<PAGE>
As filed with the Securities and Exchange Commission on November 13, 1997
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment to Application or Report
Filed Pursuant to Section 12, 13 or 15(d) of
The Securities Exchange Act of 1934
ERP OPERATING LIMITED PARTNERSHIP
(Exact Name of Registrant As Specified In Its Charter)
0-24920
(Commission File No.)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statement, exhibits or other portions of its Current Report on Form 8-K dated
October 9, 1997 as set forth in the pages attached hereto:
Filing of amended information under Items 7 (a) and (b).
Pursuant to the requirements of Securities Exchange Act of 1934, the Registrant
has duly caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
ERP Operating Limited Partnership
By: Equity Residential Properties Trust,
Its General Partner
Date: October 9, 1997 By: /s/ Michael J. McHugh
-----------------------------
Michael J. McHugh
Senior Vice President, Chief
Accounting Officer and Treasurer
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
THE OPERATING PARTNERSHIP IS HEREBY FILING PRO FORMA AND FINANCIAL
STATEMENT INFORMATION WITH RESPECT TO THE ACQUIRED AND PROBABLE
PROPERTIES AS DESCRIBED IN THE OPERATING PARTNERSHIP'S CURRENT REPORT
ON FORM 8-K DATED OCTOBER 9, 1997.
C. EXHIBITS
--------
10 CAPREIT Apartment Portfolio--Agreement for Purchase of
Partnership Interests and Related Interests
24.1 CONSENT OF ERNST & YOUNG LLP
No information is required under Items 1, 3, 4, and 6, and these items
have therefore been omitted.
2
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS
REQUIRED UNDER ITEM 7(B) OF FORM 8-K
3
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Capitalized terms not defined herein are used as defined in the Operating
Partnership's Annual Report on Form 10-K for the year ended December 31, 1996,
and the Operating Partnership's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997.
The following unaudited Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1997 and Statements of Operations for the nine months ended
September 30, 1997 and for the year ended December 31, 1996 have been presented
as if the sale of 12,650,000 Depositary Shares in September and October 1997
(the "Series G Offering"), the issuance of $150,000,000 of 7 1/8% unsecured
fixed rate notes (the "Fourth Public Debt Offering") and the acquisition or
probable acquisition of 45 multifamily properties, including the related
assumption of $218.5 million of mortgage indebtedness, had occurred on September
30, 1997 with respect to the September 30, 1997 balance sheet, January 1, 1997
with respect to the statement of operations for the nine months ended September
30, 1997 and January 1, 1996 with respect to the statement of operations for the
year ended December 31, 1996. All of these properties are included on a pro
forma basis as described in Note A and Note B of the Pro Forma Condensed
Consolidated Balance Sheet as of September 30, 1997.
The unaudited Pro Forma Condensed Consolidated Financial Statements are not
necessarily indicative of the results of future operations, nor the results of
historical operations, had all the transactions occurred as described above on
either January 1, 1996 or January 1, 1997.
The Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the accompanying Notes to the Pro Forma Condensed Consolidated
Financial Statements, the Operating Partnership's Annual Report on Form 10-K for
the year ended December 31, 1996, the Operating Partnership's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1997 and the Combined
Statements of Revenue and Certain Expenses for the acquired and for the acquired
and probable properties (included elsewhere herein).
4
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION> ACQUIRED
AND PROBABLE PRO
HISTORICAL PROPERTIES (A) OFFERINGS (B) FORMA
------------ --------------- -------------- -----------
<S> <C> <C> <C> <C>
ASSETS
Rental property, net $ 4,422,229 $ 608,000 $ -- $ 5,030,229
Real estate held for disposition 3,948 -- -- 3,948
Investment in mortgage notes, net 176,051 -- -- 176,051
Cash and cash equivalents 277,997 (389,504) 187,065 75,558
Rents receivable 2,614 -- -- 2,614
Deposits-restricted 7,761 -- -- 7,761
Escrows deposits-mortgage 31,702 -- -- 31,702
Deferred financing costs, net 14,168 -- 1,313 15,481
Other assets 97,544 -- -- 97,544
------------ --------------- -------------- -----------
Total assets $ 5,034,014 $ 218,496 $ 188,378 $ 5,440,888
============ =============== ============== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 963,819 $ 218,496 $ -- $ 1,182,315
Line of credit -- -- -- --
Notes, net 754,292 -- 148,703 902,995
Accounts payable and accrued expenses 56,864 -- -- 56,864
Accrued interest payable 20,493 -- -- 20,493
Due to affiliates 783 -- -- 783
Rents received in advance and other liabilities 28,928 -- -- 28,928
Security deposits 21,196 -- -- 21,196
Distributions payable 66,707 -- -- 66,707
------------ ----------- ---------- ----------
Total liabilities 1,913,082 218,496 148,703 2,280,281
------------ ----------- ---------- ----------
Commitments and contingencies
9 3/8% Series A Cumulative Redeemable
Preference Units 153,000 -- -- 153,000
------------ --------------- -------------- -----------
9 1/8% Series B Cumulative Redeemable
Preference Units 125,000 -- -- 125,000
------------ --------------- -------------- -----------
9 1/8% Series C Cumulative Redeemable
Preference Units 115,000 -- -- 115,000
------------ --------------- -------------- -----------
8.60 % Series D Cumulative Redeemable
Preference Units 175,000 -- -- 175,000
------------ --------------- -------------- -----------
Series E Cumulative Convertible
Preference Units 99,995 -- -- 99,995
------------ --------------- -------------- -----------
9.65 % Series F Cumulative Redeemable
Preference Units 57,500 -- -- 57,500
------------ --------------- -------------- -----------
Series G Cumulative Convertible
Preference Units 275,000 -- 41,250 316,250
------------ --------------- -------------- -----------
Partners' Capital
General Partner 1,938,553 -- (1,575) 1,936,978
Limited Partners 181,884 -- -- 181,884
------------ --------------- -------------- -----------
Total partners' capital 2,120,437 -- (1,575) 2,118,862
------------ --------------- -------------- -----------
Total liabilities and partners' capital $ 5,034,014 $ 218,496 $ 188,378 $ 5,440,888
============ =============== ============== ===========
</TABLE>
(A) Reflects the multifamily property acquisitions, which include Atrium,
Burwick Farms, Carolina Crossing, Chimneys, Clarion, Concorde Bridge,
Creekwood, Eastland on the Lake, Garden Lake, Gleneagle, Greyeagle, Hickory
Ridge, Hidden Oaks, Highland Grove, Mariners Wharf, Northlake, Silver
Springs, Tamarind at Stoneridge, Tivoli Lakes Club, Village of Sycamore
Ridge and Woodland Meadows (collectively the "Acquired Properties").
Reflects the probable acquisitions of Arbor Glen, Breckinridge Court, Ethans
Glen III, Ethans Ridge I, Ethans Ridge II, Farmington Gates, Fountain Place
I, Fountain Place II, Geary Courtyard, James Street Crossing, Ocean Walk,
Regency Woods, Ridgeway Commons, River Oaks, Royal Oaks, The Cedars,
Trailway Pond I, Trailway Pond II, Valley Creek I, Valley Creek II, Westwood
Pines, White Bear Woods, Woodcrest Villa, and Woodlane Place (collectively
the "Probable Properties"). In connection with such acquired and probable
acquisitions: (i) the amounts presented include the initial purchase price
as well as subsequent closing costs anticipated to be incurred and (ii) the
expected assumption of $218.5 million of mortgage indebtedness.
(B) Reflects the additional issuance of 1,650,000 depositary shares (the "Series
G Depositary Shares"). Each Series G Depositary Share represents a 1/10
fractional interest in a 7 1/4% Series G Convertible Cumulative Preferred
Share of Beneficial Interest, $0.01 par value per share (the "Series G
Preferred Shares"). The Liquidation preference of each of the Series G
Preferred Shares is $250.00 per share (equivalent to $25 per Series G
Depositary Share). Also included is the issuance of $150,000,000 of debt in
connection with the Fourth Public Debt Offering at an interest rate of
7.125%, net of discount and certain issuance costs.
5
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT FOR OP UNIT DATA)
<TABLE>
<CAPTION>
ACQUIRED
AND PROBABLE PRO
HISTORICAL PROPERTIES (A) ADJUSTMENTS (B) FORMA
------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 482,980 $ 63,654 $ -- $ 546,634
Fee and asset management 4,364 -- -- 4,364
Interest income - investment in mortgage notes 14,821 -- -- 14,821
Interest and other income 7,513 -- (3 ,332) 4,181
------------ --------------- ------------ -----------
Total revenues 509,678 63,654 (3,332) 570,000
------------ --------------- ------------ -----------
EXPENSES
Property and maintenance 117,681 19,907 (1,200) 136,388
Real estate taxes and insurance 48,560 7,764 -- 56,324
Property management 18,765 -- 1,591 20,356
Fee and asset management 2,523 -- -- 2,523
Depreciation 106,114 -- 13,680 119,794
Interest:
Expense incurred 82,775 -- 19,966 102,741
Amortization of
deferred financing costs 1,810 -- 49 1,859
General and administrative 10,037 -- -- 10,037
------------ --------------- ------------ -----------
Total expenses 388,265 27,671 34,086 450,022
------------ ---------------- ------------ -----------
Income before gain on disposition of properties 121,413 $ 35,983 $ (37,418) 119,978
=============== ============
Gain on disposition of properties 3,923 --
------------ -----------
Net income $ 125,336 $ 119,978
============ ===========
ALLOCATION OF NET INCOME:
9 3/8% Series A Cumulative Redeemable
Preference Units $ 10,758 $ 10,758
============ ===========
9 1/8% Series B Cumulative Redeemable
Preference Units $ 8,555 $ 8,555
============ ===========
9 1/8% Series C Cumulative Redeemable
Preference Units $ 7,870 $ 7,870
============ ===========
8.60 % Series D Cumulative Redeemable
Preference Units $ 5,477 $ 5,477
============ ===========
Series E Cumulative Convertible
Preference Units $ 2,365 $ 2,365
============ ===========
9.65 % Series F Cumulative Redeemable
Preference Units $ 1,875 $ 1,875
============ ===========
Series G Cumulative Convertible
Preference Units $ 387 (C) $ 17,196
============ ===========
General Partner 78,618 58,819
Limited Partners 9,431 7,063
------------ -----------
$ 88,049 $ 65,882
============ ===========
Net income per weighted average OP
Unit outstanding $ 1.28 $ 0.96
============ ===========
Weighted average OP Units outstanding 68,970 (D) 68,970
============ ===========
</TABLE>
(A) Reflects the results of operations for the Acquired and Probable
Properties. The amounts presented represent the historical amounts for
certain revenues and expenses for the nine months ended September 30, 1997.
6
<PAGE>
(B) the following adjustments to the Acquired and Probable
Properties results of operations as follows:
Interest and other income:
Reduction of interest income due to
the use of working capital for
property acquisitions. $ (3,332)
========
Property and maintenance:
The elimination of third-party
management fees where the Operating
Partnership is providing onsite
property management services. $ (1,200)
========
Property management:
Incremental cost associated with
self management of the Acquired
and Probable Properties for the
nine months ended September 30, 1997. $ 1,591
========
Depreciation:
Reflects depreciation based on the
expected total investment of $608
million for the Acquired and
Probable Properties less 10% allocated to
land and depreciated over a
30-year life for real property.
Depreciation for the Acquired and Probable
Properties reflect amounts for the
nine months ended September 30, $ 13,680
1997. ========
Interest:
Expense incurred:
Interest on mortgage indebtedness
for the Probable Properties. $ 11,950
Interest associated with the Fourth
Public Debt Offering in the amount
of $150 million at an interest
rate of 7.125% per annum. 8,016
--------
$ 19,966
========
Amortization of deferred financing costs
Amortization of financing costs
associated with the Fourth Public
Debt Offering in the amount of
$1.3 million over 20 years. $ 49
========
(C) Allocation of net income represents amounts payable to the Company as
holder of the Series G Cumulative Convertible Preference Units for the nine
months ended September 30, 1997.
(D) Pro Forma weighted average OP Units outstanding for the nine months ended
September 30, 1997 was 69 million. The OP Units outstanding does not
include any OP Units issued in a private or public offering that have not
been used or are not intended to be used for acquisitions or repayment of
debt directly incurred in an acquisition.
7
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT FOR OP UNIT DATA)
<TABLE>
<CAPTION>
ACQUIRED
AND PROBABLE PRO
HISTORICAL PROPERTIES (A) ADJUSTMENTS (B) FORMA
------------ -------------- --------------- -----------
<S> <C> <C> <C> <C>
REVENUES
Rental income $ 454,412 $ 82,441 $ -- $ 536,853
Fee and asset management 6,749 -- -- 6,749
Interest income - investment in mortgage notes 12,819 -- -- 12,819
Interest and other income 4,405 107 (2,942) 1,570
------------ -------------- -------------- ----------
Total revenues 478,385 82,548 (2,942) 557,991
------------ -------------- -------------- ----------
EXPENSES
Property and maintenance 127,172 25,754 (1,732) 151,194
Real estate taxes and insurance 44,128 9,848 -- 53,976
Property management 17,512 -- 2,064 19,576
Fee and asset management 3,837 -- -- 3,837
Depreciation 93,253 -- 18,240 111,493
Interest:
Expense incurred 81,351 -- 26,621 107,972
Amortization of deferred financing costs 4,242 -- 66 4,308
General and administrative 9,857 -- -- 9,857
------------ -------------- -------------- ----------
Total expenses 381,352 35,602 45,259 462,213
------------ -------------- -------------- ----------
Income before gain on disposition of properties 97,033 $ 46,946 $ (48,201) 95,778
============== ==============
Gain on disposition of properties 22,402 --
------------ ----------
Income before extraordinary item 119,435 95,778
Extraordinary item:
Write-off of unamortized costs on refinanced
debt
(3,512) --
------------ ----------
Net Income $ 115,923 $ 95,778
============ ==========
ALLOCATION OF NET INCOME:
Redeemable Preference Interests $ 263 $ --
============ ==========
9 3/8% Series A Cumulative Redeemable
Preference Units $ 14,345 $ 14,345
============ ==========
9 1/8% Series B Cumulative Redeemable
Preference Units $ 11,406 $ 11,406
============ ==========
9 1/8% Series C Cumulative Redeemable
Preference Units $ 3,264 $ 3,264
============ ==========
Series G Cumulative Convertible
Preference Units $ -- (C)$ 22,928
============ ==========
General Partner 72,609 36,528
Limited Partners 14,036 7,307
------------ ----------
$ 86,645 $ 43,835
============ ==========
Net income per weighted average OP
Unit outstanding $ 1.70 $ 0.86
============ ==========
Weighted average OP Units outstanding 51,108 (D) 51,108
============ ==========
</TABLE>
(A) Reflects the results of operations of the Acquired and Probable Properties.
The amounts presented for rental revenues, property and maintenance and
real estate taxes and insurance are based on the revenues and certain
expenses of the Probable Properties for the year ended December 31, 1996.
8
<PAGE>
<TABLE>
<S> <C>
(B) Reflects the following adjustments to the Acquired and
Probable Properties results of operations as follows:
Interest and other income:
Reduction of interest income due to the use of working $ (2,942)
capital for property acquisitions.
========
Property and maintenance:
The elimination of third-party management fees where
the Operating Partnership is providing onsite property
management services. $ (1,732)
========
Property management:
Incremental cost associated with self management of the
Acquired and Probable Properties for the
year ended December 31, 1996. $ 2,064
========
Depreciation:
Reflects depreciation based on the expected total
investment of $608 million for the Acquired and Probable
Properties less amounts allocated to land, generally 10%
and depreciated over a 30-year life for real property.
$ 18,240
========
Interest:
Expense incurred:
Interest on mortgage indebtedness for the Probable
Properties. $ 15,933
Interest associated with the Fourth Public Debt
Offering in the amount of $150 million at
an interest rate of 7.125% per annum. 10,688
--------
$ 26,621
========
Amortization of deferred financing costs
Amortization of financing costs associated with the
Fourth Public Debt Offering in the amount of $1.3 million
over 20 years. $ 66
========
</TABLE>
(C) Allocation of net income represents amounts payable to the Company as
holder of the Series G Cumulative Convertible Preference Units for the year
ended December 31, 1996.
(D) Pro Forma weighted average OP Units outstanding for the year ended December
31, 1996 was 51.1 million. The OP Units outstanding does not include any OP
Units issued in a private or public offering that have not been used or are
not intended to be used for acquisitions or repayment of debt directly
incurred in an acquisition.
9
<PAGE>
STATEMENTS OF REVENUE
AND CERTAIN EXPENSES
REQUIRED UNDER ITEM 7(A) OF FORM 8-K
10
<PAGE>
Report of Independent Auditors
The Board of Trustees of
ERP Operating Limited Partnership
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the CAPREIT Acquired and Probable Properties (the Acquired and
Probable Properties) described in Note 2 for the year ended December 31, 1996.
This combined Statement of Revenue and Certain Expenses is the responsibility of
the Acquired and Probable Properties' management. Our responsibility is to
express an opinion on the combined Statement of Revenue and Certain Expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statement of Revenue and Certain Expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement of Revenue and
Certain Expenses. An audit also includes assessing the basis of accounting used
and significant estimates made by management, as well as evaluating the overall
presentation of the Statement of Revenue and Certain Expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying combined Statement of Revenue and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission for inclusion in ERP Operating Limited Partnership's
Current Report on Form 8-K as described in Note 1, and is not intended to be a
complete presentation of the Acquired and Probable Properties' combined revenue
and expenses.
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the revenue and certain
expenses described in Note 1 for the year ended December 31, 1996 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 12, 1997
11
<PAGE>
CAPREIT Acquired and Probable Properties
Combined Statements of Revenue and Certain Expenses
(Amounts in Thousands)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED FOR THE
SEPTEMBER YEAR ENDED
30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------------------------------
<S> <C> <C>
REVENUE
Rental Income $63,372 $82,441
Other Income 282 107
------------------------------------
63,654 82,548
------------------------------------
CERTAIN EXPENSES
Property operating and maintenance 19,189 24,665
Real estate taxes and insurance 7,764 9,848
Management fees 718 1,089
------------------------------------
27,671 35,602
------------------------------------
Revenue in excess of certain expenses $35,983 $46,946
====================================
</TABLE>
See accompanying notes.
12
<PAGE>
CAPREIT Acquired and Probable Properties
Notes to Combined Statements of Revenue and Certain Expenses
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying combined financial statements consist of 45 multifamily
properties (the "CAPREIT Acquired and Probable Properties" or the "Acquired and
Probable Properties"). ERP Operating Limited Partnership (the "Operating
Partnership") acquired 21 of these multifamily properties on October 9, 1997
(the "Acquired Properties"). The Operating Partnership made a commitment to
acquire or has reached an agreement, in principle, to acquire the remaining 24
properties and the Operating Partnership is in the final stages of documenting
the acquisition of these properties (the "Probable Properties"). The closing of
these pending transactions are subject to certain contingencies and conditions;
therefore, there can be no assurance that these transactions will be
consummated.
The accompanying combined statements of revenue and certain expenses for the
year ended December 31, 1996 and the nine months ended September 30, 1997
(unaudited) were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
Current Report of the Operating Partnership on Form 8-K. The accompanying
combined financial statements are not representative of the actual operations of
the CAPREIT Acquired and Probable Properties for the periods presented as
certain expenses, which may not be comparable to the expenses to be incurred by
the Operating Partnership in the proposed future operations of the CAPREIT
Acquired and Probable Properties, have been excluded. Expenses excluded consist
of interest, depreciation and amortization, professional fees and other costs
not directly related to the future operations of the Acquired and Probable
Properties.
In the preparation of the combined statements of revenue and certain expenses in
conformity with generally accepted accounting principles, management makes
estimates and assumptions that effect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.
Rental income attributable to residential leases is recorded when due from
tenants, generally on a straight-line basis.
13
<PAGE>
CAPREIT Acquired and Probable Properties
Notes to Combined Statements
of Revenue and Certain Expenses (continued)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
The CAPREIT Acquired and Probable Properties have been presented on a combined
basis because all of the properties were either commonly owned or managed by
CAPREIT, the seller of the Acquired and Probable Properties.
2. DESCRIPTION OF PROPERTIES
The 45 Acquired and Probable Properties are multifamily properties and contain a
total of 10,724 units. The properties range in size from 48 to 468 units. The
Acquired and Probable Properties are located in Florida, Georgia, South
Carolina, North Carolina, Tennessee, Kentucky, Michigan, Ohio, Minnesota,
Missouri, Iowa, Kansas, California and Washington.
The Operating Partnership's total investment for the Acquired and Probable
Properties, including initial purchase price and closing costs is expected to be
approximately $608 million.
Forty-four of the Acquired and Probable Properties were or are anticipated to be
managed by a management company affiliated with CAPREIT through the date of
acquisition. The remaining property was managed by a party unaffiliated with the
seller. Subsequent to the date of acquisition, the Operating Partnership began
to manage the Acquired Properties and it is expected that subsequent to the sale
of the Probable Properties to the Operating Partnership, the Operating
Partnership will also manage the Probable Properties. For fifteen of the
Acquired and Probable Properties, the management fee was 3.5% of total revenues
plus an incentive fee in amount equal to a percentage, ranging from .25% to .5%,
of total revenues, based on achieving certain performance targets. For twenty-
nine of the properties, an amount was paid to the management company for
reimbursement of certain costs, which equated to approximately 1% of total
revenues for those properties.
