(e) "Commission" means the Securities and Exchange Commission, and any
successor thereto.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor thereto, and the rules and regulations thereunder.
(g) "Exercise Notice" shall have the meaning set forth in Section 8(a).
(h) "Extraordinary Transaction" means (i) any merger, consolidation, sale or
acquisition of assets, recapitalization, other business combination,
liquidation, or other action out of the ordinary course of business of the
Company, or (ii) any issuance of securities, in either case involving the sale,
issuance or other disposition of capital stock of the Company representing, in
the aggregate, at least 20% of the capital stock of the Company on a fully
diluted basis, except the Public Offering.
(i) "Extraordinary Transaction Shares" shall have the meaning set forth in
Section 8(a).
(j) "Holdings" shall have the meaning set forth in the first paragraph
hereof.
<PAGE>
(k) "NASD" means the National Association of Securities Dealers, Inc.
(l) "Person" shall mean any individual, partnership, corporation, limited
liability company, business trust, joint stock company, unincorporated
association, joint venture, other entity of whatever nature or Government
Authority.
(m) "Public Offering" shall mean the widely distributed underwritten/placed
offering of Company Common Stock led by Lehman Brothers, Inc. on or before
November 31, 1997.
(n) "Registrable Securities" means (i) any and all shares of Company Common
Stock, and (ii) any securities issued or issuable with respect to any Company
Common Stock or other securities referred to in clause (i) by way of conversion,
exchange, stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, once issued such
securities shall cease to be Registrable Securities when (A) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, or (B) such securities shall
have been sold in accordance with Rule 144 (or any successor provision) under
the Securities Act.
(o) "Registration Expenses" means all registration, filing and stock exchange
or NASD fees, all fees and expenses of complying with securities or blue sky
laws, all printing expenses, messenger and delivery expenses, any fees and
disbursements of any separate counsel retained by Buyer, any fees and
disbursements of underwriters customarily paid by sellers of securities who are
not the issuers of such securities and all underwriting discounts and
commissions and transfer taxes, if any, and any premiums and other costs of
policies of insurance obtained by Buyer against liabilities arising out of the
public offering of securities. In the case of "Incidental Registration" under
Section 4, the term "Registration Expenses" will include all such items as set
forth above, with respect to Person other than Buyer, provided that the same are
not for the account of Buyer.
(p) "Registration Suspension Period" shall have the meaning set forth in
Section 2(b).
(q) "Securities Act" means the Securities Act of 1933, as amended, and any
successor thereof, and the rules and regulations thereunder.
(r) "Shelf Registration" shall have the meaning set forth in Section 2(a).
(s) "Stock Purchase Agreement" shall have the meaning set forth in the second
paragraph hereof.
(t) "Suspension Notice" shall have the meaning set forth in Section 2(b).
(u) "Tag-Along Notice" shall have the meaning set forth in Section 8(a).
(v) "Tag-Along Shares" shall have the meaning set forth in Section 8(a).
(w) "Third Party" shall have the meaning set forth in Section 8(a).
(x) "Underwritten/Placed Offering"( means a sale of securities of the Company
to an underwriter or underwriters for reoffering to the public or on behalf of a
person other than the Company through an agent for sale to the public.
2
<PAGE>
Capitalized terms which are used in this Agreement and which are not defined
herein but are defined in the Stock Purchase Agreement shall have the meanings
ascribed to them in the Stock Purchase Agreement.
Section 2. Shelf Registration. (a) Obligation to File and Maintain. At
any time following the purchase by Buyer of Company Preferred Stock, promptly
upon the written request of Buyer, the Company will use its best efforts to file
with the Commission a registration statement under the Securities Act for the
offering on a continuous or delayed basis in the future of all of the
Registrable Securities (the "Shelf Registration"). The Shelf Registration shall
be on an appropriate form and the Shelf Registration and any form of prospectus
included therein or prospectus supplement relating thereto shall reflect such
plan of distribution or method of sale as Buyer may from time to time notify the
Company, including the sale of some or all of the Registrable Securities in a
public offering or, if requested by Buyer, subject to receipt by the Company of
such information (including information relating to purchasers) as the Company
reasonably may require, (i) in a transaction constituting an offering outside
the United States which is exempt from the registration requirements of the
Securities Act in which the Company undertakes to effect registration of such
shares as soon as possible after the completion of such offering in order to
permit such shares to be freely tradeable in the United States, (ii) in a
transaction constituting a private placement under Section 4(2) of the
Securities Act in connection with which the Company undertakes to register such
shares after the conclusion of such placement to permit such shares to be freely
tradeable by the purchasers thereof, or (iii) in a transaction under Rule 144A
of the Securities Act in connection with which the Company undertakes to
register such shares after the conclusion of such transaction to permit such
shares to be freely tradeable by the purchasers thereof. The Company shall use
its best efforts to keep the Shelf Registration continuously effective for the
period beginning on the date on which the Shelf Registration is declared
effective and ending on the first date that there are no Registrable Securities
(provided that the Company may terminate the effectiveness of a Shelf
Registration on the second anniversary of the date of effectiveness thereof plus
a number of days equal to the number of days in all Registration Suspension
Periods relating to such Shelf Registration). During the period during which the
Shelf Registration is effective, the Company shall supplement or make amendments
to the Shelf Registration, if required by the Securities Act or if reasonably
requested by Buyer or an underwriter of Registrable Securities, including to
reflect any specific plan of distribution or method of sale, and shall use its
reasonable best efforts to have such supplements and amendments declared
effective, if required, as soon as practicable after filing.
(b) Black-Out Periods of Buyer. Notwithstanding anything herein to the
contrary, (i) the Company shall have the right, by written notice to Buyer (the
"Suspension Notice"), exercisable on not more than two occasions during any
three-year period, from time to time to require Buyer not to sell under the
Shelf Registration or to suspend the effectiveness thereof during the period
starting with the date 30 days prior to the Company's good faith estimate, as
certified in writing by an executive officer of the Company to Buyer, of the
proposed date of filing of a registration statement or a preliminary prospectus
supplement relating to an existing shelf registration statement, in either case,
pertaining to an underwritten public offering of equity securities of the
Company for the account of the Company, and ending on the date 90 days following
the effective date of such registration statement or the date of filing of such
prospectus supplement, and (ii) the Company shall be entitled to postpone or
suspend (but not for a period exceeding 90 days) the filing or effectiveness of
a registration statement otherwise required to be prepared and filed by it
pursuant to this Section 2 if the Company determines, in its good faith
judgment, that such registration and offering or continued effectiveness would
interfere with any material financing, acquisition, disposition, corporate
reorganization or other material transaction involving the Company or any of its
subsidiaries or public disclosure thereof would be required prior to the time
such disclosure might otherwise be required, or when the Company is in
possession of material information that it deems advisable not to disclose in a
registration statement (either, the "Registration Suspension Period").
(c) Black-Out Periods of the Company. Subject to the conditions of this
Section 2(c), Buyer shall have the right, exercisable on not more than two
occasions during any three-year period, from time to time to require the Company
not to sell any common equity securities of the Company or any securities
convertible into
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common equity securities of the Company under any registration statement or
prospectus supplement relating to an existing shelf registration statement
(other than sales of shares of Common Stock upon the redemption of Operating
Partnership Units,or limited partnership units of any other Subsidiary of the
Company and sales of equity securities issued or granted pursuant to any
employee benefit or similar plan or any dividend reinvestment plan), or to
suspend the effectiveness thereof, during the period starting with the date 30
days prior to Buyer's good faith estimate, as certified in writing by an
executive officer of Buyer to the Company, of a proposed date of filing of a
preliminary prospectus supplement relating to a Shelf Registration filed
pursuant to Section 2(a), pertaining to an underwritten public offering of
Registrable Securities, and ending on the date 60 days following the date of
filing the final prospectus supplement, but in no event on a date later than 75
days following the date of filing of the preliminary prospectus supplement. In
no event may the Company include in any preliminary prospectus supplement under
which Buyer is offering Registrable Securities covered by this Section 2(c) any
equity securities of the Company or any securities convertible into equity
securities of the Company.
(d) Shelf Registrations. The Company shall be obligated to effect and
maintain in effect a Shelf Registration under this Section 2. A Shelf
Registration shall not be deemed to have been effected, unless such registration
becomes effective pursuant to the Securities Act and is kept continuously
effective of a period of at least two years (other than any periods during such
period of effectiveness which are Registration Suspension Periods, and provided
that no such Registration Suspension Periods shall count towards such two-year
period); provided, however, that no Shelf Registration shall be deemed to have
been effected if such registration cannot be used by Buyer for more than 45 days
as a result of any stop order, injunction or other order of the Commission or
other Government Authority for any reason other than an act or omission of
Buyer.
(e) Notice. The Company shall give Buyer prompt notice in the event that the
Company has suspended sales of Registrable Securities under Section 2(b).
(f) Expenses. All Company Registration Expenses incurred in connection with
any Shelf Registration which may be requested under this Section 2 shall be
borne by the Company, and all Registration Expenses incurred in connection with
any such Shelf Registration shall be borne by Buyer.