14
<PAGE>
EXHIBIT 10
CAPREIT APARTMENT PORTFOLIO
AGREEMENT FOR PURCHASE OF
PARTNERSHIP INTERESTS AND RELATED INTERESTS
-------------------------------------------
THIS AGREEMENT FOR PURCHASE OF PARTNERSHIP INTERESTS AND RELATED INTERESTS
(this "Agreement") is made and entered into as of the 9th day of October, 1997,
by and among Capital Apartment Properties, Inc., a Maryland corporation
("CAPREIT"), AP CAPREIT Partners, L.P., a Delaware limited partnership ("AP
CAPREIT"), and CAPREIT Limited Partnership, a Maryland limited partnership
("CAPREIT L.P."), Capital Realty Investors Tax Exempt Fund L.P., a Delaware
limited partnership ("CRITEF (Delaware)") and each "Qualified REIT Subsidiary"
(as such term is hereinafter defined) listed on the signature pages of this
Agreement, as sellers (collectively the "Seller"), and ERP Operating Limited
Partnership ("Purchaser"), an Illinois limited partnership, having offices at
Two North Riverside Plaza, Suite 400, Chicago, Illinois 60606.
RECITALS
--------
A. AP CAPREIT owns (i) a 1% interest as the sole limited partner in
CAPREIT L.P., (ii) approximately 97% of the issued and outstanding shares of
stock of CAPREIT, (iii) a 1% interest as a limited partner in CRITEF (Delaware),
and (iv) a 1% interest as a limited partner in Capital Realty Investors Tax
Exempt Fund L.P., a Maryland limited partnership ("CRITEF (Maryland)").
B. CAPREIT owns (i) a 99% interest as the sole general partner in CAPREIT
L.P., and (ii) 100% of the issued and outstanding shares of stock of each of
twenty-seven (27) separate corporations, each organized under the laws of the
State of Maryland (collectively, the "Qualified REIT Subsidiaries").
C. The Qualified REIT Subsidiaries own interests in limited partnerships
that own "Properties" (as such term is defined in Section 1 hereinbelow) as
follows:
(1) EXHIBIT A attached hereto identifies, among other things:
fourteen (14) of the Qualified REIT Subsidiaries (the "Group A Subs");
fourteen (14) limited partnerships (the "Group A Partnerships"); and
fifteen (15) Properties (the "Group A Properties"). As set forth on
EXHIBIT A: each of the Group A Subs owns a 1% interest as the sole general
partner of a Group A Partnerships; thirteen (13) of the Group A
Partnerships own one Group A Property each; and one (1) of the Group A
Partnerships owns two (2) Group A Properties.
(2) EXHIBIT B attached hereto identifies, among other things: three
(3) of the Qualified REIT Subsidiaries (collectively, the "Group B Subs");
twenty-two (22) limited partnerships (collectively, the "Group B
Partnerships"); and twenty-two (22) Properties (the "Group B Properties").
As set forth on EXHIBIT B, each of the Group B Subs owns a 1%
<PAGE>
interest as a general partner of a Group B Partnership, and each of the
Group B Partnerships owns a Group B Property.
(3) One of the Qualified REIT Subsidiaries (the "Group C Sub") owns a
39% interest as the sole general partner in FPA II Limited Partnership, a
Minnesota limited partnership ("Fountain Place II Partnership" or the
"Group C Partnership"), which owns the Property commonly known as Fountain
Place Apartments - Phase II ("Fountain Place II" or the "Group C Property,"
as the context requires), all as set forth on EXHIBIT C attached hereto.
(4) EXHIBIT D attached hereto identifies, among other things: seven
(7) of the Qualified REIT Subsidiaries (collectively, the "Group D Subs");
seven (7) limited partnerships (collectively, the "Group D Partnerships");
and seven (7) of the Properties (the "Group D Properties"). As set forth
on EXHIBIT D, each of the Group D Subs owns a 1% interest as the sole
general partner of one of the Group D Partnerships and each of the Group D
Partnerships owns one of the Group D Properties. The Group A Partnerships,
the Group B Partnerships, the Group C Partnership and the Group D
Partnerships are referred to herein collectively as the "Property
Partnerships."
(5) One of the Qualified REIT Subsidiaries (the "CRITEF Del GP") owns
a 1.01% interest as the sole general partner in CRITEF (Delaware).
(6) One of the Qualified REIT Subsidiaries (the "CRITEF MD GP") owns
a 1.01% interest as the sole general partner in CRITEF (Maryland).
D. CAPREIT L.P. owns (i) a 97.99% interest as a limited partner in CRITEF
(Delaware), (ii) 100% of the non-voting stock of CAPREIT Residential
Corporation, a Maryland corporation ("CAPREIT Residential"), (iii) none of the
voting stock of CAPREIT Residential, (iv) a 98% interest as a limited partner in
each of the Group B Partnerships, (v) a 1% interest as a general partner in each
of the Group B Partnerships, (vi) a 2% interest as a limited partner in the
Group C Partnership, and (vii) various percentage interests as a limited partner
in each of the Group D Partnerships, which interests are identified in greater
detail in EXHIBIT D.
E. CRITEF (Delaware) owns a 97.99% interest as a limited partner in
CRITEF (Maryland).
F. CRITEF (Maryland) owns various percentage interests as a limited
partner in each of the Group D Partnerships, as set forth on EXHIBIT D.
G. Limited partnership interests aggregating 99% of the partnership
interests (collectively, the "Group A Outside Interests") in each of the Group A
Partnerships are owned of record by the entities (collectively, the "Group A
Outside Partners") identified on EXHIBIT A. Each of the Group A Outside
Interests is subject to a purchase option (each, a "Group A Option") in
2
<PAGE>
favor of the Group A Sub that is the general partner of the Group A Partnerships
in question. The Group A Options are identified more particularly on EXHIBIT E
attached hereto. The Group A Outside Interests in Geary Courtyard Associates, a
California limited partnership (the "Geary Partnership") are referred to herein
as the "Geary Outside Interests"; the owners of the Geary Outside Interests are
referred to herein as the "Geary Outside Partners"; and the Group A Option
relative to the Geary Outside Interests is referred to herein as the "Geary
Option."
H. Limited partnership interests aggregating 59% of the partnership
interests in the Group C Partnership (collectively, the "Group C Outside
Interests") are owned of record, in the aggregate by the four individuals
(collectively, the "Group C Outside Partners") identified on EXHIBIT C.
I. The Group C Property and each Group A Property is encumbered by a
separate mortgage or deed of trust securing, respectively, the repayment of
separate issues of tax exempt bonds (the "Property Bonds") issued with respect
to said Property. The Property Bonds, and bonds issued with respect to three
multifamily apartment complexes not included among the Properties (collectively,
the "Third Party Bonds") are referred to herein collectively as the "Bonds." All
documents (including any trust indentures or related documents) evidencing or
securing any given issue of Bonds are referred to herein as the "Bond Documents"
for that issue of Bonds. Pursuant to (i) a certain Master Trust Agreement dated
as of November 1, 1996 (the "Master Trust Agreement"), between CRITEF
(Maryland), as Trustor and United States Trust Company of New York (the
"Trustee"), as trustee and tender agent, and (ii) certain "Series Supplements"
referred to more specifically below, the following five (5) trusts
(collectively, "CRITEF Trusts") have been created:
(i) Capital Realty Investors Tax Exempt Fund Limited
Partnership Trust Series 1996-1, created pursuant to Series Supplement No.
1996-1 dated December 4, 1996, between Trustor and the Trustee;
(ii) Capital Realty Investors Tax Exempt Limited Partnership
Trust Series 1996-2, created pursuant to Series Supplement No. 1996-2 dated
December 4, 1996, between the Trustor and the Trustee;
(iii) Capital Realty Investors Tax-Exempt Fund Limited
Partnership Trust Series 1996-3, created pursuant to Series Supplement No.
1996-3 dated December 4, 1996, between the Trustor and the Trustee;
(iv) Capital Realty Investors Tax-Exempt Fund Limited
Partnership Trust Series 1996-4, created pursuant to Series Supplement No.
1996-4 dated December 4, 1996, between the Trustor and the Trustee; and
3
<PAGE>
(v) Capital Realty Investors Tax-Exempt Fund Limited
Partnership Trust Series 1996-5, created pursuant to Series Supplement No.
1996-5 dated December 4, 1996 between the Trustor and the Trustee.
The CRITEF Trusts, collectively, are the holders of the Bonds; EXHIBIT B to each
of the Series Supplements identifies the Bonds that are held by that particular
CRITEF Trust.
J. Each of the CRITEF Trusts has issued (i) certain "Floater
Certificates" (as such term is defined in the Master Trust Agreement), (ii) a
"Subordinate Certificate" (as such term is defined in the Master Trust
Agreement), and (iii) a "Residual Certificate" (as such term is defined in the
Master Trust Agreement). The Residual Certificate issued by each of the CRITEF
Trusts is owned by CRITEF (Maryland). Thus, CRITEF (Maryland) owns five (5)
Residual Certificates.
K. Pursuant to a certain Master Reimbursement Agreement dated as of
December 1, 1996 (the "Swiss Bank Reimbursement Agreement"), by and among the
Group A Partnerships, the Group C Partnership and Swiss Bank Corporation, acting
through its Chicago branch, a banking corporation organized under the laws of
Switzerland ("Swiss Bank"), Swiss Bank has issued certain letters of credit in
favor of the Trustee. Pursuant to a certain Master Reimbursement and Security
Agreement dated as of December 1, 1996 (the "CMC Reimbursement Agreement") by
and among CRITEF (Maryland), the Group A Partnerships, the Group C Partnership,
the Group D Partnerships, Zurich International (Bermuda) Ltd. (the "Surety") and
Centre Mortgage Capital, L.L.C. ("CMC"), the Surety has issued certain insurance
surety bonds in favor of Swiss Bank. Pursuant to the Swiss Bank Reimbursement
Agreement and the CMC Reimbursement Agreement, respectively (i) the Group A
Partnerships, the Group C Partnership and the Group D Partnerships have
executed, delivered and recorded one or more mortgages or deeds of trust in
favor of Swiss Bank, CMC and/or the Surety, respectively, (ii) all of the
partners in the Group A Partnerships, the Group C Partnership and the Group D
Partnerships have pledged to the Surety and CMC their interests in those
partnerships, and (iii) CRITEF (Maryland) has pledged its interests in the
Residual Certificates to CMC, the Surety and the Swiss Bank. The financing
effectuated pursuant to the Master Trust Agreement, the Swiss Bank Reimbursement
Agreement, the CMC Reimbursement Agreement and all other instruments executed
and delivered pursuant thereto (collectively, the "CentRe Financing Documents")
is referred to herein as the "CentRe Financing."
L. Seller has agreed to sell to Purchaser and Purchaser has agreed to
acquire from Seller, upon and subject to the terms and conditions of this
Agreement, one hundred percent (100%) of the partnership interests in (i) the
Group A Partnerships, (ii) the Group B Partnerships, (iii) the Group C
Partnership, (iv) the Group D Partnerships, and (v) CRITEF (Maryland)
(collectively, the "Partnership Interests"). For convenience of reference, a
chart depicting the organizational interrelationships among the principal
entities referred to above in these Recitals is attached hereto as EXHIBIT F.
The Group A Partnerships, the Group B Partnerships, the Group C Partnership, the
Group D Partnerships and CRITEF (Maryland) are referred to herein collectively
as the "Partnerships." The Group B Partnerships (with the exception of CAPREIT
Breckinridge Limited Partnership [the "Prudential Partnership"]) are sometimes
referred to herein collectively as
4
<PAGE>
the "Stage 1 Partnerships," and the Partnerships Interests in the Stage 1
Partnerships are sometimes referred to herein collectively as the Stage 1
Partnership Interests. The Group A Partnerships, the Group C Partnership, the
Group D Partnerships and CRITEF (Maryland) are sometimes referred to herein
collectively as the "Stage 2 Partnerships," and the Partnership Interests in the
Stage 2 Partnerships are sometimes referred to herein collectively as the "Stage
2 Partnership Interests." The Properties owned by the Stage 1 Partnerships are
sometimes referred to herein as the "Stage 1 Properties." The Properties owned
by the Stage 2 Partnerships are sometimes referred to herein as the "Stage 2
Properties." The Partnership Interests in the Prudential Partnership are
sometimes referred to herein as the "Prudential Partnership Interests" and the
Property owned by the Prudential Partnership is sometimes referred to herein as
the "Prudential Property."
THEREFORE, in consideration of and in reliance upon the above Recitals, the
terms, covenants and conditions contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Purchaser agree as follows:
1. DEFINITION OF "PROPERTY" AND "PROPERTIES"
-----------------------------------------
As employed herein, the term "Properties" shall mean, collectively, all
right, title and interest of the applicable Property Partnership (whether now or
hereafter existing) in and to the following described property (which shall be
subject to the "Permitted Exceptions" (as such term is defined in Section 5(A)
below and each of which, to the extent relating to a single Premises, is
referred to individually as a "Property"):
A. those certain tracts of real estate on which are situated
apartment complexes described on the attached EXHIBIT G, which real estate
is legally described in the attached EXHIBIT H, together with all and
singular easements, covenants, agreements, rights, privileges, tenements,
hereditaments and appurtenances thereunto now or hereafter belonging or
appertaining thereto (collectively the "Land"); and
B. any land lying in the bed of any street, alley, road or avenue
(whether open, closed or proposed) within, in front of, behind or otherwise
adjoining the Land or any of it, and all right, title and interest of said
Property Partnership (whether now or hereafter existing) in and to any
award made or to be made as a result or in lieu of condemnation, and in and
to any award for damage to the Property or any part thereof by reason of
casualty (all of the foregoing being included within the term "Land"); and
C. all of the buildings, structures, fixtures, facilities,
installations and other improvements of every kind and description now or
hereafter in, on, over or under the Land, including, without limitation,
any and all plumbing, air conditioning, heating, ventilating, mechanical,
electrical and other utility systems, parking lots and facilities,
landscaping, roadways, sidewalks, swimming pools and other recreational
facilities,
5
<PAGE>
security devices, signs and light fixtures (collectively, the
"Improvements") (the Land and Improvements being collectively referred to
as the "Premises"); and
D. all furniture, furnishings, fixtures, equipment, machinery,
maintenance vehicles and equipment, tools, parts, recreational equipment,
carpeting, window treatments, stationery and other office supplies, and
other tangible personal property of every kind and description situated in,
on, over or under the Premises or used solely in connection therewith,
owned by said Property Partnership or in which said Property Partnership
otherwise has an interest and which is not owned by tenants under the
Leases (as such term is hereinafter defined), together with all
replacements and substitutions therefor (together with the intangible
personal property hereinafter identified, collectively the "Personal
Property"), a list of which is attached to this Agreement as EXHIBIT I; and
E. the following, to the extent related to the Properties and to the
extent available and in Seller's (or the applicable Property Partnership's)
possession and control: (i) all existing surveys, blue prints, drawings,
plans and specifications (including, without limitation, structural, HVAC,
mechanical and plumbing plans and specifications) and other documentation
for or with respect to the Property; (ii) all marketing artwork,
construction drawings, soil tests and environmental reports to the extent
available and in the possession of Seller, the applicable Property
Partnership or its management agent; (iii) all tenant lists and data,
correspondence with past, present and prospective tenants, vendors,
suppliers, utility companies and other third parties, booklets, manuals and
promotional and advertising materials concerning the Property or any part
thereof to the extent available and in the Seller's possession; and (iv)
all other existing books, records and documents (including, without
limitation, those relating to ad valorem taxes and leases); and
F. the Leases and Service Contracts (as such terms are hereinafter
defined) and the other intangible personal property now or hereafter owned
by the applicable Property Partnership or in which the applicable Property
Partnership otherwise has an interest and used in connection with or
arising from the business now or hereafter conducted on or from the
Property including, without limitation, claims, choses in action, lease and
other contract rights with respect to that Property, names, and, if
available, telephone exchange numbers, specifically excluding any telephone
numbers assigned to CAPREIT or CAPREIT L.P. A rent roll of all leases
affecting each Premises as of September 23, 1997 -- September 30, 1997, in
the case of the "Geary Partnership" (as such term is hereinafter defined)--
(the "Leases," with such rent roll being referred to in this Agreement as
the "Rent Roll"), setting forth each tenant's name, a description of the
space leased, the amount of rent due and the amount of any security deposit
paid, and the term of each Lease, is attached to this Agreement as EXHIBIT
J. A list of all service and maintenance agreements, equipment leases and
licenses and permits (the "Service Contracts") affecting or pertaining in
any way to each Property as of August 31, 1997 is attached to this
Agreement as EXHIBIT K.
6
<PAGE>
Notwithstanding anything to the contrary herein contained, there shall be
excluded from the definitions of Improvements, Personal Property and Properties,
as the context requires, (i) all personal property owned by tenants of any
Property, (ii) all equipment, if any, leased by Seller (provided that, in the
case of any leased equipment for which the lease is being assumed by Purchaser
hereunder, Seller's rights under the leases in question shall be included in the
term "Property"), (iii) computer programs, computer software and licenses
related thereto (the "Software"), (iv) any correspondence between any Seller or
any Partnership, on the one hand, and CAPREIT, AP CAPREIT or Apollo Real Estate
Investment Fund, L.P. on the other hand, (v) all appraisals, valuations and
valuation analyses, (vi) any document that is not binding upon any Partnership
after Closing and, that is not material to the organizational or tax status of
any Partnership, and is not material to the operation, leasing, management,
construction, design, maintenance, repair, renewal, insurance claims,
litigation, compliance with legal requirements, or financing of any Property or
any Partnership, (vii) brochures and the like bearing the name "CAPREIT",
subject to Section 8(A)(vi), and (viii) any flags bearing the name "CAPREIT."
2. PURCHASE AND SALE OF INTERESTS
------------------------------
Subject to the terms and conditions of this Agreement, on the applicable
"Closing Date" (as such term is defined in Section 6(A)), Seller shall sell and
convey or cause to be sold and conveyed, and Purchaser shall purchase, one
hundred percent (100%) of the Partnership Interests contemplated to be conveyed
on said Closing Date pursuant to this Agreement, with the exception of the
interests in the Geary Partnership (collectively, the "Geary Partnership
Interests"), which shall be sold and conveyed to Purchaser as provided in
Section 6(A)(2) hereinbelow.
3. PURCHASE PRICE
--------------
The total consideration to be paid by Purchaser to Seller for the
Partnership Interests (the "Purchase Price") is Six Hundred Seven Million Five
Hundred Sixteen Thousand Eight Hundred Fifty Dollars ($607,516,850). Purchaser
and Seller acknowledge and agree that the closing of the transactions
contemplated by this Agreement shall be consummated in stages (subject to
partial adjournments, as provided below, in the case of the Geary Partnership),
with the "Stage 1 Closing" (as such term is hereinafter defined), the
"Prudential Closing" (as such term is hereinafter defined) and the "Stage 2
Closing" (as such term is hereinafter defined) occurring separately at the times
set forth in Section 6 hereinbelow. The portion of the Purchase Price that is
attributable to the Stage 1 Partnership Interests (the "Stage 1 Purchase Price")
is $277,517,520. The Stage 1 Purchase Price consists of (i) the "Stage 1 Base
Purchase Price," in the amount of $261,517,520 and (ii) the "Stage 1 Contingent
Purchase Price," in the amount of $16,000,000. The portion of the Purchase
Price that is attributable to the Stage 2 Partnership Interests (the "Stage 2
Purchase Price") is $312,516,850. The portion of the Purchase Price that is
attributable to the Prudential Partnership Interests (the "Prudential Purchase
Price") is $17,482,480. The Purchase Price shall be paid as follows:
7
<PAGE>
A. Earnest Money
-------------
(i) Upon the execution and delivery of this Agreement by
Seller and Purchaser, Purchaser shall deliver to the Chicago office of
the Title Insurer (as hereafter defined) ("Escrowee") by wire transfer
of immediately available funds the sum of Fifteen Million Dollars
($15,000,000) (together with any interest earned thereon, net of
investment costs, the "Earnest Money") to be held by the Escrowee
pursuant to escrow instructions (the "Escrow Instructions") in the
form attached hereto as EXHIBIT L. The Escrowee shall invest the
Earnest Money in accordance with the Escrow Instructions. Any and all
interest earned on the Earnest Money shall be reported to Purchaser's
federal tax identification number, and any taxes thereon shall be paid
by Purchaser.
(ii) If the transaction contemplated by this Agreement closes
in accordance with the terms and conditions of this Agreement, then at
the Stage 2 Closing the Earnest Money shall be delivered by the
Escrowee to Seller as payment toward the Stage 2 Purchase Price. If
any of the Closings fails to occur due to a default on the part of any
Seller or if a contingency set forth in this Agreement for the benefit
of Purchaser is not satisfied or removed, after the expiration of any
grace periods provided under this Agreement, the Earnest Money shall
be delivered by the Escrowee to Purchaser, to the extent provided in
Section 10 below or in Section 12(A) or Section 14 below, as
applicable. If any of the Closings fails to occur for any other
reason, after the expiration of any grace periods provided under this
Agreement, the Earnest Money shall be delivered by the Escrowee to
Seller, to the extent provided for in Section 12(B) below.
B. Bond Financing
--------------
At the Stage 2 Closing, Purchaser shall acquire the Stage 2
Partnership Interests, with the Stage 2 Partnership Interests (and
CRITEF (Maryland's) interest in the Residual Certificates) remaining
subject to the lien of the CentRe Financing, and with the Stage 2
Properties remaining subject to the lien of (i) the CentRe Financing
and (ii) the Bond Documents related to the Property Bonds.
C. Payment of Prepayable Debt
--------------------------
At the Stage 1 Closing, Purchaser shall make available to Seller
sufficient funds to enable Seller to cause to be paid in full, at the
Stage 1 Closing, to the holders thereof, the amount (said amount being
referred to herein in the aggregate as the "Prepayment Amount")
required to pay and satisfy in full the "Prepayable Debt" (as defined
in Section 10(D) hereof). Seller shall direct Purchaser, at the Stage
1 Closing, to make said payments to the holders of the Prepayable Debt
on Seller's behalf.
8
<PAGE>
D. Prudential Debt
---------------
At the Prudential Closing, Purchaser shall acquire the Prudential
Partnership Interests, with the Prudential Property remaining subject
to the lien of the "Prudential Debt" (as such term is defined in
Section 10(D) below).
E. Cash at Closing
---------------
(1) At the Stage 1 Closing, Purchaser shall pay to Seller an
amount (the "Stage 1 Base Cash Balance") equal to the Stage 1 Base
Purchase Price less the Prepayment Amount as of the Stage 1 Closing
Date.
(2) At the Prudential Closing, Purchaser shall pay to Seller an
amount (the "Prudential Cash Balance") equal to the Prudential
Purchase Price, less the outstanding principal balance of the
Prudential Debt as of the Prudential Closing Date.
(3) At the Stage 2 Closing, Purchaser shall pay to Seller an
amount (the "Stage 2 Cash Balance") equal to the Stage 2 Purchase
Price less (i) the Earnest Money (once paid to Seller), (ii) the
outstanding principal balance of the Floater Certificates and the
Subordinate Certificates as of the Stage 2 Closing Date, determined
after the consummation of the Third Party Withdrawals, which amount is
anticipated to be equal to $208,998,790, and (iii) the sum of $500,000
(the "Geary Holdback"), which shall be held by the Title Insurer
pursuant to the Escrow Instructions and paid to Seller together with
interest thereon, if any, upon and subject to the consummation of the
"Geary L.P. Closing" (as such term is defined in Section 6(A)(2)
hereinbelow), or else released to Purchaser from said escrow as
provided in Section 6(C)(i)(p) hereinbelow.
(4) The Stage 1 Base Cash Balance, the Prudential Cash Balance
and the Stage 2 Cash Balance, as the case may be, subject, however, to
such adjustments as are required by this Agreement, shall be paid by
wire of immediately available funds which must be received by Seller
on or before 2:00 p.m. Eastern time on the applicable Closing Date to
an account or accounts designated by Seller in writing by notice
received by Purchaser not less than one (1) business day prior to said
Closing Date.
F. STAGE 1 CONTINGENT PURCHASE PRICE
---------------------------------
At the Stage 1 Closing, Purchaser shall deposit the Stage 1
Contingent Purchase Price in a strict joint order escrow with the
Title Insurer, pursuant to escrow instructions that are in the same
form as the Escrow Instructions. All
9
<PAGE>
interest earned on the Stage 1 Contingent Purchase Price under the
terms of said escrow, net of investment costs, shall be paid to
Purchaser as earned, regardless of whether the Stage 1 Contingent
Purchase Price is ultimately paid to Seller or returned to Purchaser.
Upon the consummation of the Stage 2 Closing, Purchaser and Seller
shall direct the Escrowee to deliver the Stage 1 Contingent Purchase
Price to Seller. If the Stage 2 Closing fails to occur due to a
default on the part of any Seller or if a contingency set forth in
this Agreement for the benefit of Purchaser with respect to the Stage
2 Closing is not satisfied or removed, after the expiration of any
grace periods provided under this Agreement, the Stage 1 Contingent
Purchase Price shall be delivered by the Escrowee to Purchaser, to the
extent provided in Section 10 below or in Section 12(A) or Section 14
below, as applicable, in which event Purchaser shall have no further
obligation to pay the Stage 1 Contingent Purchase Price to Seller at
any time, and the Stage 1 Purchase Price shall be deemed equal to the
Stage 1 Base Purchase Price. If the Stage 2 Closing fails to occur for
any other reason, after the expiration of any grace periods provided
under this Agreement, the Stage 1 Contingent Purchase Price shall be
delivered by the Escrowee to Seller, to the extent provided for in
Section 12(B) below, in full satisfaction of Purchaser's obligation to
pay the Stage 1 Contingent Purchase Price. Purchaser and Seller agree
that said structuring of the Stage 1 Purchase Price is equitable in
view of the fact that (i) from Purchaser's perspective, the Stage 1
Purchase Price was established in contemplation of the acquisition of
a larger portfolio including the Stage 2 Partnership Interests, and
(ii) from Seller's perspective, if the Stage 2 Closing does not occur,
Seller will experience the substantial disadvantages of operating a
smaller portfolio consisting solely of the Stage 2 Partnership
Interests.
G. ADDITIONAL PAYMENTS. Upon and subject to the occurrence of the
-------------------
Stage 1 Closing, Purchaser shall pay to Seller, as additional consideration
for the sale, an additional payment (the "Stage 1 Additional Payment") in
the amount of $750,000. Upon and subject to the occurrence of the Stage 2
Closing, Purchaser shall pay to Seller , as additional consideration for
the sale an additional payment (the "Stage 2 Additional Payment") in the
amount of $750,000.
As employed herein, the term "Stage 1 Closing" shall mean the closing of the
transactions contemplated by this Agreement as they relate to the Stage 1
Partnerships, the Stage 1 Partnership Interests, the Stage 1 Properties and the
Prepayable Debt (that is, the payment of the Stage 1 Cash Balance, the transfer
of the Stage 1 Partnership Interests to Purchaser with the Stage 1 Properties
being subject to the Permitted Exceptions, the prepayment by Purchaser of the
Prepayable Debt and the satisfaction of all other terms and conditions of this
Agreement as they relate to the Stage 1 Partnerships, the Stage 1 Partnership
Interests, the Stage 1 Properties, and the Prepayable Debt). As employed
herein, the term "Stage 2 Closing" shall mean the closing of the transactions
contemplated by this Agreement as they relate to the Stage 2 Partnerships, the
Stage 2 Partnership Interests, the Stage 2 Properties, the Property Bonds, the
Bond Documents, the CentRe Financing,
10
<PAGE>
the Residual Certificates and the Series Trusts (that is, the payment of the
Stage 2 Cash Balance, the transfer of the Stage 2 Partnership Interests to
Purchaser with the Stage 2 Properties being subject to the Bond Documents, the
CentRe Financing Documents and the other Permitted Exceptions, and the
satisfaction of all other terms and conditions of this Agreement as they relate
to the Stage 2 Partnerships, the Stage 2 Partnership Interests, the Stage 2
Properties, the Property Bonds, the Bond Documents, the CentRe Financing, the
Residual Certificates and the Series Trusts). As employed herein, the term
"Prudential Closing" shall mean the closing of the transactions contemplated by
this Agreement as they relate to the Prudential Partnership, the Prudential
Partnership Interests, the Prudential Property and the Prudential Debt (that is,
the payment of the Prudential Cash Balance, the transfer of the Prudential
Partnership Interests to Purchaser with the Prudential Property being subject to
the Permitted Exceptions and the Prudential Debt and the satisfaction of all
other terms and conditions of this Agreement as they relate to the Prudential
Partnership, the Prudential Partnership Interests, the Prudential Property and
the Prudential Debt). As employed herein, the term "Closing" shall mean the
Stage 1 Closing, the Prudential Closing, the Stage 2 Closing or any or all of
the foregoing, as the context requires. The payment of the Purchase Price at
each applicable Closing is subject to prorations to be made pursuant to Section
6.C hereof.
4. OPERATION OF PROPERTIES THROUGH CLOSING;
OTHER PRE-CLOSING COVENANTS OF SELLER
-------------------------------------
Through (i) the consummation of the Stage 1 Closing (in the case of the
Stage 1 Properties), (ii) the consummation of the Prudential Closing (in the
case of the Prudential Property), (iii) the consummation of the Stage 2 Closing
(in the case of the Stage 2 Properties), or (iv) the termination of this
Agreement, Seller covenants that:
A. Except as otherwise provided in this Section 4, Seller shall
lease, manage and operate and maintain their respective Properties in
accordance with its existing practices. Seller will not make any change in
its normal and customary billing and collection practices, without notice
to and the consent of Purchaser, which consent shall not be unreasonably
withheld, conditioned or denied. Seller shall not permit the respective
Property Partnerships to apply any security deposits against rent
delinquencies or other Lease defaults (other than for tenants who have
either vacated their apartments or with whom said Property Partnerships is
engaged in litigation) without notice to and the consent of Purchaser.
B. Seller shall not (and shall not permit the respective Property
Partnerships to) sell, mortgage, pledge, hypothecate or otherwise transfer
or dispose of all or any part of any Property or any interest therein
(except for such items of tangible Personal Property as become obsolete or
are disposed of in the ordinary course), nor shall Seller, without
Purchaser's consent, which shall not be unreasonably withheld, conditioned
or denied, permit any Property Partnership to initiate, consent to, approve
or otherwise take any action binding on any said Property Partnership or
said Property Partnership's Property with
11
<PAGE>
respect to zoning rules or regulations presently applicable to all or any
part of said Property Partnership's Property.
C. Prior to December 15, 1997, without the prior written consent of
Purchaser, which shall not be unreasonably withheld, conditioned or denied,
Seller shall not terminate, modify, extend, amend or renew any Lease or
Service Contract or enter into any new Lease or Service Contract (except
for the termination of Leases in the ordinary course of business and for
any new Lease or Lease renewals providing for a monthly rental not less
than the rental presently being charged (or unless pursuant to the rent
promotional program attached hereto as EXHIBIT N for the particular
Property referenced therein) and for a term of not more than twelve (12)
months), except that, as of the applicable Closing, Seller shall terminate
any management contracts affecting the Properties, with the exception of
the Geary Management Agreement (as hereinafter defined). From and after
December 15, 1997, Seller shall have the right to permit the respective
Property Partnerships to terminate and/or renew Leases in the ordinary
course of business in accordance with said Property Partnership's customary
practices as of the date hereof. Any new Lease or Service Contract entered
into with Purchaser's consent shall be subject to the covenants,
representations and warranties set forth in this Agreement with respect to
Leases and Service Contracts.
D. As of the applicable Closing, (i) all units on the Properties
that have been vacated for more than ten (10) days or fifteen (15) days, as
applicable (as provided below) shall have been put in rent ready condition
by Seller, at Seller's sole cost and expense, and (ii) all management
contracts pertaining to the Properties shall have been terminated, with the
exception of that certain Residential Property Management and Leasing
Agreement dated as of January 1, 1997 by and between Oakwood Management
Company and the Geary Partnership (the "Geary Management Agreement"). The
period referred to in clause (i) above shall be (x) ten (10) days, if the
Closing in question occurs within the first fifteen (15) days of any month,
and (y) fifteen (15) days, if the Closing in question occurs on the
sixteenth (16th) day or later in any given month.
E. Seller shall promptly give written notice to the Purchaser of the
occurrence of any event known to Seller which materially affects the truth
or accuracy of any representations or warranties made or to be made by
Seller under or pursuant to this Agreement.
F. (Intentionally Omitted).
G. Seller shall cause the respective Property Partnerships to
maintain in full force and effect its existing insurance coverages as
disclosed to Purchaser, provided that the same remain available at
commercially reasonable rates and to the extent that said policies relate
to the applicable Property Partnership, Seller may, but shall not be
obligated to, terminate said coverages with respect to the applicable
Properties at the applicable Closing
12
<PAGE>
and Seller shall be fully responsible for paying all costs of terminating
said insurance coverages.
H. Seller shall not sell, assign, pledge, hypothecate or otherwise
transfer or dispose of all or any portion of any Partnership Interest or
the Residual Certificates, except as expressly permitted by this Agreement.
Seller shall not exercise or permit CRITEF (Maryland) to exercise any right
or remedy, or to furnish any directions (other than directions furnished in
the ordinary course of business), under or in connection with the Master
Trust Agreement, the Swiss Bank Reimbursement Agreement, the CMC
Reimbursement Agreement or any of the other CentRe Financing Documents, the
Bond Documents relative to the Property Bonds, or the Residual
Certificates, without the prior written approval of Purchaser, which
approval shall not be unreasonably withheld, conditioned or denied,
provided, however, that Seller shall use good faith reasonable effort to
effectuate the release (the "Third Party Bond Withdrawals") to CRITEF
(Maryland) prior to the last day of the "Stage 2 Consent Period" (as such
term is hereinafter defined), of the "Outstanding Bonds" relating to the
three "Third Party Projects" known as the "Paces Landing Project," the
"Greenhaven Project" and the "Washington Ridge Project" (as such terms are
employed in the CMC Reimbursement Agreement), in accordance with Section
2.03(d) of the CMC Reimbursement Agreement and Sections 6.1 or 6.2, as the
case may be, of the Master Trust Agreement. Provided that Seller has used
good faith reasonable efforts to obtain the Third Party Bond Withdrawals,
Purchaser agrees that Seller shall have no liability to Purchaser for its
failure to obtain the Third Party Withdrawals, subject, however, to Section
3(F) above.
I. Notwithstanding the foregoing, Seller covenants and agrees,
through exercise of the Group A Options (in the case of the Group A
Partnerships) or otherwise (in the case of the Group C Partnership) (i) to
cause all of the Group A Outside Interests (other than the Geary Outside
Interests) and all of the Group C Outside Interests to be transferred to
Purchaser at the Stage 2 Closing, together with the other Partnership
Interests pursuant to the terms of this Agreement, and (ii) assign to
Purchaser all of CAPREIT of Geary Courtyard, Inc.'s interests in the Geary
Option. Seller agrees to fully assume the risk of causing the Group A
Outside Interests and the Group C Outside Interests to be transferred to
Purchaser pursuant to the terms of this Agreement. Purchaser, relying in
part upon the indemnities in subclause (C) of Section 9(A) of this
Agreement, agrees to accept said transfers directly from the Group A
Outside Partners and/or the Group C Outside Partners, as the case may be.
With respect to the Group A Properties, Seller shall have the right to do
the following (and, in the case of the Geary Option, shall do the
following) in lieu of exercising the Group A Options and proceeding as
above:
(i) cause to be deposited in an escrow satisfactory to
Purchaser in the exercise of Purchaser's reasonable judgment the
following, to be released from said escrow at the Stage 2 Closing (or,
in the case of the Geary Option, at the Geary L.P. Closing: (A)
instruments of assignment executed by the Group A Outside Partners
13
<PAGE>
in the form contemplated under the Group A Options, with Purchaser
identified as the transferee, (B) instruments assigning the Group A
Options to Purchaser and (C) instruments, executed by the Group A
Outside Partners, consenting to the assignment of the Group A Options
to Purchaser, waiving all requirements with respect to appraisals and
other conditions precedent, and agreeing that Purchaser shall have the
right to exercise each of the Group A Options and acquire the Group A
Outside Interests for a price of $1.00 paid to each optionor; and
(ii) cause the instruments referred to in clauses (B) and (C)
of clause (i) above to be delivered to Purchaser immediately prior to
(but conditioned upon the occurrence of) the Stage 2 Closing.
If Seller takes the steps referred to in clauses (i) and (ii) above no
later than the Stage 2 Closing, then Purchaser shall exercise the Group A
Options (other than the Geary Option, which shall be exercised as provided
in Section 6(A)(2) below) at the Stage 2 Closing and accept delivery at the
Stage 2 Closing of the assignments referred to in subclause (A) of clause
(i) above. If, with respect to any given Group A Outside Interest (other
than the Geary Outside Interests, which are treated as provided below),
Seller does not take the steps referred to in clauses (i) and (ii) above on
or before the Stage 2 Closing, or if (through no fault of Purchaser's) the
assignment referred to in subclause (A) of clause (i) above shall not be
delivered to Purchaser from escrow at the Stage 2 Closing, Seller shall be
obligated to exercise said Group A Option and cause said Group A Outside
Interest to be conveyed to Purchaser at the Stage 2 Closing. The delivery
to Purchaser at the Stage 2 Closing of an assignment referred to in
subclause (A) of clause (i) above shall satisfy Seller's obligation to
cause the Group A Outside Interest in question to be assigned to Purchaser,
subject, however, to the representations of Seller in Section 8(C)(v) below
and the indemnities of Seller in subclause (C) of Section 9(A) below.
Notwithstanding the direct exercise by Purchaser of the Group A Outside
Options following Seller's deposit of the applicable documents in escrow
pursuant to clauses (i) and (ii) above, the closing prorations with respect
to the Group A Properties and the Group A Outside Interests shall be
performed between Purchaser and Seller as otherwise provided in Section
6(C) below, as though Seller had conveyed the Group A Outside Interests
directly to Purchaser.
J. Prior to each Closing, any and all loans and/or loan servicing
arrangements between (i) Seller, Seller's affiliates and any of the
Partnerships involved in said Closing or (ii) CRITEF (Maryland) and any of
the Partnerships involved in said Closing, as the case may be, shall be
terminated and released at the sole cost and expense of Seller, so that, as
of each Closing, none of the Partnerships involved in said Closing shall
have any surviving obligations whatsoever to Seller or any affiliates of
Seller.
K. Seller shall use good faith, reasonable efforts to cause the
respective conditions precedent in Section 10 of this Agreement to be
satisfied prior to the end of the applicable Consent Period; provided that
Seller shall not be obligated to pay any money to
14
<PAGE>
the Existing Lenders or other third parties in connection therewith, other
than as specifically provided in this Agreement. Provided that Seller has
used good faith reasonable efforts to cause said conditions to be satisfied
within said time period, Purchaser agrees that Seller shall have no
liability to Purchaser for its failure to cause said conditions to be
satisfied, subject, however, to Section 3(F) hereof.
L. [Intentionally omitted]
M. Seller shall update the Rent Roll and provide Property-level
operating statements to Purchaser on a monthly basis on or before the 25th
day of each month prior to the respective Closings.
5. STATUS OF TITLE TO PROPERTY AND PARTNERSHIP INTERESTS
-----------------------------------------------------
A. State of Title
--------------
Subject to Section 5(D) hereof, at each Closing, the applicable
Partnerships' title to the Properties shall be subject only to: (i)(a) in
the case of Stage 1 Properties, those covenants, conditions and
restrictions of record which are identified on Schedule B of the pro-forma
policies of title insurance referred to in Attachment 1 to Exhibit II and
(b) in the case of the other Properties, Purchaser hereby accepts the
condition of title as of this date for all Properties and is relying solely
on the Title Insurer's "Title Commitments" (as such term is hereinafter
defined) with respect thereto (provided that Seller delivers to the Title
Insurer with respect to each such Property at the applicable Closing the
Affidavits in the form used for each Property for the Stage 1 Closing,
provided that the information contained in said Affidavits does not in and
of itself cause the Title Insurer to include new title exceptions
notwithstanding any other actions or undertakings by Seller), or (c) which
are shown on the "Surveys" (as such term is hereinafter defined, (ii) the
lien of real estate taxes which are not yet due or payable; (iii) the
Leases; (iv) the Assumed Debt and (v) certain utility contracts identified
on EXHIBIT HH (the above enumerated exceptions collectively referred to as
the "Permitted Exceptions"). At the Stage 1 Closing, subject to the terms
and conditions of this Agreement, Seller shall convey or cause to be
conveyed to Purchaser one hundred percent (100%) of the Stage 1 Partnership
Interests, subject to no security interests of any kind. At the Prudential
Closing, subject to the terms and conditions of this Agreement, Seller
shall convey or cause to be conveyed to Purchaser one hundred percent
(100%) of the Prudential Partnership Interests, subject solely to any
security interests securing the Prudential Debt. At the Stage 2 Closing,
subject to the terms and conditions of this Agreement, Seller shall convey
or cause to be conveyed to Purchaser one hundred percent (100%) of the
Stage 2 Partnership Interests, subject solely to any security interests in
favor of Swiss Bank and/or CMC and/or the Surety and/or the Trustee in
connection with the CentRe Financing.
15
<PAGE>
B. Preliminary Evidence of Title
-----------------------------
Purchaser has obtained from Chicago Title Insurance Company (the
"Title Insurer") commitments (the "Title Commitments") for 1992 ALTA
Owner's Title Insurance Policies. The Title Commitments are identified on
EXHIBIT II attached hereto and by this reference made a part hereof. The
Owner's Title Insurance Policies (the "Title Insurance Policies") referred
to in Section 10(A) below shall be issued based upon Purchaser's reasonable
allocation of the Purchase Price to the respective Properties and shall not
include any general or standard exceptions which are a part of the printed
form of the policy, but shall include deletion of the Creditors' Rights
exclusion, a fairway endorsement, a non-imputation endorsement or other
endorsement insuring that knowledge of any matters known or imputed to be
known by Seller or the property Partnership or their affiliates prior to
the applicable Closing will not be imputed to Purchaser, Purchaser's
affiliates or the Property Partnerships from and after Closing for purposes
of title insurance coverage, and to the extent available in each
jurisdiction, the following additional endorsements: (i) 3.1 Zoning
Endorsement with parking; (ii) ALTA Form 103.7 Access Endorsement; (iii)
Survey Endorsement; (iv) P.I.N. Endorsement; (v) Environmental Endorsement;
(vi) Modified Owner's Comprehensive Endorsement to insure over all
covenants, conditions and restrictions of record; and (vii) Utility Access
Endorsement. Notwithstanding anything to the contrary herein contained,
Purchaser agrees that Purchaser shall accept Title Insurance Policies for
the Stage 1 Properties in the form of the pro-forma policies of title
insurance identified on Attachment 1 to Exhibit II.
C. Surveys
-------
Seller has furnished to purchaser Seller's existing plats of survey
with respect to each of the Properties. Said surveys (collectively, the
"Surveys") are identified on EXHIBIT JJ attached hereto.