(g) Selection of Underwriters. Any and all underwriters or other agents
involved in any sale of Registrable Securities pursuant to a registration
statement contemplated by this Section 2 shall include such underwriter(s) or
other agent(s) as selected by Buyer and are assented to by the Company with such
assent not to be unreasonably withheld or delayed.
(h) Company Right to Purchase. If Buyer proposes to offer any Registrable
Securities in an underwritten offering under a Shelf Registration statement
filed by the Company pursuant to Section 2(a), Buyer shall give the Company
prior written notice of the proposed offering, setting forth the number of
Registrable Securities that Buyer proposes to offer, the expected timing of the
proposed offering, and the expected gross selling price of such offering. The
Company shall have the right, if it irrevocably so notifies Buyer within 10
Business Days after its receipt of Buyer's notice, to purchase all of the
Registrable Securities that Buyer proposes to offer, at the gross selling price
set forth in Buyer's notice to the Company. In the event the Company shall so
notify Buyer, it shall effect such purchase within 10 Business Days.
Section 3. Requested Registration. (a) Obligation to File. If, with respect
to Registerable Securities at any time, and from time to time thereafter, the
Company shall receive from Buyer a written request for the Company to effect any
registration, qualification or compliance with respect to Registerable
Securities, then, at a time specified in such request, the Company will use
reasonable efforts to effect all such registrations, qualifications and
compliances when so specified in such request, subject as aforesaid and provided
that the Company shall have at least 85 days after such request (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under the applicable blue sky or other
state
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securities laws and appropriate compliance with regulations issued under
the Securities Act and any other governmental requirements or regulations) to
effect all such registrations, qualifications and compliances as would permit or
facilitate the sale and distribution of Registerable Securities as are specified
in such request; provided that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 3:
(i) in a particular jurisdiction in which the Company would be required
to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act; or
(ii) if the Company has already effected one registration for Buyer
pursuant to this Section 3 during the immediately preceding twelve-month period
or if there is a registration effective pursuant to Section 2 at the time of
such request.
(b) Underwriting. If Buyer intends to distribute the Registerable Securities
covered by its request by means of an underwritten public offering, it shall so
advise the Company. Any and all underwriters or other agents involved in any
sale of Registrable Securities pursuant to a registration statement contemplated
by this Section 3 shall include such underwriter(s) or other agent(s) as
selected by Buyer and are assented to Buyer, with such assent not to be
unreasonably withheld or delayed.
(c) Black-Out Periods of Buyer. Subject to the conditions of this Section 3,
(i) the Company shall have the right, exercisable on not more than two occasions
during any three-year period, from time to time to require Buyer not to sell
under the registration requested pursuant to this Article 3 or to suspend the
effectiveness thereof during the period starting with the date 30 days prior to
the Company's good faith estimate, as certified in writing by an executive
officer of the Company to Buyer, of the proposed date of filing of a
registration statement or a preliminary prospectus supplement relating to an
existing registration statement, in either case, pertaining to an underwritten
public offering of equity securities of the Company for the account of the
Company, and ending on the date 90 days following the effective date of such
registration statement or the date of filing of such prospectus supplement, and
(ii) the Company shall be entitled to postpone or suspend (but not for a period
exceeding 90 days) the filing or effectiveness of a registration statement
otherwise required to be prepared and filed by it pursuant to this Article 3 if
the Company determines, in its good faith judgment, that such registration and
offering or continued effectiveness would interfere with any material financing,
acquisition, disposition, corporate reorganization or other material transaction
involving the Company or any of its subsidiaries or public disclosure thereof
would be required prior to the time such disclosure might otherwise be required,
or when the Company is in possession of material information that it deems
advisable not to disclose in a registration statement.
(d) Black-Out Periods of the Company. Subject to the conditions of this
Section 3.4, Buyer shall have the right, exercisable on not more than two
occasions from time to time, to require the Company not to sell any common
equity securities of the Company or any securities convertible into common
equity securities of the Company under any registration statement or prospectus
supplement relating to an existing registration statement requested pursuant to
this Article 3 (other than sales of shares of Common Stock upon the redemption
of Operating Partnership Units, or limited partnership units of any other
Subsidiary of the Company and sales of equity securities issued or granted
pursuant to any employee benefit or similar plan or any dividend reinvestment
plan), or to suspend the effectiveness thereof, during the period starting with
the date 15 days prior to Buyer's good faith estimate, as certified in writing
by an executive officer of Buyer to the Company, of a proposed date of filing of
a preliminary prospectus supplement relating to a registration statement filed
pursuant to Section 3.1, pertaining to an underwritten public offering of
Registrable Securities, and ending on the date 60 days following the date of
filing the final prospectus supplement, but in no event on a date later than 75
days following the date of filing of the preliminary prospectus supplement.