D. Title Defects
-------------
If any revision or update of any of the Title Commitments or the
Surveys discloses exceptions to title (including survey exceptions) other
than Permitted Exceptions from any matter first arising after the date
hereof, Purchaser shall so notify Seller, time being of the essence, and
Seller shall have until the applicable Closing (and may adjourn said
Closing for such reasonable periods, not to exceed fourteen (14) days in
the aggregate for each Closing) to have each such unpermitted exception to
title removed; provided, however, that if the revision or update of any
Title Commitment discloses any such exception to title which predates the
date of the respective Title Commitments as shown on EXHIBIT II hereto, and
if the Title Insurer is willing to endorse over or delete such exception,
the Closing shall not be adjourned and Purchaser shall accept title as it
then is with such endorsement to (or the deletion of such exception from)
the appropriate Title Insurance Policy. Nothing herein shall require
Seller to bring any action or proceeding (except as
16
<PAGE>
provided below) or take any other action or pay any other amount to remove
an unpermitted exception. If Seller fails to have each such unpermitted
exception removed or insured over, Purchaser may at its sole option either
(i) terminate this Agreement, in which event this Agreement, without
further action of the parties, shall become null and void and neither party
shall have any further rights or obligations under this Agreement, except
for any provisions which, by their terms, are intended to survive such
termination, or (ii) elect to accept title to the Property as it then is
with the right to deduct from the Purchase Price a sum equal to the amount
reasonably required to discharge any liens or encumbrances (other than any
Liens or Encumbrances constituting Permitted Exceptions) of a definite or
ascertainable amount; provided, however, that (except in the case of liens
or encumbrances arising from the willful acts of Seller) Purchaser shall
not have the right to deduct from the Purchase Price an amount in excess of
$100,000 for any one Property and $1,000,000 in the aggregate for all
Properties. If Purchaser fails to make either such election within five (5)
business days following written notice thereof from Seller, Purchaser shall
be deemed to have elected option (i). For purposes hereof, if the Title
Insurer will not remove a given unpermitted title exception, it shall be
permissible for Seller to cure said title exception by causing First
American Title Insurance Company, Commonwealth Land Title Insurance Company
or Lawyers' Title Insurance Company, at Seller's election, to issue a title
insurance policy that is otherwise substantially identical to the Title
Insurance Policy in question, but with the unpermitted exception removed;
provided that any costs of said alternative title policies shall be paid by
Seller to the extent that the cost thereof exceeds the cost of the Title
Insurance Policy for which it is a substitute.
6. CLOSING
-------
A. Closing Dates.
-------------
(1) The Stage 1 Closing shall occur at 9:00 a.m. at the offices
of Seller's counsel in New York, New York on the date (the "Stage 1
Closing Date") which is the later to occur of (A) October 9, 1997 or
(B) three (3) business days after Purchaser's receipt of (i) all
Payoff Letters (as hereinafter defined) from "Existing Lenders" (as
such term is hereinafter defined) with respect to the Prepayable Debt,
which Payoff Letters shall conform with the requirements of Section
10D and shall be in customary form and substance and (ii) in the case
of the Prudential Partnership, the Consent Agreement (as hereinafter
defined) from Prudential (as hereinafter defined) with respect to the
Prudential Debt, which Consent Agreement shall conform with the
requirements of Section 10D and shall be in customary form and
substance. Notwithstanding the foregoing, without the prior written
consent of Purchaser, which may be withheld in Purchaser's sole
discretion, the Stage 1 Closing Date shall not be extended beyond
October 9, 1997 by reason of the failure of the Existing Lenders
holding the Prepayable Debt to furnish Payoff Letters in accordance
herewith providing for the full payoff of the Prepayable Debt on said
date and to accept payment on said date in accordance with said Payoff
Letters.
17
<PAGE>
(2) The Stage 2 Closing shall occur at 9:00 a.m. at the offices
of Seller's counsel in New York, New York on the date (the "Stage 2
Closing Date") which is the later to occur of (A) December 9, 1997 or
(B) three (3) business days after (i) Purchaser's receipt of Consent
Agreements with respect to the CentRe Financing, which Consent
Agreements shall conform with the requirements of Section 10D and
shall be in form reasonably agreeable to Purchaser, Seller and the
Existing Lenders, and (ii) the satisfaction or waiver (by the party
for whose benefit said conditions exist) of the other conditions set
forth in Section 10E, Sections 10G through L and Section 14 below (the
"Stage 2 Debt Conditions"). On the Stage 2 Closing Date, Seller shall
convey to Purchaser CAPREIT of Geary Courtyard, Inc.'s 1% interest as
a general partner in the Geary Partnership, and shall assign to
Purchaser all of CAPREIT of Geary Courtyard, Inc.'s interests in the
Geary Option (the "Geary G.P. Closing"). Notwithstanding the
foregoing, the Closing of the purchase and sale of the Geary Outside
Interests ("Geary L.P. Closing" ), with the payment of the Geary
Holdback Amount to Seller, subject to the applicable prorations and
adjustments as provided in Section 6 below) shall occur on the date
(the "Geary L.P. Closing Date") that is 190 days after the date on
which the "Geary Restructuring" (as such term is defined in Section
10K below) shall have been consummated. Purchaser hereby agrees to
duly exercise the Geary Option in accordance with its terms and to
specify the Geary L.P. Closing Date as the closing date under the
Geary Option in Purchaser's notice of exercise. Notwithstanding
anything to the contrary herein contained, the prior or concurrent
consummation of the Stage 1 Closing shall be a condition precedent to
the consummation of the Stage 2 Closing.
(3) In the event Purchaser and Seller shall have not received
all Payoff Letters with respect to the Prepayable Debt (as such term
is defined in Section 10(D)) on or before the expiration date (the
"Stage 1 Outside Date") of the "Stage 1 Consent Period" (as such term
is hereinafter defined), either party may elect to terminate this
Agreement by providing written notice to the other at any time
following the expiration of the Stage 1 Consent Period, but prior to
the date on which said Payoff Letters have been received in accordance
herewith, in which case, without further action of the parties, this
Agreement shall become null and void such that neither party shall
have any further rights or obligations under this Agreement except for
those rights and obligations which by their terms expressly survive
any such termination, and the Earnest Money shall be returned to
Purchaser.
(4) The Prudential Closing shall occur at 9:00 a.m. at the
offices of Seller's counsel in New York on the date (the "Prudential
Closing Date") that is three (3) business days after the receipt of
the Consent Agreement relative to the Prudential Debt; provided,
however, that in the event that the Consent Agreement relative to the
Prudential Debt has not been received in accordance herewith on or
before December 20, 1997, then either party (at any time prior to the
date, if any, on
18
<PAGE>
which said Consent Agreement is received by Purchaser and Seller) may
elect to delete the Prudential Partnership Interests from the scope of
the transactions contemplated under this Agreement, in which event the
Purchase Price shall be reduced by an amount equal to the Prudential
Purchase Price and this Agreement shall remain in full force and
effect except that all references therein to the Prudential
Partnership, the Prudential Partnership Interests, the Prudential Debt
and any matters related thereto shall be deemed deleted therefrom.
(5) In the event that the Stage 2 Debt Conditions shall not have
been satisfied on or before the last day (the "Stage 2 Outside Date")
of the "Stage 2 Consent Period" (as such term is hereinafter defined)
then either party may elect to terminate this Agreement as it relates
to any Partnership Interests not previously purchased by providing
written notice to the other at any time following the Stage 2 Outside
Date, but prior to the date on which the Stage 2 Debt Conditions shall
have been satisfied in accordance herewith, in which case, without
further action of the parties, this Agreement shall become null and
void insofar as it relates to the Stage 2 Partnership Interests such
that neither party shall have any further rights or obligations under
this Agreement in connection with the Stage 2 Partnership Interests
except for those rights and obligations which by their terms expressly
survive any such termination, and the Earnest Money shall be returned
to Purchaser.
(6) As employed herein, (i) the "Stage 1 Consent Period" shall
be the period commencing on the date hereof and continuing through and
including October 9, 1997, unless Purchaser (in Purchaser's sole
discretion) consents in writing to the extension thereof, in which
event the last day of the Stage 1 Consent Period shall be December 20,
1997, and (ii) the "Stage 2 Consent Period" shall be the period
commencing on the date hereof and continuing through and including
March 31, 1998.
As employed herein, the term "Closing Date" shall mean the Stage 1 Closing
Date, the Prudential Closing Date, the Stage 2 Closing Date, the Geary L.P.
Closing Date or any or all of the foregoing, as the context requires.
B. Closing Documents
-----------------
(i) Seller. Seller shall deliver or cause to be
------
delivered to Purchaser a copy of each of the following (the original
of each in form and substance acceptable to Purchaser and Seller, if
not attached as an EXHIBIT to the Agreement), to be executed (if
necessary) and delivered at the Stage 1 Closing, the Prudential
Closing and the Stage 2 Closing and the Geary L.P. Closing, as
applicable):
19
<PAGE>
(a) The Group A Subs, the Group B Subs, the Group C Sub
and the Group D Subs shall each execute and deliver to Purchaser
a counterpart of an Assignment and Assumption of Partnership
Interests, in the form attached hereto as EXHIBIT M, transferring
said Group A Sub's Partnership Interests in the applicable
Property Partnerships to Purchaser;
(b) Each of the Group A Outside Partners and the Group C
Outside Partners shall execute and deliver to Purchaser a
counterpart of an Assignment and Assumption of Partnership
Interests, in the form attached hereto as EXHIBIT M, transferring
said party's Partnership Interests in the applicable Group A
Partnerships and the Group C Partnership to Purchaser; provided,
however, that the Geary Outside Partners shall execute and
deliver said instruments on the Geary L.P. Closing Date.
(c) CAPREIT L.P. shall execute and deliver to Purchaser a
counterpart of an Assignment and Assumption of Partnership
Interests, in the form attached hereto as EXHIBIT M, transferring
CAPREIT L.P.'s interests as a limited partner in the Group B
Partnerships, the Group C Partnership and the Group D
Partnerships to Purchaser;
(d) CAPREIT L.P. shall execute and deliver to Purchaser
or Purchaser's designee a counterpart of an Assignment and
Assumption of Partnership Interests, in the form attached hereto
as EXHIBIT M, transferring CAPREIT L.P.'s interests as a general
partner in the Group B Partnerships to Purchaser;
(e) CRITEF (Delaware) shall execute and deliver a
counterpart of an Assignment and Assumption of Partnership
Interests, in the form attached hereto as EXHIBIT M, transferring
CRITEF (Delaware) interests as a limited partner in CRITEF
(Maryland) to Purchaser;
(f) The CRITEF MD GP shall execute and deliver a
counterpart of an Assignment and Assumption of Partnership
Interests, in the form attached hereto as EXHIBIT M, transferring
the CRITEF MD GP's interests as the sole general partner in
CRITEF (Maryland) to Purchaser; and
(g) AP CAPREIT shall execute and deliver a counterpart of
an Assignment and Assumption of partnership Interests, in the
form attached hereto as EXHIBIT M, transferring AP CAPREIT's
interests as a limited partner in CRITEF (Maryland) to Purchaser.
20
<PAGE>
(h) a letter advising tenants under the Leases of the
change in management of the Premises and where security deposits
will be held, and directing them to pay rent as Purchaser may
direct;
(i) certain affidavits, certificates or other documents
in substantially the form attached hereto as EXHIBIT KK for the
benefit of the Title Insurer in order to cause it to issue the
Owner's Title Insurance Policy in the form and condition required
by this Agreement;
(j) [Intentionally Omitted]
(k) an updated Rent Roll and schedule of Leases and
Service Contracts certified by CAPREIT L.P. as being true,
accurate and complete as of the applicable Closing which
certifications shall survive said Closing for a period of nine
(9) months. If the Stage 1 Closing or the Stage 2 Closing, as the
case may be, takes place on the tenth (10th) day of a month or
later, then the Rent Roll for said Closing shall be dated as of
the end of the previous month; if the applicable closing occurs
on the ninth (9th) day of a month or earlier, then the Rent Roll
shall be dated as of the end of the month immediately preceding
the previous month;
(l) all of the original Leases and written Service
Contracts which will survive said Closing, any and all items of
the type referred to in Section 1(E) above (subject to the
notwithstanding clause at the end of Section 1) and other
documentation concerning all or any part of the Properties and in
the possession and control of Seller or any Property Partnership;
provided that Seller shall effectuate said delivery by causing
said items to be left in the respective offices of each of the
Properties, except in the case of any books, records and other
documentation located in Seller's central offices which relate to
the Properties, the Partnerships or the Existing Loans (the
"Centralized Records"). Purchaser and Seller shall meet after
each Closing and Purchaser will be afforded the opportunity to
make copies for itself , of any Centralized Records that
Purchaser reasonably requests; provided that Seller will make
copies for itself and furnish Purchaser with originals of any
Centralized Records that Purchaser advises Seller are required to
be obtained by Purchaser to comply with governmental, SEC,
regulatory or rating agency requirements.
(m) any construction surety bonds, and bonds over
mechanic's liens, and any warranties or guaranties which are for
the benefit of the Property Partnerships and are in Seller's
possession;
21
<PAGE>
(n) with respect to CAPREIT, Apollo Real Estate
Management, Inc. and each corporate entity transferring
Partnership Interests to Purchaser or executing instruments of
assignment on behalf of any partnership that is transferring
Partnership Interests to Purchaser: a corporate resolution
authorizing the sale and the execution of this document and the
closing documents as certified by the secretary of said
corporation; a certificate of good standing dated not more than
sixty (60) days prior to the Closing in question; a certified
copy of the articles of incorporation from the Secretary of State
of the state of said corporation's formation dated not more than
sixty (60) days prior to the Closing in question; and a
certificate of the secretary of said corporation with respect to
the corporation's by-laws and including a certificate of
incumbency certifying the titles and signatures of the corporate
officers authorized to consummate the sale on behalf of Seller,
or such other customary evidence of Seller's power and authority;
(o) with respect to Apollo Real Estate Investment Fund,
L.P., each Partnership, and any partnerships that are
transferring Partnership Interests to Purchaser: a certificate of
existence from the Secretary of State of the state of said
partnership's formation dated not more than sixty (60) days prior
to the Closing in question; a copy of said partnership's
certificate of limited partnership, from the Secretary of State
of the state of said partnership's formation dated not more than
sixty (60) days prior to the Closing in question; a copy of the
partnership agreement of said partnership and all amendments
thereto as certified by the general partner of said partnership;
(p) with respect to each entity transferring Partnership
Interests to purchaser: Seller's affidavit stating, as required
under said Section 1445, Seller's U.S. taxpayer identification
number and that Seller is not a foreign person within the meaning
of Section 1445 of the Internal Revenue Code;
(q) in the event any of the Properties are subject to a
homeowner's association or similar organization: any and all
declarations, by-laws, minute books relating to any homeowner's
association or similar organization affecting the Property to the
extent the same are in the possession or control of Seller or any
of the Partnerships;
(r) such assignment and assumption documents related to
the "Existing Loan Documents" (as such term is hereinafter
defined) as reasonably requested by Purchaser or Seller and in a
form reasonably acceptable to Purchaser and Seller, subject
however to the requirements of Section 10(D) hereof; provided,
however, that such documents shall not
22
<PAGE>
impose any greater obligations on Seller or take away any rights
from Seller than provided under this Agreement;
(s) such other instruments and documents as may
reasonably be required in order to complete the transactions
contemplated hereunder, including, but not limited to, an
assignment of any security interests for personal property as
evidenced by a Uniform Commercial Code financing statement
assignment or similar form; provided, however, that said
instruments and documents shall not impose any greater
obligations on Seller or take away any rights from Seller than
provided under this Agreement;
(t) evidence of the termination of the Management
Agreements (with the exception of the Geary Management agreement,
which shall not be terminated in connection with the Geary
Deferred Closing), with a release by the Manager of all liability
of the applicable Partnership in connection therewith.
(u) Execution and delivery of applicable Consent
Agreements and other documents that are conditions precedent
under Sections 10D through L).
(v) CAPREIT of Geary Courtyard, Inc. shall execute and
deliver an instrument assigning to Purchaser all of CAPREIT of
Geary Courtyard, Inc.'s interests in the Geary Option, together
with an instrument, executed by each of the Geary Outside
Partners, (i) consenting to said assignment and (ii) stating that
the Geary Option is in full force and effect without modification
or amendment, and that the optionee is not in default under the
Geary Option.
(ii) Purchaser. At the Stage 1 Closing or the Stage 2
---------
Closing, the Prudential Closing or the Geary L.P. Closing, as the case
may be (or such earlier time as specified below), Purchaser shall
deliver or cause to be delivered:
(a) to Seller, the Stage 1 Base Cash Balance, the
Prudential Cash Balance or the Stage 2 Cash Balance, as required
pursuant to Section 3E; and the Stage 1 Additional Payment or the
Stage 2 Additional Payment, as the case may be, as required
pursuant to Section 3G. In addition, Seller shall deposit the
Stage 1 Contingent Purchase Price in escrow with the Title
Insurer at the Stage 1 Closing as required pursuant to Section
3F.
23
<PAGE>
(b) to Seller, executed counterparts of any other
documents listed in Section 6.B.(i) (including, without
limitation, each Assignment and Assumption of Partnership
Interests) required to be signed by Purchaser;
(c) to the Existing Lenders in connection with the
Prepayable Debt, the amount indicated on the Payoff Letters
approved by Purchaser in accordance with Section 6(A) hereof;
(d) to Seller, counterparts of any instruments referred
to in Section 6(B)(r) above; and
(e) such other documents and instruments as may
reasonably be required in order to complete the transactions
contemplated hereunder or to evidence compliance by Purchaser
with the covenants, agreements, representations and warranties
made by it hereunder; provided, however, that such documents and
instruments shall not impose any greater obligations on Purchaser
or take away any rights from Purchaser than provided under this
Agreement.
C. Closing Prorations and Adjustments
----------------------------------
(i) A proposed statement of prorations and other
adjustments shall be prepared by Purchaser in conformity with the
provisions of this Agreement not less than one (1) business day prior
to each Closing Date. For purposes of prorations, each Closing shall
be deemed to have occurred at midnight on the day before the
respective Closing Date. In addition to prorations and other
adjustments that may otherwise be provided for in this Agreement, the
following items are to be prorated or adjusted, as the case may
require, as of the applicable Closing Date:
(a) real estate and personal property taxes and
assessments (initially prorated on the basis of 100% of the most
recent ascertainable bill, but subject to reproration upon
issuance of the actual bill therefor to effectuate the actual
proration), and any tax refunds, reductions or credits obtained
pursuant to any Tax Appeal Agreements (as hereinafter defined)
with respect to the tax year in which the applicable Closing
occurs;
(b) the rent payable by tenants under the Leases;
provided, however, that rent and all other sums which are due and
payable to Seller by any tenant but uncollected as of the Closing
shall not be adjusted, but Purchaser shall cause the rent and
other sums for the period prior to Closing to be remitted to
Seller if, as and when collected; and to the extent Seller
receives any rents or other sums under the Leases for the period
from and after the Closing, Seller shall promptly remit said
amounts to Purchaser. At
24
<PAGE>
Closing, Seller shall deliver to Purchaser a schedule (prepared
by Seller as of the most recent date available) of all such past
due but uncollected rent and other sums owed by tenants.
Purchaser shall promptly remit to Seller any such rent or other
sums paid by scheduled tenants, but only if a deficiency in the
then current rent is not thereby created. Purchaser shall bill
tenants who owe rent for periods prior to the Closing on a
monthly basis for six consecutive months following the Closing
Date. For amounts due Seller not collected within thirty (30)
days after Closing, Seller shall have the right to sue to collect
same (and Seller shall have the right to continue any eviction
action in process as of said Closing), but in no event may Seller
seek to evict any tenant or terminate any Lease. There shall be
an initial reproration of rents as of the seventh (7th) day after
each Closing, and Purchaser and Seller shall promptly furnish
each other with a report on all rents collected by either of them
from tenants under the Leases during said seven (7) day period. A
final reproration of rents shall be performed subsequently as
provided generally below.
(c) the full amount of security deposits and fifty
percent (50%) of any non-refundable pet or cleaning fees paid
under the Leases, to the extent unapplied, together with interest
thereon if required by law or otherwise; provided that Purchaser
hereby assumes all liability for the proper refund or return of
such security deposits to the extent of the amount credited to
Purchaser at Closing; provided that Seller shall have the right
to apply security deposits against delinquent tenants to the
extent provided in Section 4(A) above.
(d) water, electric, telephone and all other utility and
fuel charges, fuel on hand (at cost plus sales tax), and any
assignable deposits with utility companies (said assignable
deposits being credited to Seller) (to the extent possible,
utility prorations will be handled by meter readings on the
Closing Date);
(e) amounts due and prepayments under the Service
Contracts
(f) assignable license and permit fees;
(g) any signing bonus or similar payment relating to any
laundry room, cable T.V., telephone or similar agreement in
effect as of the Closing to the extent that said agreement was
entered into on or after August 1, 1997;
(h) all interest and other required payments (other than
payments in reduction of principal) related to the Prudential
Debt including but not
25
<PAGE>
limited to any escrows which, to the extent held by Prudential
will be credited to Seller and any fees or expenses (other than
matters described in Section 6(D) below) owed to the holder of
the Prudential Debt;
(i) all interest and other required payments related to
the Property Bonds, including, but not limited to, any escrows,
any bond remarketing fees or expenses due to the issuing
authority for any debt or bonds or to any debt or bond trustee
which have accrued and remain unpaid as of the Stage 2 Closing
Date; a schedule of the costs and expenses to be prorated in
connection with this Section 6(C)(i) is attached hereto as
EXHIBIT LL;
(j) all fees and other required payments in connection
with the CentRe Financing, including, without limitation, those
items shown on EXHIBIT LL attached hereto, but excluding (1) any
prepaid fees for the Interest Rate Protection Agreement dated
December 4, 1996, and (2) any other fees or payments paid at the
inception of the CentRe Financing which are not re-occurring in
nature;
(k) Seller shall receive a credit at the Stage 2 Closing
for any escrows, reserves, pledged bank accounts, impound
accounts, deposits and other funds being held by or on behalf of
CMC, the Surety or Swiss Bank in connection with the CentRe
Financing, including, without limitation, the "Additional
Proceeds Account" and the balance, if any, in the "Sinking Fund
Account" (as such terms are defined in the CMC Reimbursement
Agreement) to the extent that deposits to the Sinking Fund
Account have commenced prior to the Stage 2 Closing. A non-
itemized schedule of the items for which Seller is to receive a
credit pursuant to this Section 6(C)(k) is attached hereto as
EXHIBIT T. Seller shall furnish Purchaser with an itemized
schedule of such items (reflecting current account balances, and
subject to further adjustment prior to the Stage 2 Closing)
within ten (10) days after the consummation of the Stage 1
Closing;
(l) all payments received under the Residual Certificates
for the payment period in which the Stage 2 Closing occurs shall
be estimated and prorated based upon the relative number of days
in such period prior to the Stage 2 Closing, versus the number of
days in said period from and after the Stage 2 Closing, subject
to readjustment when the actual payment for said period is
received by CRITEF (Maryland);
(m) other expenses of operation and similar items
customarily prorated in connection with real estate closings for
multi-family apartment buildings;
26
<PAGE>
(n) Seller shall be responsible for paying all premiums,
fees and other costs associated with the maintenance or
termination of any insurance policies maintained by the Property
Partnerships prior to any given Closing, and shall be entitled to
any refunds in connection with the termination of said policies;
(o) Seller shall be responsible for the payment of all
fees and costs (including termination fees) under the Management
Agreements that are terminated at said Closing; and
(p) In the case of the Geary L.P. Closing, (i) upon and
subject to Purchaser's acquisition of the Geary Outside Interests
pursuant to the Geary Option, Purchaser shall pay to Seller an
amount equal to the Geary Holdback Amount, less (x) the amount,
----
if any, by which the price required to be paid by Purchaser to
the Geary Outside Partners under the Geary Option exceeds the
amount of $1.00 to each optionor and (y) any out-of-pocket costs
incurred by Purchaser (including but not limited to reasonable
attorneys' fees and court costs) in enforcing Purchaser's rights
to acquire the Geary Outside Interests; provided, however, that
Purchaser shall not exercise any rights and remedies under the
Geary Option without first giving Seller written notice and a
period of twelve (12) months within which to cause the Geary L.P.
Closing to occur in accordance herewith. If Seller shall not,
within said period of time, cause the Geary L.P. Closing to occur
in accordance herewith, then Purchaser shall have the right, but
not the obligation, to receive the Geary Holdback Amount as
liquidated damages in lieu of prosecuting to completion any
action to enforce Purchaser's rights under the Geary Option. At
the Geary G.P. Closing, all prorations and credits that are based
on obligations of the Geary Partnership shall be determined as
though Purchaser were acquiring a 100% economic interest in said
Partnership at the Geary G.P. Closing. At the Geary L.P.
Closing, there shall be no further prorations or credits;
(q) Purchaser shall receive a credit at each Closing in the
amount of the cost of all work that has not yet been performed or
has not yet been paid for as of the date of said Closing under
any construction contracts to which the applicable Property
Partnership is a party, in accordance with the construction
contracts identified in Exhibit UU hereto. The payment of stages
of the work shall be evidenced by paid receipts, contractors'
sworn statements, and lien waivers, and the completion of the
work shall be evidenced by a certificate from the supervising
architect, or such other evidence of payment and completion as
shall be satisfactory to Purchaser in the exercise of Purchaser's
reasonable judgment.
27
<PAGE>
Except with respect to general real estate and personal property taxes
(which shall be reprorated upon the issuance of the actual bills, if
necessary), any proration which must be estimated at any Closing shall be
reprorated and finally adjusted as soon as practicable after the applicable
Closing Date; otherwise, all prorations shall be final.
D. Closing Costs
-------------
(i) Each party shall be responsible for its own legal
counsel and (subject to Section 11 below) all real estate commissions
it incurs. Seller shall be responsible for all other costs incurred
(including any prepayment fees) to repay any liens other than the
Assumed Debt and Permitted Exceptions, and other expenses due from or
incurred by Seller in connection with the transaction (including one-
half of any loan assumption fees and expenses, if any, regarding the
Prudential Debt). Purchaser shall pay one-half of any loan assumption
fees and expenses relating to the Prudential Debt. Any out-of-pocket
fees of the Trustee, CMC, the Surety, or Swiss Bank or any issuers of
Property Bonds in connection with the Consent Agreements relative to
the CentRe Financing (including the underlying Property Bonds) and the
satisfaction of the conditions precedent to Closing set forth in
Sections 10D through 10J of this Agreement shall be shared equally by
Purchaser and Seller. Neither Seller nor Purchaser shall have any
obligation to pay any assumption fees, consent fees, prepayment
premiums or similar fees charged by CMC, the Surety or Swiss Bank in
connection with the Third Party Withdrawals or the withdrawal of any
other Property Bonds from any of the CRITEF Trusts.
(ii) Purchaser and Seller shall each pay 50% of title
insurance and recording costs (including the costs of title
endorsements) at each Closing, provided that Seller shall not be
obligated to pay an amount in excess of $275,000 with respect to said
title insurance costs (including the cost of title endorsements). It
is anticipated that no transfer taxes or excise taxes will be payable
based in the transfer of the Partnership Interests, other than (to the
extent required by applicable law) in the State of Washington, where
such amounts shall be paid solely by Seller.
(iii) Purchaser shall pay for its own legal counsel and its
own due diligence activities, including engineering, environmental
reports and lease and expense audits. Seller shall pay for its own
legal counsel.
(iv) Seller shall be entitled to retain all insurance
proceeds with respect to the damage described on EXHIBIT NN attached
hereto, provided that Seller provides Purchaser with evidence that the
restoration of said damage has been completed and paid for in full by
Seller.
28
<PAGE>
7. CASUALTY LOSS AND CONDEMNATION
------------------------------
If, prior to Closing, any Property or any part thereof shall be condemned,
or destroyed or damaged by fire or other casualty (i) Purchaser shall be
entitled to receive at Closing, subject to mortgagee's rights, the condemnation
proceeds or settle after Closing the loss under all policies of insurance
applicable to the destruction or damage and/or receive the proceeds of insurance
applicable thereto, and Seller shall, at Closing and thereafter, execute and
deliver to Purchaser all required proofs of loss, assignments of claims and
other similar items, (ii) Purchaser shall receive at Closing a credit against
the Stage 1 Cash Balance, the Prudential Cash Balance or the Stage 2 Cash
Balance, as the case may be, in an amount equal to any deductible(s) and
uninsured amounts applicable thereto, and (iii) in the case of damage or
destruction by fire or other casualty, there shall be withheld from the Stage 1
Cash Balance, the Prudential Cash Balance or the Stage 2 Cash Balance, as the
case may be, an amount (the "Holdback Amount") equal to 110% of the total cost
of repair, less the amount of any insurance proceeds held by said mortgagees and
any credits given to Purchaser at Closing for any deductibles or uninsured
amounts and less the cost of all such work theretofore completed and paid for by
Seller (as indicated by lien waivers, sworn statements and such architect's
certificates as would reasonably be required by an institutional construction
lender). The Holdback Amount shall be held in a strict joint order escrow
account with the Title Insurer. Upon Purchaser's actual receipt of any casualty
insurance proceeds with respect to the casualty in question, the corresponding
amount shall be released to Seller from the escrow account in which the Holdback
Amount is held, it being understood that all such insurance proceeds shall be
the property of Seller, subject to the terms hereof. In performing any repair or
restoration work that was not completed and paid for prior to Closing, Purchaser
shall first apply the amount of any insurance proceeds actually received by
Purchaser and an amount equal to any credit received at Closing for any
deductibles or uninsured amounts, and thereafter shall be entitled to have the
Holdback Amount disbursed to Purchaser from escrow to compensate Purchaser for
(i) any remaining costs of said repair or restoration work and (ii) an amount
equal to the lost rental income from the units that were rented at the time of
the casualty and were removed from service by the casualty, for the period from
and after the Closing through and including the date on which the units are
rendered rent ready, based upon the monthly rental income rates for said units
immediately prior to the casualty. Any amounts remaining in the said escrow,
after the repair or restoration work is completed and any amounts to which
Purchaser is entitled under the preceding sentence have been disbursed to
Purchaser, shall be disbursed from said escrow to Seller, after the payment of
all reasonable fees and charges of the escrowee. Subject to mortgagee's rights,
Purchaser shall have the reasonable right to determine the scope of the repair
and restoration work (as may be required to restore the applicable Property to
the condition immediately prior to the casualty) and the identity of all
contractors and architects engaged in connection therewith. In the event of a
condemnation of one of the Properties, Seller's settlement or conduct of any
condemnation case prior to the applicable Closing shall be subject to
Purchaser's prior approval, which shall not be unreasonably withheld,
conditioned or delayed, and Seller shall assign to Purchaser at said Closing all
rights in connection with any pending condemnation action or award.
29
<PAGE>
8. REPRESENTATIONS AND WARRANTIES
------------------------------
A. Except as provided in EXHIBIT OO attached hereto, Seller
represents and warrants to Purchaser that the following are true and
correct as of the date of this Agreement:
(i) Neither Seller nor any of the Partnerships has
entered into any agreement to lease (except as shown on the rent roll
attached hereto as EXHIBIT J (the "Rent Roll")) or sell, or dispose of
its interest in the Properties or any part thereof, except for this
Agreement and leases entered into in accordance with this Agreement.
(ii) Attached hereto as EXHIBIT O is a schedule of all of
Seller's (and the Partnerships') insurance policies (exclusive of
CAPREIT's corporate insurance policies not providing coverage at the
Property level, and exclusive of any insurance policies owned by
CAPREIT or its affiliates that are not the subject of this Agreement),
together with a claims history with respect to each of the Properties
from and after the later of (i) February 1, 1994 and (ii) the date of
CAPREIT's acquisition of any direct or indirect ownership interests in
said Property. EXHIBIT O contains a true and complete list of all
insurance policies owned by or on behalf of Seller with respect to the
Properties or any part thereof. Neither Seller nor any of the
Partnerships has received written notice that such policies are not in
full force and effect. No written notice has been received by Seller
or any of the Partnerships from any insurer with respect to any
defects or inadequacies of all or any part of the Properties or the
use or operation thereof, which have not been cured or corrected.
(iii) Except as provided on EXHIBIT P, and with the
exception of any actions to dispossess tenants or collect back rent (a
schedule of which actions is attached hereto as EXHIBIT PP), there is
no action, proceeding or investigation pending or to Seller's
knowledge, threatened in writing and received by Seller or any of the
Partnerships, against Seller, any of the Partnerships or the
Properties or any part thereof before any court or governmental
department, commission, board, agency or instrumentality.
(iv) Except as provided on EXHIBIT P, neither Seller nor
any of the Partnerships has received from any governmental authority
written notice of any violation of any zoning, building, fire or
health code or any other statute, ordinance rule or regulation
applicable (or alleged to be applicable) to the Properties which
remain uncured. Purchaser agrees to assume the risk of any such
notices that are received by Seller or the Partnerships from and after
the date hereof.
(v) The Service Contracts described on EXHIBIT K attached
hereto comprise every Service Contract which affects the Properties or
to which
30
<PAGE>
Seller or any of the Partnerships is a party and which will bind
Purchaser after Closing. Neither Seller nor any of the Partnerships
has given or received a written notice of an uncured default under the
terms of any Service Contract.
(vi) Except as set forth on Schedule QQ, to Seller's knowledge,
Seller and the Partnerships have no patents, trademarks or trade names
which are used by Seller or the Partnerships with respect to any
Property. There is no claim pending or to Seller's knowledge,
threatened in writing and received by Seller or any of the
Partnerships against Seller or any of the Partnerships with respect to
any alleged infringement of any patent, trademark or trade name owned
by another. Seller shall retain all rights to the name "CAPREIT" and
any associated logos, and (after each Closing) the Partnerships shall
have no right to the use of the name CAPREIT, provided that Purchaser
is hereby granted a license to continue the use of the name "CAPREIT"
on existing signs, brochures and the like (with the specific exception
of any flags, which shall be removed by Seller prior to the applicable
Closing) in connection with any Property and under existing
advertising for a period of 120 days following the Closing, provided
that Purchaser and Seller shall cooperate in facilitating the
transition as promptly and in less time than 120 days, if reasonably
possible. At the end of said transition period, Seller shall have the
right to remove all signs, promotional materials and other materials
bearing the name "CAPREIT" or associated logos.
(vii) Seller and each of the Partnerships is duly organized,
validly existing and qualified and empowered to conduct its business,
and has full power and authority to enter into and fully perform and
comply with the terms of this Agreement. Neither the execution and
delivery of this Agreement nor its performance by Seller will
materially conflict with or result in the material breach of any
contract, agreement, law, rule or regulation to which Seller is a
party or by which Seller is bound. Subject to laws affecting
creditors' rights and equitable relief generally, this Agreement is
valid and enforceable against Seller in accordance with its terms and
each instrument to be executed by Seller pursuant to this Agreement or
in connection herewith will, when executed and delivered, be valid and
enforceable against Seller in accordance with its terms. Except to the
extent that consents may be required from the issuers of the Property
Bonds, CMC, the Surety or Swiss Bank, no consents are required from
any governmental agency in connection with the transfer of the
Partnership Interests to Purchaser in accordance with this Agreement.
(viii) Except as set forth on EXHIBIT RR, neither Seller nor any
of the Partnerships has received any written notice within 6 months
prior to the date hereof of any plan, study or effort by any
governmental authority or agency which in any way affects or would
affect the present use or zoning of any of the Premises or of any
existing, proposed or contemplated plan to widen, modify or realign
any street or highway or any existing, proposed or contemplated
eminent domain
31
<PAGE>
proceedings that would affect the Premises in any way whatsoever;
except as disclosed in the material previously furnished to Purchaser
by Seller in connection with the potential street widening or street
realignment (and matters relating thereto) at Ocean Walk.
(ix) The Rent Roll sets forth all Leases as of September 23,
1997, with the exception of the information relative to the Geary
Property which shall be dated as of September 30, 1997. Each tenant
under the Leases is a bona fide tenant in possession or has a right to
possession of the premises demised thereunder pursuant to the Leases.
Each of the Leases is in effect, and, except as disclosed on the Rent
Roll, has not been assigned, modified, amended or rescinded by the
landlord (other than collateral assignments in connection with the
Existing Loans), and the rights of each lessee thereunder are as
tenants only. No tenant under any Lease has any ownership interest or
option or right of first refusal to acquire any ownership interest in
any Property, and none has any right or option to renew or extend the
Lease term or to terminate the Lease, except as provided in its Lease,
under applicable laws and/or as described in the Rent Roll. No
commissions to any broker or leasing agent are due or will become due
on account of any of the Leases. As of the date of the Rent Roll, no
monetary default exists on the part of the tenant under any of the
Leases, other than as set forth on the delinquency report attached to
the Rent Roll. The Rent Roll discloses all security and other deposits
made by each of the tenants under the Leases which have not been
applied, and no tenant is or was entitled to any rebate or concession
which is not disclosed in the Rent Roll, other than as set forth on a
schedule attached to the Rent Roll. Seller has not received any
advance payment of rent (other than for the current and next month) on
account of any of the Leases except as shown in the Rent Roll. There
are no written or oral leases or tenancies affecting any Property
other than those listed in the Rent Roll.
(x) A true, correct and complete copy of all notes, mortgages,
loan agreements and other financing documents relating to the Assumed
Debt and any other debt obligation of the Partnerships other than the
Prepayable Debt (as defined in Section 10(D) hereof) have been
delivered to Purchaser. A true and correct listing of all such
documents for the Assumed Debt ("Loan Documents") are attached to this
Agreement as EXHIBIT S. As of August 31, 1997, the outstanding
principal balance of each of the Existing Loans, all accrued interest
as of the date hereof, and all escrows, reserves, impound accounts,
deposits and other funds being held by CMC, the Surety or Swiss Bank
in connection with the CentRe Financing or by any bond trustees,
mortgage holders or other entities in connection with the Property
Mortgage Loans or the Property Bonds, are identified on EXHIBIT T
attached hereto. Neither Seller nor any of the Partnerships has
received any written notice of default on the part of the borrower
under the Existing Loans, and Seller has no knowledge of any event or
condition which, with the giving of notice, passage of time or both
could constitute a material default.
32
<PAGE>
(xi) From and after December 4, 1996, all reports submitted by
or on behalf of Seller or any of the Group A Partnerships or the Group
C Partnership, to any person pursuant to the terms of any Bond
Documents or to any governmental authority certifying the status of
low and moderate income tenancies at the Property were true and
correct as of the time submitted. From and after December 4, 1996, to
Seller's knowledge, Seller, the Group A Partnerships and the Group C
Partnership have been in compliance in all material respects with all
covenants and requirements contained in the Bond Documents, other than
the Bond Documents relating to the Third Party Bonds (but, in such
case, only to the extent that there are no defaults under the CentRe
Financing Documents to which Purchaser is taking subject, which relate
to the Third Party Bonds). From and after December 4, 1996, neither
Seller, nor any of the Group A Partnerships or the Group C Partnership
has received any material, adverse notice from the Internal Revenue
Service, the Securities Exchange Commission or any other federal or
state governmental agency concerning the Property Bonds, the Bond
Documents, the Floater Certificate, the Subordinate Certificates or
the Residual Certificates.
(xii) Neither Seller nor any of the Partnerships control any
homeowner's associations. A schedule of all homeowner's associations
of which Seller or any of the Partnerships is a member is set forth in
EXHIBIT SS attached hereto.
(xiii) EXHIBIT I is a true and correct list of all Personal
Property owned by the Partnerships. Subject to any security interests
in connection with the Existing Loans and the Permitted Title
Exceptions, the applicable Partnerships own good title to the Personal
Property, free and clear of liens, claims or encumbrances of any kind
other than the Existing Loans.
B. Seller represents and warrants to Purchaser that the following
are true and correct as of the date of this Agreement with respect to each
of the Property Bonds:
(i) To Seller's knowledge, the applicable Series Trust is
the sole owner of, and has good and marketable fee simple title to
said Property Bonds free and clear of all liens and encumbrances,
other than liens and encumbrances in favor of CMC, Swiss Bank or the
Surety in connection with the CentRe Financing. To Seller's knowledge,
the applicable Series Trust has not entered into any agreement to
lease, sell, participate, assign mortgage or otherwise encumber or
dispose of its interest in the Property Bonds or any part thereof,
and, other than in connection with the Third Party Withdrawals, Seller
has not attempted to effectuate the withdrawal of any of the Property
Bonds from any of the Series Trusts. To Seller's knowledge, the Series
Trusts have been since their formation and continue to be treated for
federal income tax purposes as partnerships and not as corporations or
associations taxable as corporation;
33
<PAGE>
(ii) Except as set forth on EXHIBIT TT, there is no
action, proceeding or investigation pending or to Seller's knowledge
threatened against Seller or, to Seller's knowledge, any of the Series
Trusts before any court or governmental department, commission, board,
agency or instrumentality relating to or affecting the Property-level
mortgage loan to which the Property Bonds relate (a "Property Mortgage
Loan"), which, if successful, would have a material adverse effect on
the CentRe Financing, any of the Series Trusts, any Property Bonds, or
any Property Mortgage Loans.
C. Seller represents and warrants to Purchaser that the following
are true and correct as of the date of this Agreement with respect to the
Partnerships, the Partnership Interests and the Residual Certificates:
(i) To Seller's knowledge, each Partnership has obtained
and kept in force any materially necessary licenses to carry on its
business now conducted in any state, including the state in which any
Properties owned by said Partnership are located. Any materially
necessary business certificates or fictitious name certificates, or
both, required to be filed by the Partnerships under the laws of any
state have been duly filed and are in full force and effect in
accordance with the respective terms thereof.
(ii) EXHIBIT W attached hereto, and by this reference made
a part hereof, sets forth the principal place of business and chief
executive office of each of the Partnerships and each of the owners of
the Partnership Interests as of the date hereof.
(iii) Seller has delivered to Purchaser complete and
correct copies of the limited partnership agreements (and all
amendments thereto) for each of the Partnerships, a schedule of which
is attached hereto as EXHIBIT X.
(iv) Except as otherwise disclosed herein, none of the
Property Partnerships has any "Subsidiaries." As used in this
Agreement, the term "Subsidiary" of any "Person" means any
corporation, partnership, limited liability company, joint venture or
other legal entity of which such Person (either directly or through or
together with another subsidiary of such Person) owns any of the
capital stock or other equity interests of such corporation,
partnership, limited liability company, joint venture or other legal
entity. As employed herein, the term "Person" means any individual,
corporation, partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity.
(v) Except as set forth in EXHIBIT Y and as otherwise
disclosed in this Agreement, and with the exception of Liens in favor
of CMC, the Surety,
34
<PAGE>
Swiss Bank or CS First Boston (as the same has been assigned to State
Street Bank and Trust Company, as Trustee for CS First Boston Mortgage
Corporation Multi-Family Mortgage Pass-Through Certificates Series
1994-M1) in connection with the Existing Loans, all partnership
interests in the Partnerships are owned by the persons and entities
referred to in the Recitals to this Agreement or identified in
EXHIBITS A through D attached to this Agreement (including, without
limitation, the Group A Outside Partners and the Group C Outside
Partners) and shall be transferred to Purchaser (either directly by
Seller or, in the case of the Group A Outside Interests, upon exercise
of the Group A Options by Purchaser) upon the consummation of the
applicable Closing, free and clear of all "Liens" (as such term is
hereinafter defined), and CRITEF (Maryland) owns all of the Residual
Certificates free and clear of all Liens. The sole subsidiary of
CRITEF (Delaware) is CRITEF (Maryland). The sole Subsidiaries of
CRITEF (Maryland) are as set forth in the Recitals to this Agreement.
None of the Property Partnerships owns any real property other than
the Property identified in EXHIBITS A, B, C and D hereof, and none of
the Property Partnerships owns any personal property other than
personal property incidental to the operation of said real property.
As employed herein, the term "Lien" means any pledge, claim, lien,
charge, encumbrance, hypothecation or security interest of any kind or
nature whatsoever.