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(e) Expenses. All Company Registration Expenses incurred in connection with
any registration which may be requested under this Section 3 shall be borne by
the Company, and all Registration Expenses incurred in connection with any such
registration shall be borne by Buyer.
Section 4. Incidental Registrations. (a) Notification and Inclusion. If the
Company proposes to register for its own account any common equity securities of
the Company or any securities convertible into common equity securities of the
Company under the Securities Act (other than (i) a registration relating solely
to the sale of securities to participants in a dividend reinvestment plan, (ii)
a registration on Form S-4 relating to a business combination or similar
transaction permitted to be registered on such Form S-4, (iii) a registration on
Form S-8 relating solely to the sale of securities to participants in a stock or
employee benefit plan, (iv) a registration permitted under Rule 462 under the
Securities Act registering additional securities of the same class as were
included in an earlier registration statement for the same offering and declared
effective, (v) a registration on Form S-3 for Company Common Stock issuable upon
conversion of Operating Partnership Units issued in exchange for assets or (vi)
the Public Offering), the Company shall, at each such time, promptly give
written notice of such registration to Buyer. Upon the written request of Buyer
given within 10 days after receipt of such notice by Buyer, the Company shall
seek to include in such proposed registration such Registrable Securities as
Buyer shall request be so included and shall use its best efforts to cause a
registration statement covering all of the Registrable Securities that Buyer has
requested to be registered to become effective under the Securities Act,
provided, that for purposes of this Section 4 Registrable Securities of Buyer
shall be limited to Company Common Stock. The Company shall be under no
obligation to complete any offering of securities it proposes to make under this
Section 3 and shall incur no liability to Buyer for its failure to do so. If, at
any time after giving written notice of its intention to register any securities
and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to Buyer and, thereupon,
(i) in the case of a determination not to register, the Company shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration
Expenses incurred in connection therewith) and (ii) in the case of a
determination to delay registering, the Company shall be permitted to delay
registering any Registrable Securities for the same period as the delay in
registering such other securities. The Company agrees, for the benefit of Buyer,
not to grant or afford to any holder of Operating Partnership Units (or holder
of shares of Company Common Stock issuable upon exercise of Operating
Partnership Units) referred to in clause (v) of the parenthetical to the first
sentence of this clause (a), any "piggyback" or incidental registration rights
that would arise from or become effective upon the registration by the Company
on behalf of Buyer of any Registrable Securities.
(b) Cut-back Provisions. If a registration pursuant to this Section 4
involves an Underwritten/Placed Offering of the securities so being registered,
whether or not solely for sale for the account of the Company, which securities
are to be distributed by or through one or more underwriters of recognized
standing under underwriting terms customary for such transaction, and the
underwriter or the managing underwriter, as the case may be, of such
Underwritten/Placed Offering shall inform the Company of its belief that the
amount of securities requested to be included in such registration or offering
exceeds the amount which can be sold in (or during the time of) such offering
without delaying or jeopardizing the success of the offering (including the
price per share of the securities to be sold), then the Company will include in
such registration (i) first, all the securities of the Company which the Company
proposes to sell for its own account and (ii) second, to the extent of the
amount which the Company is so advised can be sold in (or during the time of)
such offering, Registrable Securities requested to be included in such
registration, pro rata, among Buyer and others exercising incidental
registration rights, on the basis of shares of Company Common Stock requested to
be included by all such persons.
(c) Expenses. The Company shall bear and pay all Company Registration
Expenses incurred in connection with any registration of Registrable Securities
pursuant to this Section 4 for Buyer, and all Registration Expenses incurred in
connection with any registration of any other securities referred to in the
first sentence of
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Section 4(a), and Buyer shall bear and pay all Registration Expenses incurred in
connection with any registration of Registrable Securities pursuant to this
Section 4, other than Company Registration Expenses, for Buyer.
(d) Duration of Effectiveness. At the request of Buyer, the Company shall,
subject to Section 2(b), use its best efforts to keep any registration statement
for which Registrable Securities are included under this Section 4 effective and
usable for up to 90 days (subject to extension for the length of any
Registration Suspension Period), unless the distribution of securities
registered thereunder has been earlier completed; provided, however, that in no
event will the Company be required to prepare or file audited financial
statements with respect to any fiscal year by a date prior to the date on which
the Company would be so required to prepare and file such audited financial
statements if such registration statement were no longer effective and usable.