(vi) None of the Partnership Interests is subject to any
option (with the exception of the Group A Options referred to in
Recital G hereof and, in the case of the Group C Partnership, the
right of the general partner to acquire the interests of the limited
partners pursuant to the terms of the partnership agreement), right of
first refusal, purchase agreement, put, call or other right to
purchase, and none of the Partnerships is obligated to issue
additional Partnership units or to distribute additional Partnership
Interests to any parties whatsoever.
(vii) None of the Property Partnerships has sold any
securities from and after December 5, 1996. CRITEF (Maryland) either
has not sold any securities (other than the interests which are
reflected in the Recitals to this Agreement) or otherwise has not been
obligated to file any reports, schedules, forms, statements and other
documents with the SEC through the date hereof.
(viii) Seller has furnished Purchaser with a copy of
certain audited financial statements for fiscal year 1996, together
with certain unaudited financial statements for the first eight (8)
months of 1997; provided that the financial statements for 1997 shall
be subject to normal and customary audit adjustment. A copy of said
audited and unaudited financial statements is attached hereto as
EXHIBIT WW. The most recent such audited financial statements are
referred to herein as "Seller's Current Financial Statements."
Seller's Current Financial Statements are true, correct and complete
in all material respects and do not fail to state any material fact
necessary to make the statements not misleading.
35
<PAGE>
(ix) None of the Partnerships has any employees. All
employees working at the Properties are employees of the respective
management company (or of CAPREIT L.P.), with the exception of the
Geary Property, where the employees, to Seller's knowledge, are
employed by Oakwood Management Company.
(x) EXHIBIT Z attached hereto identifies all management,
agreements (collectively, the "Management Agreements") to which any of
the Partnerships is a party, it being agreed that with the exception
of the management agreement for the Geary Property, the Management
Agreements shall be terminated, on or before the Closing applicable to
said Partnership, by Seller without cost to Purchaser.
(xi) Except as set forth on EXHIBITS P and PP, there is no
suit, action or proceeding pending or to Seller's knowledge,
threatened in writing and received by Seller against or affecting any
of the Partnerships. To Seller's knowledge, EXHIBIT P attached hereto
sets forth each and every claim (whether insured or not), equal
employment opportunity claim, and claim relating to sexual harassment
and/or discrimination pending or threatened in writing as of the date
hereof against any of the Partnerships.
(xii) None of the Property Partnerships is currently a
party to any agreement, written or oral, recorded or unrecorded, for
the sale, option or other transfer of any of the Properties or any
portion thereof, other than this Agreement and the Permitted
Exceptions.
(xiii) EXHIBIT BB attached hereto is a true, complete and
correct list of all "Contracts" (as such term is hereinafter defined)
to which any of the Partnerships is a party, other than the Management
Agreements, Leases and Service Contracts identified on EXHIBITS J, K
and Z or otherwise identified in this Agreement. As employed herein,
the term "contract" means any and all non-completed written
agreements, of every kind and to which a Partnership is a party or by
which a Partnership is bound, including, without limitation,
construction contracts, architects' agreements, service agreements,
consulting agreements (including, without limitation agreements
concerning property tax consulting or appeal services ("Tax Appeal
Agreements")), incentive compensation agreements and employment
agreements of any kind. To Seller's knowledge, none of the
Partnerships is currently a party to any material non-completed oral
agreements relating to the Properties which are or will be binding on
the Properties, the Partnerships or Purchaser. Seller has delivered
or caused to be delivered to the Purchaser true and correct copies of
the contracts not excluded under the first sentence of this clause.
EXHIBIT UU sets forth the status, in terms of stage of completion,
total cost and scope of work, and amount paid to date, of all
36
<PAGE>
construction contracts. With respect to the Tax Appeal Agreements
identified in Exhibit BB: (i) to the extent such agreements relate to
taxes for any year prior to the year in which the applicable Closing
occurs, Seller shall have the right to control such appeal matters in
its sole discretion, and shall be entitled to any proceeds therefrom
attributable to such year(s); and (ii) to the extent such agreements
relate to taxes for the year in which the applicable Closing occurs,
Seller shall have the right to control such appeal matters provided
that Seller shall provide Purchaser with copies of all related
correspondence and documentation upon Seller's receipt of same and
shall obtain Purchaser's approval, which approval shall not be
unreasonable withheld, conditioned or denied, in connection with any
actions or decisions related thereto; the proceeds for the year in
which the Closing occurs shall be prorated in accordance with Section
6(C)(i)(a). Seller shall have no right to prosecute any tax appeals
for any year after the year in which the applicable Closing occurs.
(xiv) To Seller's knowledge, as of the date hereof, each of
the Partnerships has filed all tax returns and reports required to be
filed by it (after giving effect to any filing extension from a
"Governmental Entity" (as such term is hereinafter defined) having
authority to do so) and has paid (or CAPREIT has paid on its behalf)
all Taxes (as defined below) shown on such returns and reports as
required to be paid by it. To Seller's knowledge, none of the
Partnerships has, or will have at Closing, any liability for Taxes
relating to any period prior to Closing, with the exception of real
estate for which a credit is being provided hereunder. To Seller's
knowledge, no unpaid deficiencies for any Taxes have been proposed,
asserted or assessed against any of the Partnerships, and no requests
for waivers of the time to assess any such Taxes are pending. As used
in this Agreement, "Taxes" shall include all federal, state, local and
foreign income, property, sales, franchise, employment, excise and
other taxes, tariffs or governmental charges of any nature whatsoever,
together with penalties, interest or additions to tax with respect
thereto. As employed herein, the term "Governmental Entity" shall
mean any federal, state or local government or any court,
administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign. As employed
herein, the term "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(xv) To Seller's knowledge, each of the Partnerships has
been since its formation and continues to be treated for federal
income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation.
D. Seller represents and warrants to Purchaser that, as of each
applicable Closing, each of the warranties and representations set forth in
Sections 8(A), 8(B) and 8(C) above shall be true, complete and correct in
all material respects except for changes in the operation of the applicable
Properties occurring prior to said Closing which are specifically
37
<PAGE>
permitted by this Agreement, and except for matters outside Seller's
control, and that all management contracts pertaining to the applicable
Properties, other than the management agreement for the Geary Property,
shall have been terminated effective as of Closing. A change of
circumstances that renders untrue any of the foregoing representations and
warranties (to the extent provided in this Agreement) shall constitute a
failed condition to Closing, but shall not constitute a breach of this
Agreement by Seller, provided that Seller notifies Purchaser promptly
following Seller's knowledge of any such change and provided that such
change shall not result from matters which are caused by Seller; provided,
however, that to the extent that a change of circumstances which may be
within Seller's control but was not caused by Seller renders untrue any of
the foregoing representations and warranties, Seller shall not be obligated
to incur any out-of-pocket costs or expenses to cure such failure of
condition to Closing.
E. The foregoing warranties and representations of Seller shall
survive the execution and delivery of this Agreement, the Closing and
delivery of all documents and any and all performances in accordance with
this Agreement for nine (9) months following the Stage 2 Closing; provided,
however, that the warranties and representations of Seller contained in
Sections 8(C)(iii), 8(C)(iv), 8(C)(v), 8(C)(vi), 8(C)(xii), 8(C)(xiv), and
8(C)(xv), shall survive the Closings indefinitely. Notwithstanding the
foregoing, if Purchaser has knowledge that a given representation or
warranty of Seller is untrue to any extent as of Closing (the extent to
which said representation or warranty was known by Purchaser to be untrue
is referred to herein as the "Known Non-Compliance"), and Purchaser
nevertheless proceeds with the Closing, then Purchaser shall be deemed to
have waived all claims against Seller with respect to such representation
or warranty but only to the extent of the Known Non-Compliance. For
purposes hereof, Purchaser shall be deemed to have knowledge that a given
representation or warranty is untrue as of Closing if and to the extent
that such fact was actually known at Closing by Bruce Strohm, David
Neithercut, Alan George, Michael Schwaab or Yasmina Rahal, Errol Halperin
or Ross Green without duty of inquiry, provided that the burden of proving
such knowledge shall reside with Seller; and provided that none of said
individuals have any liability to Seller under this Agreement.
F. Purchaser represents and warrants to Seller as follows, and such
representations and warranties are true on the date hereof and shall be
true on the Closing Date:
(i) Except as expressly set forth in this Agreement, Seller
makes no representation, warranty or covenant of any kind with respect
to the Property, any environmental conditions at, or with respect to,
the Property, the site or physical conditions applicable to, or with
respect to, the Property, the zoning regulations or other governmental
requirements applicable to, or with respect to, the Property, the
Leases or any other matters affecting the use, occupancy, operation or
condition of or with respect to the Property. Purchaser has inspected
the Property and, as a result
38
<PAGE>
of such inspection and in reliance on Seller's representations,
warranties and covenants expressly provided for in this Agreement has
determined to purchase the Property. Subject to Seller's
representations, warranties and covenants in this Agreement, at each
respective Closing, Purchaser shall accept the Property "AS IS,"
"WHERE IS" and "WITH ALL FAULTS" (whether detectable or not) on the
corresponding Closing Date, without any reduction in the Purchase
Price for any change in the physical or financial condition occurring
from and after the date hereof, Purchaser acknowledges and agrees that
(i) except as provided herein, neither Seller nor its employees and
representatives nor any other person has made any representation,
warranty or covenant, express or implied, with respect to the
Property, the fitness, merchantability, suitability or adequacy of the
Property for any particular purpose, any environmental condition at or
with respect to the Property, the site or physical conditions
applicable to or with respect to the Property, the zoning regulations
or other governmental requirements applicable to or with respect to
the Property, the Leases or any other matters affecting the use,
occupancy, operation, ownership or condition of or with respect to the
Property, and (ii) neither Seller nor its employees and
representatives nor any other person will have, or be subject to, any
liability to Purchaser or any other person resulting from the
distribution to Purchaser, or Purchaser's use of, any information
pertaining to the Property which is not specifically set forth in this
Agreement (including all EXHIBITS hereto). Without limiting the
generality of the foregoing, Purchaser further acknowledges and agrees
that except as provided herein, no representation, warranty, covenant
or indemnity has been made or will be given to Purchaser or any other
person in respect of any environmental liability with respect to any
dangerous, toxic or hazardous wastes, materials, pollutants or
substances ("Hazardous Materials"), as such terms are defined in
federal, state and local environmental laws and regulations,
including, without limitation, the United States Comprehensive
Environmental Response, Compensation and Liability Act 1980, as
amended (collectively, "Environmental Laws"). Purchaser also
acknowledges that Purchaser has had sufficient opportunity to conduct
such investigations of and with respect to the Property as it had
deemed necessary and advisable. Except for the representations and
warranties set forth in this Agreement, Purchaser has not been induced
by, and has not relied upon, any representation, warranty or statement
made by Seller or any officer, agent, representative, employee, broker
or other person representing Seller. Purchaser's representations set
forth in this Section shall survive the Closing.
(ii) Purchaser is duly organized, validly existing and
qualified and empowered to conduct its business, and has full power
and authority to enter into and fully perform and comply with the
terms of this Agreement. Neither the execution and delivery of this
Agreement nor its performance by Purchaser will conflict with or
result in the breach of any contract, agreement, law, rule or
regulation to which Purchaser is a party or by which Purchaser is
bound. This
39
<PAGE>
Agreement is valid and enforceable against Purchaser in accordance
with its terms and each instrument to be executed by Purchaser
pursuant to this Agreement or in connection herewith will, when
executed and delivered, be valid and enforceable against Purchaser in
accordance with its terms.
(iii) Equity Residential Properties Trust ("EQR") is the
sole general partner of Purchaser. The majority of the interests in
real property that are owned directly or indirectly by EQR are owned
through EQR's ownership interests in Purchaser.
(iv) There is no action, proceeding or investigation
pending or, to Purchaser's knowledge, threatened in writing and
received by Purchaser, before any court or governmental department,
commission, board, agency or instrumentality, nor are there any
contingencies or other matters which, if decided adversely to
Purchaser, would impair Purchaser's ability to perform its obligations
under this Agreement.
The foregoing representations and warranties of Purchaser shall survive the
execution and delivery of this Agreement, the Closings and the delivery of all
documents and any and all performances in accordance with this Agreement for a
period of nine (9) months following the consummation of the Stage 2 Closing,
except for the representation in Section 8(F)(i) and (ii), which shall survive
the Closings indefinitely.
9. INDEMNIFICATION
---------------
A. CAPREIT and Apollo Real Estate Investment Fund, L.P. ("AREIF")
(to the extent provided in Section 9(E) below, the "Indemnitors") hereby
agree to indemnify, defend, protect and save and hold harmless Purchaser,
Equity Residential Properties Trust, a Maryland real estate investment
trust ("EQR"), their Subsidiaries and affiliates (including, without
limitation, the Partnerships), and their respective successors and assigns,
and the officers, directors, trustees, partners, shareholders, managers,
members, agents and employees of any of the foregoing (collectively, the
"Indemnitees") from and against any suit, demand, claim, cause of action,
loss, damages (excluding consequential damages), injury, fine, penalty,
-------------------------------
obligation to pay money, cost, liability or expense, including
investigation costs and attorneys', consultants' and expert witness fees
(collectively, a "Claim") that arises, or is alleged to have arisen, from
(A) the following obligations of any of the Partnerships arising, occurring
or accruing or relating to matters occurring on or before the time at which
the applicable Closing occurs (the "Closing Time"): (i) claims by
employees, including, but not limited to, the matters identified on EXHIBIT
P, (ii) employee claims relative to health, pension, welfare and profit
sharing rights or obligations, including, but not limited to, the matters
identified on EXHIBIT P, (iii) state, local and federal tax liabilities
with respect to any tax year or partial tax year, (iv) tort claims in
connection with
40
<PAGE>
injuries sustained or alleged by any party (a "Third Party") other than
Purchaser and its affiliates or in connection with the negligent or
otherwise tortious acts or omissions of any Partnership or its agents or
employees, officers or directors, including, but not limited to, the
matters identified on EXHIBIT P, (v) claims made by any Third Party for
breaches of contract, (vi) violations or violations alleged by any Third
Party of federal or state securities laws, (vii) claims under or with
respect to, or in any way relating to matters within the scope of, any
guaranties or indemnities furnished by any of the Indemnitors to the
Trustee, Swiss Bank, CMC, the Surety, the holders of the Floater
Certificates, or any other party in connection with the CentRe Financing,
(viii) any contingent liabilities arising under guaranties, warranties,
indemnities or other undertakings not disclosed to Purchaser in an EXHIBIT
to this Agreement, (ix) any obligations or liabilities in relation to the
"CRITEF Redemption Liability" (as such term is hereinafter defined), (x)
the characterization of any of the Partnerships as an association taxable
as a corporation for federal income tax purposes, (xi) all invoices and
accounts payable, and (xii) claims by tenants under Leases, contractors
under Service Contracts or utility companies, (B) any breach of any of the
representations and warranties of Seller pursuant to Section 8.C. of this
Agreement, (C) any defect in title to the Partnership Interests being
transferred to Purchaser by any Group A Outside Partner or Group C Outside
Partner, and (D) except to the extent that Purchaser would have acquired
said obligations by operation of law or as a result of becoming an owner of
the Property had Purchaser acquired the Properties and/or the Residual
Certificates by deed and bill of sale in lieu of acquiring the Partnership
Interests, any other obligations of any of the Partnerships (or of any
other Subsidiary of CAPREIT or CAPREIT L.P.) arising, occurring, accruing,
or relating to matters occurring on or before the Closing Time.
Notwithstanding anything to the contrary herein contained, Purchaser shall
not have the right to, and shall not be entitled to, claim reimbursement or
coverage under the foregoing indemnification, to the extent that Purchaser
received a credit therefor at Closing. In no event shall the provisions of
Section 9(A)(D) be construed to extend the survival period on Seller's
representations and warranties contained in Section 8(E) of this Agreement,
nor shall any of the Indemnitees be entitled to bring a claim under Section
9(A)(B) hereof after the date, if any, on which the representation or
warranty to which such claim relates shall have expired pursuant to Section
8(E) hereof.
B. Upon demand made by an Indemnitee to any Indemnitor with respect
to any Claim, said Indemnitor shall be obligated, within twenty (20) days
following said demand, to either (i) pay said Claim on behalf of, and
without cost to, said Indemnitee, or (ii) assume the defense of the Claim
on behalf of the Indemnitees, unless both the Indemnitors and the
Indemnitees are named in the same litigation and representation of them by
the same counsel would be inappropriate. Subject to the foregoing, the
indemnifying party shall have the right to conduct and control the defense
of any Claim for which it is providing indemnification by counsel it
selects, provided that said counsel, and the conduct of the defense, shall
be subject to the reasonable approval of the party being indemnified.
Except in cases of conflicts of interest among the Indemnitees, the
Indemnitors shall not be required to provide or pay for more than one law
firm to represent the Indemnitees in
41
<PAGE>
connection with any given case or claim, and even in a case or claim where
there are conflicts of interest among the Indemnitees, (i) the Indemnitors
shall in no event be required to provide or pay for more than three law
firms to represent the respective Indemnitees or groups of Indemnitees in
connection with said case or claim, and (ii) Purchaser shall cooperate
reasonably with the Indemnitors in an effort to minimize the number of law
firms required to represent the Indemnitees in connection with said case or
claim. The party being indemnified shall cooperate fully in the defense of
the Claim and shall provide access to all information, documents and
witnesses pertinent to the Claim that are under its control. The
indemnifying party shall have the right, in its sole discretion, to
compromise, settle or otherwise dispose of any Claim for which it has
accepted and is providing indemnification pursuant to this Agreement;
provided that (i) said settlement does not obligate the indemnified party
to do or refrain from doing anything, other than making a lump-sum monetary
payment to the plaintiffs (which payment shall be made on behalf of the
indemnified party by, and at the sole cost and expense of, the indemnifying
party), and entering into a mutual release with plaintiffs, which
instrument shall be subject to the indemnified party's reasonable review
and approval and shall not impose any obligations that this Agreement
precludes from being imposed and shall not require the indemnified party to
make any admission of wrongdoing or fault, (ii) said settlement will not be
a matter of public record and the fact of said settlement will not tend to
prejudice the conduct of other matters in which the indemnified party is or
may be a defendant, and (iii) the indemnifying party provides the
indemnified party with evidence, satisfactory to the indemnified party,
that the indemnifying party possesses sufficient funds to fully pay for any
such settlement; provided, however, that the indemnified party shall be
informed of all material settlement offers and be given a reasonable
opportunity to comment on same.
C. If the Indemnitors do not timely pay the Claim or assume the
defense of the Claim in accordance herewith, the party entitled to
indemnification hereunder shall have the right to pay said Claim or take
over the defense of said Claim and to settle said Claim on any terms it
deems reasonable, provided that (i) the party entitled to indemnification
shall first have given the Indemnitors an additional five (5) business days
prior written notice, after the expiration of the twenty (20) day period
provided in Section 9(B) above, and the Indemnitors shall not have paid the
Claim or assumed the defense of the Claim within said additional period of
five (5) business days, and (ii) the indemnified party shall notify the
Indemnitors prior to agreeing to the terms of any settlement. Any such
settlement (and the costs and expenses incurred in defending and/or selling
the Claim) shall be valid as against the Indemnitors for the purposes of
the Indemnitors' indemnity obligations, and the Indemnitors shall pay or
reimburse said amounts to the applicable Indemnitees on demand.
D. All amounts due to Purchaser under this Section 9 shall bear
interest from the date due until the time paid at the Citibank "Prime
Rate," plus four percent per annum. The payment of said interest shall
not, however, authorize Seller to defer the payment of amounts otherwise
due hereunder.
42
<PAGE>
E. (1) All of the obligations under this Section 9 shall survive
each Closing, the delivery of all documents and any and all performances in
accordance with this Agreement, without limitation as to time or, except as
expressly provided below, amount.
(2) As employed in this Agreement, the term "Indemnitors" shall
mean (i) CAPREIT, at all times prior to the occurrence of an AREIF Trigger
Event, and (ii) CAPREIT and AREIF, jointly and severally, at all times
after an AREIF Trigger Event has occurred. At such time, if any, as AREIF
shall become an Indemnitor by operation of the preceding sentence, AREIF
shall, without further action by any party, become jointly and severally
liable with CAPREIT with respect to any claims previously brought against
CAPREIT under this Article 9, in addition to any claims thereafter brought
against the Indemnitors (or either of them) under this Article 9. In
addition, if AREIF becomes an Indemnitor by operation of this Section, then
AREIF shall be liable and responsible for all of the representations,
warranties and covenants of CAPREIT under this Agreement. As employed
herein, subject to Section 9(E)(3) below, the term "AREIF Trigger Event"
shall mean the occurrence of either of the following: (i) the net worth of
CAPREIT shall at any time fall below $50,000,000 (a "Net Worth Trigger
Event"); or (ii) any cash or other assets of CAPREIT shall at any time from
and after the Stage 1 Closing have been distributed by CAPREIT to or for
the benefit of AREIF or AREIF's Subsidiaries or "Affiliates." As employed
herein, an "Affiliate" of AREIF shall mean any person or entity
controlling, controlled by or under common control with AREIF.
(3) In no event shall the liability of CAPREIT and/or AREIF
under this Section 9 exceed the sum of the following amounts: (i) the Stage
1 Cash Balance and the Stage 1 Additional Payment (if the Stage 1 Closing
has occurred) plus (ii) the Stage 2 Cash Balance, the Earnest Money, the
----
Stage 1 Contingent Purchase Price and the Stage 2 Additional Payment (if
the Stage 2 Closing has occurred), plus (iii) the Prudential Cash Balance
----
(if the Prudential Closing has occurred). Furthermore, if an AREIF Trigger
Event shall have occurred other than the Net Worth Trigger Event, then
unless and until a Net Worth Trigger Event shall have occurred, AREIF's
liability as an Indemnitor shall be limited to the aggregate amount of cash
(and the net value of all other assets) that has been distributed by
CAPREIT to or for the benefit of AREIF or AREIF's Subsidiaries or
Affiliates from and after the Stage 1 Closing.