Section 5. Registration Procedures. In connection with the filing of any
registration statement as provided in Section 2, 3 or 4, the Company shall use
its best efforts to, as expeditiously as reasonably practicable:
(a) prepare and file with the Commission the requisite registration
statement (including a prospectus therein) to effect such' registration and
use its best efforts to cause such registration statement to become
effective, provided that before filing such registration statement or any
amendments or supplements thereto, the Company will furnish to the counsel
selected by Buyer copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel before any such
filing is made, and the Company will comply with any reasonable request made
by such counsel to make changes in any information contained in such
documents relating to Buyer;
(b) prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such
registration and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement until, in the case of Section 2, the termination of the period dur
ing which the Shelf Registration is required to be kept effective, or, in the
case of Section 3 or Section 4, the earlier of such time as all of such
securities have been disposed of and the date which is 90 days after the date
of initial effectiveness of such registration statement;
(c) furnish to Buyer such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the pro spectus contained
in such registration statements (including each complete prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, including documents incorporated by reference, as
Buyer may reasonably request;
(d) register or qualify all Registrable Securities under such other
securities or blue sky laws of such jurisdictions as Buyer shall reasonably
request, to keep such registration or qualification in effect for so long as
such registration statement remains in effect, and take any other action
which may be reasonably necessary or advisable to enable Buyer to consummate
the disposition in such jurisdictions of the securities owned by Buyer,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein
it would not but for the requirements of this paragraph be obligated to be so
qualified, or to consent to general service of process in any such
jurisdiction, or to subject the Company to any material tax in any such
jurisdiction where it is not then so subject;
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(e) cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other Government
Authority as may be reasonably necessary to enable Buyer to consummate the
disposition of such Registrable Securities;
(f) furnish to Buyer a signed counterpart, addressed to Buyer (and the
underwriters), of
(i) an opinion of counsel for the Company, dated the effective date of
such registration statement (and, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), reasonably satisfactory in form and substance to
Buyer, and
(ii) to the extent permitted by then applicable rules of professional
conduct, a "comfort" letter, dated the effective date of such registration
statement (and, if such registration includes an underwritten public
offering, dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement;
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, all as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities;
(g) immediately notify Buyer at any time when the Company becomes aware
that a prospectus relating thereto 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 registration statement, as then in effect,
includes 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 not misleading in the light of the circumstances under
which they were made, and at the request of Buyer promptly prepare and
furnish to Buyer a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(h) comply or continue to comply in all material respects with the
Securities Act and the Exchange Act and with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of
at least 12 months, but not more than 18 months, beginning with the first
full calendar month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and not file any amendment or supplement to such registration
statement or prospectus to which Buyer shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act, having been furnished
with a copy thereof at least five Business Days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement; and
(ii) list all Company Stock covered by such registration statement on
any securities exchange on which any of the Company Stock is then listed.
Buyer shall furnish in writing to the Company such information regarding Buyer
(and any of its affiliates), the Registrable Securities to be sold, the intended
method of distribution of such Registrable Securities, and such other
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information requested by the Company as is necessary for inclusion in the
registration statement relating to such offering pursuant to the Securities Act
and the rules of the Commission thereunder. Such writing shall expressly state
that it is being furnished to the Company for use in the preparation of a
registration statement, preliminary prospectus, supplementary prospectus, final
prospectus or amendment or supplement thereto, as the case may be.
Buyer agrees by acquisition of the Registrable Securities that upon receipt
of any notice from the Company of the happening of any event of the kind
described in paragraph (g) of this Section 5, Buyer will forthwith discontinue
its disposition of Registrable Securities pursuant to the registration statement
relating to such Registrable Securities until Buyer's receipt of the copies of
the supplemented or amended prospectus contemplated by paragraph (g) of this
Section 5.
Section 6. Underwritten Offerings. If requested by the underwriters for any
underwritten offerings by Buyer, under a registration requested pursuant to
Section 2(a) or Section 3(a), the Company and the Operating Partnership will
enter into a customary underwriting agreement with such underwriters for such
offering, to contain such representations and warranties by the Company and the
Operating Partnership and such other terms as are customarily contained in
agreements of this type, including indemnities to the effect and to the extent
provided in Section 9. Buyer shall be a party to such underwriting agreement and
may, at its option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of Buyer. Buyer shall not be required to make any
representations or warranties to or agreement with the Company or the
underwriters other than representations, warranties or agreements regarding
Buyer and Buyer's intended method of distribution and any other representation
or warranty required by law.
Section 7. Preparation, Reasonable Investigation. In connection with the
preparation and filing of the registration statement under the Securities Act
pursuant to Section 2 or 3 hereof, the Company will give Buyer, its
underwriters, if any, and their respective counsel, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers, its counsel and the independent public accountants who have certified
its financial statements as shall be necessary, in the opinion of Buyer's and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
Section 8. Tag-Along Rights. Buyer shall be entitled to the rights set forth
in this Section 8.