(4) From and after the Stage 1 Closing and until such time, if
any, as AREIF shall become an Indemnitor, CAPREIT shall furnish Purchaser,
on a quarterly basis on or before the 30th day following each fiscal
quarter, with a balance sheet and a statement of income, profit and loss
for CAPREIT for the previous fiscal quarter, which statement shall be
certified to Purchaser by an officer of CAPREIT as having been prepared in
accordance with generally accepted accounting principles consistently
applied and as fairly reflecting the financial condition of CAPREIT.
43
<PAGE>
F. Notwithstanding anything to the contrary herein contained,
Purchaser shall be responsible for all obligations of each Partnership
accruing after the Closing Time applicable to Purchaser's acquisition of
the Partnership Interests in said Partnership, except to the extent that
said obligations arise from any actual or alleged actions, omissions or
occurrences happening on or before said Closing Time.
10. CONDITIONS PRECEDENT
--------------------
At the option of Purchaser, the obligations of Purchaser under this
Agreement are contingent and conditional upon any one or more of the following,
the failure as of the applicable Closing of any of which shall, at the request
of Purchaser and after the return to Purchaser of the Earnest Money and (if the
unsatisfied conditions relate to the Stage 2 Closing, the Stage 1 Contingent
Purchase Price), render this Agreement null and void except for any obligations
expressly provided in this Agreement as surviving the expiration or termination
of this Agreement:
A. Purchaser shall have received, at each closing, as applicable,
the Title Insurance Policy insuring fee simple title to the Premises in the
applicable Property Partnerships, subject only to the Permitted Exceptions,
and otherwise in the form and condition required by this Agreement;
B. Each and every representation and warranty of Seller is true,
correct and complete in all material respects as of the applicable Closing,
as the case may be relative to said Closing.
C. As of the applicable Closing, Seller shall have performed and
satisfied in all material respects each and every obligation, term and
condition to be performed and satisfied by Seller under this Agreement
relative to said Closing.
D. The Properties and the Residual Certificates are currently
subject to the terms of the existing liens held by the Lenders described on
EXHIBIT VV (the "Existing Lenders") secured by the Properties ("Existing
Loans"). In the case of the CentRe Financing, the term "Existing Lender"
shall mean and include the Trustee, CMC, Swiss Bank, and the Surety. It
shall be a condition to Purchaser's obligations to close that consent
agreements ("Consent Agreements") be obtained prior to Closing with respect
to the CentRe Financing and the Existing Loan from The Prudential Insurance
Company of America (the "Prudential Debt") (collectively, the "Assumed
Debt") and that any and all conditions set forth in said Consent Agreements
shall have been satisfied. The Consent Agreements shall be in such form as
shall be satisfactory to Purchaser and Seller in their reasonable judgment.
Each Consent Agreement shall contain a representation by the Existing
Lenders, stating that the Seller and the Partnerships are not then in
default in the performance of any of their covenants, agreements or
obligations under the existing Loan Documents, and that the Existing Lender
has expressly consented to the transfer of the
44
<PAGE>
Partnership Interests to Purchaser subject to the Existing Loan. In
addition, in the case of the CentRe Financing, the Consent Agreements shall
state that no Events of Default are in existence under the CentRe Financing
Documents and that Purchaser and the Partnerships have no liability in
connection with any indemnities or guaranties furnished by CAPREIT, CAPREIT
L.P., AP CAPREIT, Apollo Real Estate Investment Fund L.P. ("AREIF") or any
other parties other than the Partnerships, including without limitation,
the guaranties and indemnities referred to in Section 10G below. In the
case of the Prudential Debt, Purchaser shall use all reasonable efforts to
obtain the Consent Agreement and shall keep Seller advised of the progress
of its attempts to obtain said Consent Agreement; and Seller agrees to
render reasonable assistance to Purchaser in obtaining said Consent
Agreement. In the case of the CentRe Financing, Seller shall use all
reasonable efforts to obtain the Consent Agreements and shall keep
Purchaser advised of the progress of its attempts to obtain such Consent
Agreements; and Purchaser agrees to render reasonable assistance to Seller
in obtaining such Consent Agreements. With respect to the other Existing
Loans (the "Prepayable Debt"), as a condition of Purchaser to close, Seller
shall cause the Existing Lenders to deliver payoff letters to Purchaser
("Payoff Letters") in form and substance reasonably satisfactory to
Purchaser.
E. The Master Trust Agreement shall have been amended so as to:
(i) delete Section 12.2(d) therefrom; and
(ii) modify the definition of "Maximum Residual Profit
Percentage" so as to permit a transfer of interests in the
"Residual Certificate Holder" to qualify as a "Timely Transfer"
(as such terms are defined in the Master Trust Agreement) so long
as it is made prior to the termination of the applicable Series
Trust; and
(iii) delete the net worth requirement of Section 12.2(b)
and the termination of the CRITEF Trusts pursuant to Section 14.5
(and the related "Mandatory Tender Event" under Section
5.2(a)(vi) upon bankruptcy of CRITEF (Maryland) or the failure of
CRITEF (Maryland) to maintain the "Trustor's Required Interest").
F. [Intentionally Omitted]
G. The CentRe Financing Documents shall have been amended so as to
eliminate any cross-defaults or cross-references to CAPREIT, AREIF, AP
CAPREIT, CRITEF (Delaware), the financial or other status of any of the
foregoing, or any guaranties, indemnities or other agreements to which any
of said entities are a party, including without limitation (i) a certain
Process Guaranty and Indemnity, dated December 1, 1996 (the "Non-Recourse
Guaranty"), made by AREIF in favor of CMC and the
45
<PAGE>
Surety; and (iii) a certain Indemnity Agreement dated as of December 1,
1996 made by CAPREIT and AREIF in favor of Swiss Bank. If required by CMC
and the Surety, Purchaser shall enter into instruments in favor of CMC and
the Surety, in form satisfactory to Purchaser in Purchaser's reasonable
judgment, pursuant to which Purchaser would (i) guaranty the same non-
recourse carve-outs that are the subject of the Non-Recourse Guaranty, but
only to the extent of any actions or omissions occurring from and after the
consummation of the Stage 2 Closing, and (ii) undertake to CMC and Zurich
to provide CMC or Zurich with a letter of credit in the amount of
$2,000,000 as "Additional Collateral" (as such term is defined in the CMC
Reimbursement Agreement) during all periods from and after June 4, 1998 in
which the "Debt Service Coverage Ratio" (as such term is defined in the CMC
Reimbursement Agreement) is less than 1.20 to 1. Purchaser agrees, if
requested by CMC as a condition of CMC's taking the actions contemplated
under this Agreement, to agree not to exercise its rights under Sections
2.03(e) and (f) of the CMC Reimbursement Agreement prior to December 3,
2000.
H. Seller shall have furnished Purchaser with an opinion of
nationally recognized bond counsel ("Bond Counsel"), in the form and
substance previously agreed to orally between Purchaser and Seller to the
effect that under present law (i) the acquisition and ownership by
Purchaser throughout the term of the Master Trust Agreement of one hundred
percent of the Property Partnerships and CRITEF (Maryland), the owner of
the Residual Certificates will not adversely affect the tax status of the
Floater Certificates and the Subordinate Certificates; (ii) all approvals
required under the CentRe Financing, the Property Bonds and the Bond
Documents in connection with the transactions contemplated under the
Agreement have been obtained; (iii) the exercise of the Group A Options,
and the transfer to Purchaser of the Group A Outside Interests and the
Group C Outside Interests at the Stage 2 Closing, the assumption of the
indebtedness evidenced by the Property Bonds and the Bond Documents and the
Seller's obligations under the Bond Documents will not constitute a
"refinancing" within the meaning of Treasury Regulation 1.150-1 nor
adversely affect the tax-exempt status of the interest payable on the Bonds
for federal income tax purposes; and (iv) the consummation of the
transactions contemplated hereby in the manner set forth herein will not
contravene any of the provisions of the Bond Documents or the CentRe
Financing Documents or any other documents relating thereto. If after
reasonable efforts Seller is unable to obtain the Consent Agreement or the
Bond Counsel opinion on or before the Stage 2 Outside Date, then Purchaser
may elect to terminate this Agreement by giving Seller notice, in writing,
prior to the Stage 2 Outside Date that Purchaser elects to terminate this
Agreement. In such event, the Earnest Money shall be returned to
Purchaser, at which time this Agreement shall be null and void and neither
party shall have any rights or obligations under this Agreement, with the
exception of obligations expressly provided herein to survive the
expiration or termination of this Agreement, and any surviving obligations
relative to Closings that have previously occurred. If Purchaser fails to
give timely notice of its election to terminate this Agreement as
aforesaid, it shall be conclusively presumed that Purchaser has satisfied
or waived the foregoing contingency. Purchaser agrees that the law firms
of Orrick Herrington & Sutcliffe, Locke Purnell, Rain
46
<PAGE>
Harrell or Kutak Rock would be acceptable to Purchaser as Bond Counsel for
the purposes of this Section 10H.
I. Seller shall have obtained the written consent of the bond
issuers of the Property Bonds for the Ocean Walk and Regency Woods
Properties with respect to the transfers of the Partnership Interests in
the Partnerships owning those Properties to Purchaser as contemplated under
this Agreement. In addition, Seller shall have obtained the written consent
of all issuers that have taken the position that such consent is required,
upon receipt of notice, describing the transfers of Partnership Interests
in the respective Property Partnerships. If any of the consents required to
be obtained pursuant to this Section 10(I) have not been obtained on or
before the Stage 2 Outside Date, then (if the aggregate value of the
Property Bonds to which said consents relate does not exceed $30,000,000),
Seller and Purchaser shall, for a period of two weeks after the Stage 2
Outside Closing Date, negotiate in good faith in an effort to reach an
agreement with respect to the terms (including a price adjustment) upon
which said Property Bonds may be removed from the CRITEF Trusts and the
related Properties may be deleted from the scope of the Stage 2 Closing;
but if for any reason Purchaser and Seller are unable to reach such an
agreement within said period, or if the Existing Lenders do not release
such Property Bonds from the CRITEF Trusts, either party shall have the
right to terminate this Agreement upon notice to the other, in which event
the Earnest Money shall be delivered to Purchaser and this Agreement shall
be of no further force or effect except for obligations expressly stated to
survive.
J. The "Geary Restructuring" shall have been consummated. As
employed herein the term "Geary Restructuring" shall mean the closing of
the refinancing of the Property Bonds with respect to the Property owned by
the Geary Partnership, as contemplated by the CentRe Financing Documents.
Notwithstanding anything to the contrary herein contained, it is understood
and agreed that the consummation of the Geary Restructuring is a condition
precedent to the Stage 2 Closing in its entirety, not merely a condition
precedent to the Geary L.P. Closing.
K. The Third Party Withdrawals shall be fully consummated prior to
the Stage 2 Closing, at Seller's sole cost and expense, with no surviving
obligations whatsoever on the part of CRITEF (Maryland) or any of the other
Partnerships to any parties in connection therewith; and the Third Party
Bonds shall be transferred by CRITEF (Maryland), prior to the Stage 2
Closing, to an entity other than one of the Partnerships, and CRITEF
(Maryland) shall have no surviving obligations in connection therewith.
L. The CentRe Financing Documents shall have been amended so as to
release the Paces working capital loan and line of credit, which was
pledged to CMC and Zurich by CRITEF (Delaware) (the "Paces Loan Pledge").
47
<PAGE>
Purchaser and Seller agree that the conditions precedent set forth in Sections
10(A), 10(B) and 10(C) relate to each Closing; the conditions precedent set
forth in Sections 10(E), 10(G), 10(H), 10(I), 10(J), 10(K) and 10(L) are
conditions precedent with respect to the Stage 2 Closing only (other than the
provisions in Section 10(H) relating to the approval of the form of the Bond
Counsel opinion prior to the Stage 1 Closing); and the conditions precedent set
forth in Section 10(D) relate in part to the Stage 1 Closing, in part to the
Stage 2 Closing, and in part to the Prudential Closing.
11. BROKERAGE
---------
Each party represents to the other that they dealt with no broker in
connection with this transaction other than Karpf Zarrilli & Co., Inc., which
was engaged by (and shall be paid by) Seller. Seller shall indemnify and hold
Purchaser harmless from and against any and all claims of all brokers and
finders (including Karpf Zarrilli & Co., Inc.) claiming by, through or under
Seller and in any way related to the sale and purchase of the Property pursuant
to this Agreement, including, without limitation, attorneys fees incurred by
Purchaser in connection with such claims. Purchaser shall indemnify, defend and
hold Seller harmless from and against any and all claims of all brokers and
finders claiming by, through or under Purchaser and in any way related to the
sale and purchase of the Property pursuant to this Agreement, including, without
limitation, attorneys fees incurred by Seller in connection with such claims.
Notwithstanding anything to the contrary contained in this Agreement, Seller's
and Purchaser's obligations under the preceding sentences shall survive Closing
or any termination of this Agreement. Each party shall pay for its own
consultants.
12. DEFAULTS AND REMEDIES
---------------------
A. Notwithstanding anything to the contrary contained in this
Agreement, if (i) Seller fails to perform in accordance with the terms of
this Agreement in any material respect and does not cure said failure
within five (5) days following written notice thereof from Purchaser, or
(ii) if Purchaser has knowledge (within the meaning of Section 8E of this
Agreement) that Seller's representations or warranties contained in this
Agreement shall not be true and correct in any material respect upon
closing, then, Purchaser shall have the right to elect by written notice to
Seller within thirty (30) days following such default, any one of the
following remedies, which shall be mutually exclusive (and by failing to
provide said notice Purchaser shall be deemed to have elected the remedy
provided in clause (i) below): either (i) Purchaser may terminate the
applicability of this Agreement as to future Closings, in which case the
Earnest Money (and if the Stage 1 Closing has occurred but the Stage 2
Closing has not occurred, the Stage 1 Contingent Purchase Price) shall be
returned to Purchaser (at which time this Agreement shall be null and void
and neither party shall have any rights or obligations under this
Agreement, other than obligations expressly stated herein as surviving the
termination of this Agreement); or (ii) Purchaser may sue for specific
performance of this Agreement; or (iii) Purchaser may waive such default
and proceed to Closing; provided, however, that if this Agreement shall be
terminated pursuant to this Section 12A, Seller shall pay to Purchaser, on
demand, an amount, not to exceed
48
<PAGE>
$1,000,000 in the aggregate (said limit being reduced to $500,000 if the
Stage 1 Closing has previously been consummated), equal to all of the out-
of-pocket costs (including without limitation reasonable attorneys' and
consultants' fees and all travel and other out-of-pocket costs, not
including salaries and overhead, of Purchaser's own personnel) in
connection with the transactions contemplated under this Agreement,
including such costs and expenses relative to due diligence and the
preparation and negotiation of this Agreement.
B. Notwithstanding anything to the contrary contained in this
Agreement, if Purchaser fails for each Closing to perform in accordance
with the terms of this Agreement in any material respect and does not cure
said failure within five (5) days following written notice thereof from
Seller, then Seller shall have the right to elect by written notice to
Purchaser within thirty (30) days following such default, any one of the
following remedies, which shall be mutually exclusive (and by failing to
provide said notice Seller shall be deemed to have elected the remedy
provided in clause (i) below): either (i) Seller may terminate the
applicability of this Agreement as to future Closings, in which case, the
Earnest Money (and, if the Stage 1 Closing has occurred but the Stage 2
Closing has not occurred, the Stage 1 Contingent Purchase Price) shall be
paid to Seller (as directed by CAPREIT on behalf of all of the entities
constituting Seller) as liquidated damages (which shall in such case be
Seller's sole and exclusive remedy against Purchaser), at which time this
Agreement shall be null and void and neither party shall have any rights or
obligations under this Agreement other than obligations expressly stated
herein as surviving the termination of this Agreement; or (ii) Seller may
sue for specific performance of this Agreement; or (iii) Seller may waive
such default and proceed to Closing. Purchaser and each entity
constituting Seller acknowledges and agrees that (i) the Earnest Money is a
reasonable estimate of and bears a reasonable relationship to the damages
that would be suffered and costs incurred by Seller as a result of having
withdrawn the Property from sale and the failure of Closing to occur due to
a default of Purchaser under this Agreement; (ii) the actual damages
suffered and costs incurred by Seller as a result of such withdrawal and
failure to close due to a default of Purchaser under this Agreement would
be extremely difficult and impractical to determine; (iii) Purchaser seeks
to limit its liability under this Agreement to the amount of the Earnest
Money in the event this Agreement is terminated and the transaction
contemplated by this Agreement does not close due to a default of Purchaser
under this Agreement; and (iv) the Earnest Money shall be and constitute
valid liquidated damages.
13. MISCELLANEOUS
-------------
A. From the date of this Agreement through the applicable Closing
relative to each Property, Purchaser and its employees, accountants and
auditors shall have such access to the Properties at reasonable times upon
reasonable prior notice to facilitate the ownership transition, and to
verify that Seller is in compliance with its representations, warranties
and covenants under this Agreement. Also during such time period, Seller
shall make all of Seller's books, files and records relating in any way to
the Property available for
49
<PAGE>
examination by Purchaser and Purchaser's employees, accountants and
auditors, who shall have the right to make copies of such books, files and
records and to extract therefrom such information as they may desire, and
who shall have the right to audit and have certified, thoroughly and
completely, all income and expenses, profits and losses, and operational
results of the Property for the two (2) calendar years prior to the date of
the applicable Closing and for the current calendar year to date. Any entry
("Entry") upon the Properties by Purchaser and its employees, agents and
auditors (collectively, "Purchaser's Representatives") shall be at the sole
risk and expense of Purchaser and Purchaser's Representatives, and
Purchaser shall not unreasonably interfere with or disrupt the activities
on or about the Properties of Seller, its tenants and their invitees.
Purchaser shall not make any Entry without the prior approval of Richard
Kadish, Jeff Goldshine, Ernest Heyman or Bruce Esposito, which may be given
orally or in writing and which shall not be unreasonably withheld,
conditioned or delayed, and which notice shall identify the Property or
Properties involved, describe the purpose of the Entry and the identity of
the individuals entering upon the Property. Purchaser shall, at Purchaser's
sole cost and expense, promptly repair, restore or replace any property of
Seller damaged by Purchaser in connection with any inspections, test
borings, surveys, and hazardous waste, engineering and other studies or
tests (collectively, "Tests") conducted by Purchaser at the Property prior
to the date of the Agreement to the same condition as existed immediately
before conduct of such Tests by Purchaser.
B. If the transaction does not close other than by reason of
Seller's default, Purchaser shall furnish to Seller, at no cost or expense
to Seller except for actual out-of-pocket copying charges, copies of all
surveys, soil test results, engineering, asbestos, environmental and other
studies and reports prepared by third parties relating to the
Investigations which Purchaser shall obtain with respect to the Properties.
If the transaction does not close other than by reason of Seller's default,
then Purchaser shall keep no copies of any information provided by Seller
with respect to the Partnerships, the Partnership Interests and the
Properties and shall return all such information to Seller or destroy such
information.
C. Purchaser shall not allow any Entry or any other activities
undertaken by Purchaser or Purchaser's Representatives to result in liens,
judgments or other encumbrances being filed or recorded against the
Properties, and Purchaser, at its sole cost and expense, shall promptly
discharge of record any such liens or encumbrances that are so filed or
recorded (including without limitation, liens for services, labor or
materials; provided, however, nothing contained herein is intended to, and
shall not authorize the filing or recording of such liens or entitle any
person or entity to claim that Seller authorized that any services, labor
or materials be supplied to the Properties).
D. (i) Purchaser shall indemnify, defend and hold harmless Seller
and Seller's partners, and their respective officers, directors, employees,
agents, contractors and tenants (the "Seller Indemnitees") from and against
any and all direct loss, cost, expense, damage
50
<PAGE>
and liability (including, without limitation, reasonable attorneys' fees
and disbursements incurred at the pretrial, trial and appellate levels),
suffered or incurred by Seller or any of such other entities or persons and
directly arising out of or in connection with (i) any Entry, Tests, or
other activities conducted thereon by Purchaser or Purchaser's
Representatives, or any other activities conducted thereon prior to the
date of this Agreement by Purchaser, Purchaser's Representatives, and any
other agents, contractors or representatives engaged by Purchaser, and (ii)
any liens or encumbrances filed or recorded against the Properties as a
consequence of the Entry, Tests, or any and all other activities undertaken
by Purchaser or Purchaser's Representatives, and any and all other
activities referred to in clause (i) of this sentence. Purchaser shall
defend, indemnify and hold Seller harmless from all loss, cost, expense,
damage and liability (including, without limitation, reasonable attorneys'
fees and disbursements incurred at the pretrial, trial and appellate
levels) resulting from (a) any claims for injury to or death of persons
which arise out of or in connection with the negligent or otherwise
tortious acts or omission of Purchaser after the Closing, (b) claims by
tenants under Leases, contractors under Service Contracts or utility
companies with respect to matters that occur or obligations that accrue
after the Closing during Purchaser's (or Purchaser's affiliates') time
period of ownership of the Properties and (c) any claims arising from the
ownership or operation of any Property that relate to matters occurring
after the Closing during Purchaser's (or Purchaser's affiliates') time
period of ownership of said Property. Each of the Matters specified in this
Section 13(D) are referred to hereinafter as an "Indemnified Claim."