(a) Rights and Notice. The Company shall not directly or indirectly sell or
otherwise dispose of shares of Company Stock to any person (a "Third Party") in
connection with an Extraordinary Transaction in which the consideration for some
or all of the shares of Company Stock is cash or cash equivalents (as determined
under GAAP), unless the terms and conditions of such sale or other disposition
shall include an offer to Buyer to include, at the option of Buyer, in such sale
or other disposition of the Company Stock owned by Buyer at the time of such
sale or other disposition determined in accordance with Section 8(b) (the
"Tag-Along Shares"). The Company shall send a written notice (the "Tag-Along
Notice") to Buyer setting forth the number of shares of Company Stock proposed
to be sold or otherwise disposed of in the Extraordinary Transaction (the
"Extraordinary Transaction Shares"), and the price at which such shares are
proposed to be sold (or the method by which such price is proposed to be
determined). At any time within 15 days after its receipt of the Tag-Along
Notice, Buyer may exercise its option to sell the Tag-Along Shares by furnishing
written notice of such exercise (the "Exercise Notice") to the Company.
(b) Number of Shares to be Included. If the proposed sale or other
disposition by the Company in connection with an Extraordinary Transaction is
consummated, Buyer shall have the right to sell to the Third Party as part of
such proposed sale or other disposition of such number of Company Stock (with
Company
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Preferred Stock determined in terms of the number of shares of Company Common
Stock into which it would then be entitled to be converted without giving effect
to any time restriction on conversion) owned by Buyer equal to the product of
(i) the ratio (which in no event shall exceed 20% for purposes of this Section
8) of the total number of shares of Company Stock owned by Buyer at the time
that Buyer receives the Tag-Along Notice to the total number of outstanding
shares of Company Stock at the time that Buyer receives the Tag-Along Notice,
and (ii) the number of Extraordinary Transaction Shares; provided, however, that
if the number of Tag-Along Shares is less than the number of shares of Company
Stock owned by Buyer at the time that Buyer receives the Tag-Along Notice, such
that the number of shares that Buyer would have been able to sell as determined
above in this Section 8(b) based upon the total number of shares of Company
Stock owned by Buyer at the time Buyer receives the Tag-Along Notice is more,
then Buyer shall have the right to sell to the Third Party as part of the
proposed sale or other disposition to the Third Party by the Company in
connection with an Extraordinary Transaction such larger number of shares as
determined based upon the total number of shares of Company Stock owned by Buyer
at the time that Buyer receives the Tag-Along Notice. All calculations pursuant
to this paragraph shall exclude and ignore any unissued shares of Company Stock
issuable pursuant to stock options, warrants and other rights to acquire shares
of Company Stock and pursuant to convertible or exchangeable securities other
than with respect to the Company Stock held by Buyer, but shall include shares
of Company Common Stock issuable upon redemption of limited partnership
interests in the Operating Partnership (all of which shares shall be deemed to
be outstanding for purposes of this calculation).
(c) Abandonment of Sale. Each of the Company and the Third party shall have
the right, in its sole discretion, at all times prior to consummation of the
proposed sale or other disposition giving rise to the tag-along right granted by
this Section 8 to abandon, rescind, annul, withdraw or otherwise terminate such
sale or other disposition, whereupon all tag-along rights in respect of such
sale or other disposition pursuant to this Section 8 shall become null and void,
and neither the Company nor the Third Party shall have any liability or
obligation to Buyer with respect thereto by virtue of such abandonment,
rescission, annulment, withdrawal or termination.
(d) Terms of Sale. The purchase from Buyer pursuant to this Section 8 shall
be on the same terms and conditions, including the per share price and the date
of sale or other disposition, as are applicable to the Company, and which shall
be consistent with the relevant Tag-Along Notice.
(e) Timing of Sale. If, with respect to any Tag-Along Notice, Buyer fails to
deliver an Exercise Notice within the requisite time period, the Company shall
have 150 days after the expiration of the time in which the Exercise Notice is
required to be delivered in which to sell or otherwise dispose of not more than
the number of shares of Company Stock described in the Tag-Along Notice on terms
not more favorable to the Company than were set forth in the Tag-Along Notice.
If, at the end of 150 days following the receipt of the Tag-Along Notice, the
Company has not completed the sale or other disposition of Company Stock in
accordance with the terms described in the Tag-Along Notice, the Company shall
again be obligated to comply with the provisions of this Section 8 with respect
to, and provide Buyer with the opportunity to participate in, any proposed sale
or other disposition of shares of Company Stock in connection with an
Extraordinary Transaction.
Section 9. Indemnification. (a) Indemnification by the Company. In the event
of any registration of any Registrable Securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless
Buyer, each other person who participates as an underwriter in the offering or
sale of such securities and each other person who controls any such underwriter
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which Buyer or any such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement
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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
light of the circumstances under which they were made, not misleading, and the
Company will reimburse Buyer and each such underwriter and controlling person
for any reasonable legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, liability,
action or proceedings; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such regis tration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by Buyer or
any other person who participates as an underwriter in the offering or sale of
such securities, in either case, specifically stating that it is for use in the
preparation thereof, and provided, further, that the Company shall not be liable
to any person who participates as an underwriter in the offering or sale of
Registrable Securities or any other person, if any, who controls such
underwriter within the meaning of the Securities Act in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such person's failure to send or give
a copy of the final prospectus or supplement to the persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
person if such statement or omission was corrected in such final prospectus or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Buyer or any such underwriter or
controlling person and shall survive the transfer of such securities by Buyer.
(b) Indemnification by Buyer. In the event of registration of any Registrable
Securities in any registration statement pursuant to Section 2, Section 3 or
Section 4, the Company shall receive an undertaking satisfactory to it from
Buyer to indemnify and hold harmless (in the same manner and to the same extent
as set forth in paragraph (a) of this Section 9) the Company, each director of
the Company, each officer of the Company and each other person, if any, who
controls the Company within the meaning of the Securities Act, and each other
person who participates as an underwriter in the offering or sale of such
securities and each other person who controls any such underwriter within the
meaning of the Securities Act, with respect to any untrue statement or alleged
untrue statement of a material fact in or omission or alleged omission to state
a material fact from such registration statement, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, if such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by Buyer specifically stating that
it is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer, or
controlling person and shall survive the transfer of such securities by Buyer.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party of
notice of the commencement of any action or proceeding involving a claim
referred to in the preceding paragraphs of this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under the preceding paragraphs of this Section 9, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation.
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(d) Other Indemnification. Indemnification similar to that specified in the
preceding paragraphs of this Section 9 (with appropriate modifications) shall be
given by the Company and Buyer with respect to any required registration or
other qualification of securities under any federal or state law or regulation
of Governmental Authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this Section 9
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(f) Contribution. If, for any reason, the foregoing indemnity is unavailable,
or is insufficient to hold harmless an indemnified party, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party as
a result of the expense, loss, damage or liability, (i) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other (determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in the proportion as is appropriate to
reflect not only the relative fault of the indemnifying party and the
indemnified party, but also the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other, as well as any
other relevant equitable considerations. No indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any indemnifying party
who was not guilty of such fraudulent misrepresentation.
Section 10. Covenants Relating to Rule 144, etc. The Company will file in a
timely manner, information, documents and reports in compliance with the
Exchange Act and will, at its expense, forthwith upon the request of Buyer,
deliver to Buyer a certificate, signed by the Company's principal financial
officer, stating (a) the Company's name, address and telephone number (including
area code), (b) the Company's Internal Revenue Service identification number,
(c) the Company's Commission file number, (d) the number of shares of Company
Common Stock and the number of shares of Company Preferred Stock outstanding as
shown by the most recent report or statement published by the Company, and (e)
whether the Company has filed the reports required to be filed under the
Exchange Act for a period of at least 90 days prior to the date of such
certificate and in addition has filed the most recent annual report required to
be filed thereunder. If at any time the Company is not required to file reports
in compliance with either Section 13 or Section 15(d) of the Exchange Act, the
Company will, at its expense, forthwith upon the written request of Buyer, make
available adequate current public information with respect to the Company within
the meaning of paragraph (c)(2) of Rule 144 of the General Rules and Regulations
promulgated under the Securities Act.
The Company agrees that if Buyer arranges for the delivery to the Company of
an opinion of counsel (reasonably satisfactory to the Company), to the effect
that the Registrable Securities may be sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and legends with respect thereto (other than those
required by the Company Charter in effect on the date hereof) are removed upon
the consummation of such sale, Buyer may request that its certificates
evidencing such Registrable Securities be exchanged by the Company for
certificates free and clear of all transfer restrictions and legends (other than
those required by the Company Charter in effect on the date hereof, unless
deleted from the Company Charter after the date hereof and before any such
delivery). The Company agrees to deliver such legend free shares certificates to
Buyer within three business days of Buyer's request therefor. Should the Company
fail to deliver such certificates within such three business day period, the
Company agrees to indemnify Buyer for all losses sustained by Buyer as a result
of any decrease in value of such Registrable Securities
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from such date beginning on the fourth business day following Buyer's request
for exchange and continuing until such date as new certificates, free and clear
of all legends, has been delivered to Buyer.
Section 11. Miscellaneous. (a) Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section 11, provided receipt of copies of such counterparts is
confirmed.
(b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
CHOICE OF LAW PRINCIPLES THEREOF.
(c) Entire Agreement. This Agreement (including agreements incorporated
herein) contains the entire agreement between the parties with respect to the
subject matter hereof and there are no agreements or understandings between the
parties other than those set forth or referred to herein. This Agreement is not
intended to confer upon any person not a party hereto (and their successors and
assigns) any rights or remedies hereunder.
(d) Notices. All notices and other communications hereunder shall be
sufficiently given for all purposes hereunder if in writing and delivered
personally, sent by documented overnight delivery service or, to the extent
receipt is confirmed, telecopy, telefax or other electronic transmission service
to the appropriate address or number as set forth below. Notices to the Company
shall be addressed to:
Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attention: David Marshall
Marianne Pritchard
Telecopy Number: 617-556-8171
The Berkshire Group
470 Atlantic Avenue
Boston, MA 02210
Attention: Scott D. Spelfogel, Esq.
Telecopy Number: 617-556-8171
with a copy to:
Peabody & Brown
101 Federal Street
Boston, MA 02110
Attention: Alexander J. Jordan, Jr.
Telecopy Number: 617-345-1300
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyer. Notices to Buyer shall be
addressed to:
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Westbrook Partners, L.L.C.
599 Lexington Avenue
New York, NY 10022
Attention: Michael Barr
Telecopy Number: (212) 849-8801
and a copy to:
Westbrook Partners, L.L.C.
13155 Noel Road, LB 54
Dallas, TX 75240
Attention: Patrick Fox
Telecopy Number: (972) 934-8333
with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Allen Curtis Greer, II
Telecopy Number: (212) 878-8375
(e) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors. Neither party
shall be permitted to assign any of its rights hereunder to any third party,
except that if (i) Buyer transfers or pledges any or all Registrable Securities
to a bona fide financial institution as security for any bona fide indebtedness
of any Buyer, the pledgee of the Registrable Securities shall be considered an
intended beneficiary hereof and may exercise all rights of Buyer hereunder, (ii)
any person included within the definition of the term Buyer shall be permitted
to assign its rights hereunder to any other person included in such definition,
and (iii) the rights to cause the Company to take actions with respect to
Registerable Securities granted by the Company hereunder may be assigned or
otherwise conveyed to any Person which is a direct or indirect transferee or
assignee of Buyer with respect to Registrable Securities; provided that (A) only
Buyer may request, on behalf of itself and other holders of Registrable
Securities, registration pursuant to this Agreement, (B) such transfer is
effected in accordance with applicable federal and state securities laws, (C)
such transferee or assignee becomes a party to this Agreement or agrees in
writing to be subject to the terms hereof to the same extent as if it were Buyer
hereunder and (D) in the event of a pledge of Registrable Securities, Buyer
shall retain and be bound by all obligations of Buyer hereunder during the
period of any such pledge and in the event of a foreclosure of the pledged
Registrable Securities.
(f) Headings. The Section and other headings contained in this Agreement are
inserted for convenience of reference only and will not affect the meaning or
interpretation of this Agreement. All references to Sections or other headings
contained herein mean Sections or other headings of this Agreement unless
otherwise stated.
(g) Amendments and Waivers. This Agreement may not be modified or amended
except by an instrument or instruments in writing signed by the party against
whom enforcement of any such modification or amendment is sought. Any party
hereto may, only by an instrument in writing, waive compliance by the other
party hereto with any term or provision hereof on the part of such other party
hereto to be performed or complied with. The waiver by any party hereto of a
breach of any term or provision hereof shall not be construed as a waiver of any
subsequent breach.
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(h) Interpretation; Absence of Presumption. For the purposes hereof, (i)
words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other gender as the context
requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and Section,
paragraph or other references are to the Sections, paragraphs, or other
references to this Agreement unless otherwise specified, (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise requires or unless
otherwise specified, (iv) the word "or" shall not be exclusive, and (v)
provisions shall apply, when appropriate, to successive events and transactions.
This Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting or causing
any instrument to be drafted.
(i) Severability. Any provision hereof which is invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without affecting in any way the remaining provisions hereof.
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IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of
the parties hereto as of the day first above written.
BERKSHIRE REALTY COMPANY, INC.
By: _____________________________________
_____________, President
WESTBROOK BERKSHIRE HOLDINGS, L.L.C.
By: _____________________________________
_____________, Authorized Signatory
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