(ii) Upon demand made by a Seller Indemnitee to Purchaser with
respect to any Indemnified Claim, Purchaser shall be obligated, within
twenty (20) days following said demand, to either (i) pay said Indemnified
Claim on behalf of, and without cost to, said Seller Indemnitees, or (ii)
assume the defense of the Indemnified Claim on behalf of the Seller
Indemnitees, unless both the Purchaser and the Seller Indemnitees are named
in the same litigation and representation of them by the same counsel would
be inappropriate. Subject to the foregoing, Purchaser shall have the right
to conduct and control the defense of any Indemnified Claim for which it is
providing indemnification by counsel it selects, provided that said counsel
and the conduct of the defense, shall be subject to the reasonable approval
of the party being indemnified. The party being indemnified shall
cooperate fully in the defense of the Indemnified Claim and shall provide
access to all information, documents and witnesses pertinent to the
Indemnified Claim that are under its control. Purchaser shall have the
right, in its sole discretion, to compromise, settle or otherwise dispose
of any Indemnified Claim for which it has accepted and is providing
indemnification pursuant to this Agreement; provided that (i) said
settlement does not obligate the indemnified party to do or refrain from
doing anything, other than making a lump-sum monetary payment to the
plaintiffs (which payment shall be made on behalf of the indemnified party
by, and at the sole cost and expense of, Purchaser), and entering into a
mutual release with plaintiffs, which instrument shall be subject to the
indemnified party's reasonable review and approval and shall not impose any
obligations that this Agreement precludes from being imposed and shall not
require the indemnified party to make any
51
<PAGE>
admission of wrongdoing or fault, (ii) said settlement will not be a matter
of public record and the fact of said settlement will not tend to prejudice
the conduct of other matters in which the indemnified party is or may be a
defendant, and (iii) Purchaser provides the indemnified party with
evidence, satisfactory to the indemnified party, that Purchaser possesses
sufficient funds to fully pay for any such settlement; provided, however,
that the indemnified party shall be informed of all material settlement
offers and be given a reasonable opportunity to comment on same.
(iii) If Purchaser does not timely pay the Indemnified Claim or
assume the defense of the Indemnified Claim in accordance herewith, the
party entitled to indemnification hereunder shall have the right, after
giving an additional five (5) business days' prior written notice to
Purchaser, after expiration of the twenty (20) day period provided in
Section 13(D)(ii) above, to pay said Indemnified Claim or take over the
defense of said Indemnified Claim and to settle said Indemnified Claim on
any terms it deems reasonable, provided that the indemnified party shall
notify Purchaser prior to agreeing to the terms of any settlement. Any
such settlement (and the costs and expenses incurred in defending and/or
selling the Claim) shall be valid as against Purchaser for the purposes of
Purchaser's indemnity obligations, and Purchaser shall pay or reimburse
said amounts to the applicable Seller Indemnitees on demand.
E. Neither this Agreement nor any interest hereunder shall be
assigned or transferred by Seller, except to the extent expressly permitted
pursuant to the provisions of Section 13(V) of this Agreement in connection
with the liquidation of CAPREIT, but in no event shall any assignment or
transfer by Seller be deemed to release Seller of its obligations
hereunder. Immediately prior to, and only in conjunction with, a Closing,
Purchaser may assign or otherwise transfer its interest under this
Agreement for rights under that Closing to any entity (any such entity
being referred to as an "EQR Subsidiary") wholly owned, directly or
indirectly by Purchaser and/or Equity Residential Properties Trust,
provided that Purchaser shall not thereby be released from its obligations
under this Agreement. As used in this Agreement, the term "Purchaser"
shall be deemed to include any permitted assignee or other transferee of
the initial Purchaser. Purchaser shall have the right prior to any Closing
under this Agreement, to designate in writing to Seller one or more EQR
Subsidiaries as the entities to whom Seller shall transfer some or all of
the Partnership Interests that would otherwise be transferred to Purchaser
itself pursuant to this Agreement. Subject to the foregoing, this
Agreement shall inure to the benefit of and shall be binding upon Seller
and Purchaser and their respective successors and permitted assigns.
F. This Agreement constitutes the entire agreement between Seller
and Purchaser with respect to the Property and shall not be modified or
amended except in a written document signed by Seller and Purchaser. Any
prior agreement or understanding between Seller and Purchaser concerning
the Property (including, without limitation, the letter of intent dated
July 29, 1997 by and between CAPREIT and Equity Residential Properties
Trust) is hereby rendered null and void.
52
<PAGE>
G. Seller agrees to provide Purchaser and its representatives with
access to Seller's books and records both prior to and after the Closing
upon reasonable advance notice in order to conduct the required audit, to
the extent necessary to prepare audited financial statements pertaining to
the Properties for one prior calendar year of operation and the portion of
the calendar year in which the Closing occurs up to the Closing Date that
are required to be filed by the Purchaser with the Securities and Exchange
Commission prior to and after the Closing. Seller shall not be obligated
to sign any affidavits or furnish any representations with respect to such
financial statements in connection with any filings made by Purchaser with
the Securities and Exchange Commission. Purchaser specifically advises
Seller that it will be necessary for Purchaser, within fifteen (15) days
after the date hereof, to file a Form 8-K report with the Securities and
Exchange Commission per Rule 3-14 of Regulation S-X. Purchaser agrees not
to file said report prior to October 10, 1997, and shall not file said
report under any circumstances if this Agreement has previously been
terminated. In that report, Purchaser will need to include a description
of each Property and the terms of purchase. With 60 days following the
filing of the Form 8-K report, Purchaser will be obligated to file audited
financial statements for the Properties for the year ended December 31,
1996, and unaudited financial statements for the Properties for 1997
through the date as of which the most recent financial information is
available, and Seller agrees that Purchaser may do so. Seller shall have
the right to have access to and make copies of any of the materials
referred to in Section 6(B)(i)(L), at Seller's expense, to the extent the
same remain in Purchaser's or the Property Partnership's possession or
control, during regular business hours at any time following the applicable
Closing, upon furnishing Purchaser with reasonable advance notice.
H. Time is of the essence of this Agreement, subject to any periods
of grace provided herein. In the computation of any period of time
provided for in this Agreement or by law, the day of the act or event from
which the period of time runs shall be excluded, and the last day of such
period shall be included, unless it is a Saturday, Sunday, or legal
holiday, in New York or Chicago, in which case the period shall be deemed
to run until the end of the next day which is not a Saturday, Sunday, or
legal holiday.
I. All notices, requests, demands or other communications required
or permitted under this Agreement shall be in writing and delivered by hand
or by certified mail, return receipt requested, postage prepaid, by
telecopy or other facsimile transmission, or by overnight courier (such as
Federal Express), addressed as follows:
53
<PAGE>
1. If to Seller:
Capital Apartment Properties, Inc.
11200 Rockville Pike
Rockville, Maryland 20852
Attention: Richard L. Kadish
Telecopier: (301) 468-8391
Apollo Real Estate Advisors, L.P.
1301 Avenue of the Americas
New York, New York 10019
Attention: Richard Mack
Telecopier: (212) 261-4060
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 48th Floor
New York, New York 10166
Attention: Andrew H. Levy
Telecopier: (212) 351-4035
2. If to Purchaser:
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Douglas Crocker II
President
Telecopier: (312) 454-0434
With a copy to:
Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Bruce C. Strohm
Telecopier: (312) 454-0039
54
<PAGE>
With a copy to:
Rudnick & Wolfe
203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601
Attention: Errol R. Halperin and Ross Green
Telecopier: (312) 236-7516
All notices given in accordance with the terms hereof shall be deemed given
and received when delivered personally; the following business day if sent
by overnight courier; the third business day after deposit postage prepaid,
if sent by certified mail; or upon receipt if sent by telecopy. Either
party hereto may change the address for receiving notices, requests,
demands or other communication by notice sent in accordance with the terms
of this Section.
J. This Agreement shall be governed and interpreted in accordance
with the laws of the State of New York, without giving effect to the
principles thereof relating to conflicts of laws. Purchaser and Seller
(and each Indemnitor) hereby irrevocably and unconditionally (i) submit for
themselves and their property in any suit, action or other legal proceeding
arising out of or relating to this Agreement, or for the recognition and
enforcement of any judgment in respect thereof, to the jurisdiction of the
courts of the United States, for the Southern District of New York, and the
appellate courts thereof, and (ii) consent that any suit, action or other
legal proceeding in connection with this Agreement shall be brought solely
in those courts set forth in clause (i) above. Notwithstanding the
foregoing, if precluded by any court set forth in clause (i) above from
bringing an action in any one of the courts set forth in clause (i) above
due to a lack of jurisdiction of such court to hear such claim, then the
party precluded from bringing such claim may file such claim with the state
courts of the State of New York, sitting in New York County, and the
appellate courts thereof; and if a party is precluded by said courts of the
State of New York from bringing an action in said court due to a lack of
jurisdiction of said court to hear such claim, then the party precluded
from bringing such claim may file such claim with any court of competent
jurisdiction. Purchaser and Seller (and each Indemnitor) hereby
irrevocably and unconditionally waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the
laying of venue of any such suit, action or other legal proceeding in any
of those courts in which claims are authorized to be brought pursuant to
this Section 13J and any claim that any such suit, action or other legal
proceeding brought in such court has been brought in an inconvenient forum
and agree not to plead or claim the same. Purchaser and Seller (and each
Indemnitor) agree that a final judgment in any such suit, action or other
legal proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable law. THE PARTIES HERETO HEREBY WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY ACTION ARISING HEREUNDER OR UNDER THIS AGREEMENT. In the event of
any action or proceeding at law or in equity between
55
<PAGE>
Purchaser and Seller (or any Indemnitor) to enforce any provision of this
Agreement or to protect or establish any right or remedy of either party
hereunder, the unsuccessful party to such litigation (after exhaustion of
all appeals) shall pay to the prevailing party all costs and expenses,
including reasonable attorneys' fees incurred therein by such prevailing
party, and if such prevailing party shall recover judgment in any such
action or proceeding, such costs and expenses (including such attorneys'
fees) as are related to said action or proceeding, or as were incurred by
the party ultimately prevailing in connection with any lower court
proceedings which have been overturned, shall be included in and as a part
of such judgment.
K. This Agreement may be executed in any number of identical
counterparts, any or all of which may contain the signatures of fewer than
all of the parties but all of which shall be taken together as a single
instrument.
L. Notwithstanding anything in this Agreement to the contrary,
except as specifically provided herein, in the Closing Documents delivered
pursuant hereto or the Closing Prorations and adjustments referenced in
Section 6(C), Purchaser shall not be deemed to assume any liability or
obligation (contingent or otherwise) of Seller or Properties. However,
Purchaser acknowledges that by acquiring partnership interests as
contemplated by this Agreement, Purchaser, as a matter of law, may be
acquiring certain liabilities or obligations of such partnerships, provided
that this provision shall in no way affect or limit any of the
representations, warranties, covenants and indemnities made by Seller in
this Agreement.
M. The date of this Agreement shall be the date set forth above.
N. [Intentionally Omitted]
O. The parties hereto agree that all information and materials
regarding the transaction contemplated by this Agreement shall be held in
confidence and shall not be disclosed to any third party other than the
respective parties' lenders, principals, affiliates, employees, agents and
consultants and except as required by law. Purchaser and Seller agree that
(i) no press releases or public announcements shall be issued or made from
and after the date hereof with respect to the transactions that are the
subject of any Closing until said Closing has been consummated, without the
prior written consent of the other party (unless such disclosure is
required to be made by law), which consent shall not be unreasonably
withheld, conditioned or delayed, and (ii) any press release issued in
connection with the consummation of the Stage 2 Closing shall include a
reference to the proposed joint venture referred to in Section 13(T) below.
P. For purposes of this Agreement, "knowledge" with respect to
Seller shall mean matters as to which Richard Kadish, Jeff Goldshine, Bruce
Bershtein, Bruce Esposito, Ernest Heyman or Andrew H. Levy has actual
knowledge without any duty or
56
<PAGE>
responsibilities to make any inquiry, review or investigation other than
inquiry of the managing agent of the Properties; and provided that none of
said individuals shall have any liability to Purchaser under this
Agreement.
Q. Seller covenants that as of each Closing, Seller shall cause the
management company currently managing the Properties involved in said
Closing to terminate the on-site employees then employed by Seller or by
CAPREIT's management company with respect to said Properties and, for a
period of fifteen (15) days following said Closing, not to solicit these
employees for employment elsewhere. Purchaser agrees, upon acquiring the
Partnership Interests relative to any given Property, to employ (effective
as of said Closing) those Property-level employees who are currently
working at such Property; provided that such employment shall be on a
provisional basis pending compliance with Purchaser's employment policies
and procedures (including criminal background screening and drug testing).
R. The provisions of the foregoing paragraphs 13A, B, C, D, F, G, D,
K, O, P, Q and R and the following paragraphs 13S, V and W shall survive
the Closing or any termination of this Agreement.
S. All of the obligations and liabilities of the Seller and the
entities collectively constituting Seller hereunder shall constitute
obligations and liabilities of CAPREIT. CAPREIT shall be fully liable to
Purchaser at all times for the performance of any and all of the
obligations and liabilities of Seller and any or all of the entities
collectively constituting Seller, and Purchaser shall have no obligation to
join any of the other parties constituting Seller in any action brought by
Purchaser in connection with this Agreement. Each of the other entities
collectively constituting Seller shall be severally liable and responsible
to Purchaser for the performance of all representations, warranties and
covenants under this Agreement but only to the extent that the same relate
to the Partnership Interests owned by said entity, or to the Partnerships
to which said Partnership Interests relate. CAPREIT is hereby authorized,
on behalf of all of the Seller entities, to receive all payments due to
Seller under this Agreement, and to furnish, on behalf of all of the Seller
entities, any consents or approvals under this Agreement, and to enter into
any modifications, waivers or amendments in connection with this Agreement.
T. Purchaser and Seller agree to negotiate in good faith the terms
and provisions of a joint venture agreement in accordance with the term
sheet attached hereto as EXHIBIT FF. If for any reason (other than bad
faith) the parties do not execute and deliver said joint venture agreement
prior to the Stage 2 Closing, neither party shall have any further
obligation with respect to said proposed joint venture. Moreover, neither
Purchaser nor Seller shall have any obligation to enter into said joint
venture agreement unless and until the State 2 Closing has occurred, it
being understood that said joint venture agreement will be entered into, if
at all, concurrently with the consummation of the Stage 2 Closing.
57
<PAGE>
U. [Intentionally Omitted]
V. Purchaser acknowledges that Seller may desire to dissolve and
liquidate CAPREIT on or before December 31, 1997 or transfer substantially
all of CAPREIT's assets to "Successor Entities" (as such term is
hereinafter defined) if for any reason the Stage 2 Closing has not occurred
on or before December 15, 1997 and agrees that CAPREIT may do so provided
that it has obtained the consent of CMC, the Surety and Swiss Bank, and
provided that CAPREIT complies with the following conditions (and CAPREIT
hereby agrees that it shall not be dissolved or liquidated, transfer its
"Transactional Assets" [as such term is hereinafter defined] or distribute
other assets with a value exceeding $5,000,000 without complying with the
following conditions): (i) upon such dissolution or liquidation or
transfer, substantially all of the assets of CAPREIT are transferred to a
liquidating trust or other entity or entities (said entities being referred
to herein as the "Successor Entities") and (ii) the Successor Entities, in
writing, ratify, confirm and assume and agree to perform all obligations of
CAPREIT under this Agreement. If substantially all of the assets (and all
of the Transactional Assets) of CAPREIT shall be distributed or transferred
to a single "Successor Entity" that assumes and agrees to perform all of
CAPREIT's obligations under this Agreement, then, among other things, the
transfer of assets to said Successor Entity shall not constitute an AREIF
Trigger Event under Section 9 and the Successor Entity (in lieu of CAPREIT)
shall be the sole "Indemnitor" under Section 9 of this Agreement unless and
until an AREIF Trigger Event shall occur with respect to the Successor
Entity itself (and in such case, for purposes of determining whether an
AREIF Trigger Event has occurred with respect to the Successor Entity, the
name of said Successor Entity shall be substituted for CAPREIT in the last
sentence of Section 9(E)(2)). If, however, the Transactional Assets of
CAPREIT are transferred or distributed to more than one Successor Entity,
or if more than one Successor Entity acquires "Substantial Assets" of
CAPREIT, then upon the occurrence of said transfer or distribution, AREIF
shall, without further action by any party, be and become jointly and
severally liable with CAPREIT for the performance of all of the
representations, warranties, covenants, obligations and indemnities made or
undertaken to be performed by CAPREIT under this Agreement. As employed
herein the term "Transactional Assets" shall mean all of CAPREIT's
ownership interests in the Qualified REIT Subsidiaries and the
Partnerships. As employed herein, the term "Substantial Assets" shall mean
assets with a value in excess of $5,000,000, and the term "substantially
all" as it relates to CAPREIT's assets, shall mean all of the assets of
CAPREIT, with the exception of assets with an aggregate value not exceeding
$5,000,000. The dissolution, liquidation or transfer of substantially all
of the assets of CAPREIT in accordance herewith is referred to herein as a
"CAPREIT Liquidation Transaction". Notwithstanding anything to the
contrary herein contained, CAPREIT shall have the right (subject to
obtaining the consent of CMC, the Surety and Swiss Bank) to transfer its
ownership interests in CRITEF (Delaware) and CAPREIT Residential
Corporation to any party, and the restrictions of this Section 13(V) shall
not apply to any such transfers.
58
<PAGE>
W. Notwithstanding anything to the contrary herein contained:
(1) if the condition precedent set forth in Section 14(D)(2)
with respect to Section 10K above is not satisfied, Seller agrees to
waive said condition if Purchaser agrees (in a document in form and
substance reasonably satisfactory to Seller) to pay Seller, as and
when received, any income derived by Purchaser to the extent relating
to the Third Party Bonds under the Residential Certificates;
(2) if the condition precedent set forth in Section 14(D)(2)
with respect to Section 10(L) above is not satisfied, Seller agrees to
waive said condition if Purchaser agrees (in a document in form and
substance reasonably satisfatory to Seller) to compensate Seller for
any losses or costs suffered or sustained by Seller as a result of the
exercise by CMC or the Surety of their rights and remedies under the
Paces Loan Pledge as a consequence of any event of default arising
under the CentRe Financing after the consummation of the Stage 2
Closing;
(3) if the Stage 2 Closing does not occur solely by reason of
the failure of satisfaction of the conditions precedent set forth in
Sections 10(D), 10(E), 10(G) and/or 14(C), and if Purchaser was
otherwise ready; willing and able to consummate the Stage 2 Closing,
then:
(A) Seller shall pay to Purchaser, on demand, the sum of
$1,000,000 (without limitation of any remedies that may otherwise
available to Purchaser under Section 12(A));
(B) If Seller enters into a binding purchase and sale
agreement with respect to any of the Stage 2 Partnership
Interests with another purchaser on or before December 9, 1998,
then upon the consummation of the closing of each such sale,
Seller shall pay to Purchaser, on demand, the amount, if any, by
which the net proceeds, after transactional expenses, paid to or
for the benefit of Seller from said other purchaser exceeds the
Stage 2 Purchase Price; and
(C) If Seller enters into a binding purchase and sale
agreement with respect to any Stage 2 Properties with another
purchaser on or before December 9, 1998, then upon the
consummation of the closing of each such sale, Seller shall pay
to Purchaser, on demand, the amount if any, by which the net
proceeds, after transactional expenses, paid to or for the
benefit of Seller exceeds the "Allocable Asset Price" (as such
term is hereinafter defined) for said Property. As employed
herein, the term "Allocable Asset Price" with respect to any
given Stage 2 Property shall mean the portion of the Stage 2
Purchase Price reasonably and fairly allocable to said Property.
If the Stage 2 Closing does not occur in circumstances in which
this Section 13(W)(3) may become operative, then
59
<PAGE>
promptly following the Stage 2 Outside Date Purchaser and Seller
shall endeavor in good faith to agree upon the Allocable Asset
Price for each of the Stage 2 Properties. Notwithstanding the
foregoing, Seller shall not be obligated to pay Purchaser any
amount under this Section 13(W)(3)(C) with respect to the first
$20,000,000 in sale proceeds of the Stage 2 Properties measured
on a cumulative basis. By way of example, if the first two Stage
2 Properties are sold for $17,000,000 (measured cumulatively), no
amount would be due Purchaser under this Section 13(W)(3)(C) even
if the sale price exceeds the Allocable Asset Price for said
Properties. If a third Stage 2 Property were then sold for
$10,000,000 and the Allocable Asset Price for said Property were
$6,000,000, then the amount otherwise due hereunder (i.e.,
$4,000,000) would be prorated based upon the fact that 70% of the
sale price is over the cumulative $20,000,000 threshold, so that
the amount due hereunder to Seller would be $2,800,000.
Properties sold as part of a group property transaction shall
have their sale prices and Allocable Asset Prices grouped
together for purposes of this Section.
14. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.
At the option of Seller, the obligations of Seller under this Agreement are
contingent and conditional upon any one or more of the following, the failure as
of the applicable Closing of any of which shall, at the request of Seller and
after the return to Purchaser of the Earnest Money (and, if the Stage 1 Closing
has previously been consummated, the Stage 1 Contingent Purchase Price), render
this Agreement null and void, except any obligations expressly provided in this
Agreement as surviving the expiration or termination of this agreement.
A. Each and every representation and warranty of Purchaser is true,
correct and complete in all material respects as of the applicable Closing,
as the case may be relative to said Closing.
B. As of the applicable Closing, Purchaser shall have performed and
satisfied in all material respects each and every obligation, term and
condition to be performed and satisfied by Purchaser under this Agreement
relative to said Closing.
C. As a condition precedent to the Stage 2 Closing, the consent of
CMC, the Surety and Swiss Bank shall have obtained with respect to the
potential "CAPREIT Liquidation Transaction" (as such terms is defined in
Section 13(V) above.
D. As a condition precedent to the Stage 2 Closing:
(1) The conditions precedent set forth in clauses (i), (ii) and
(iii) of Section 10(E), and in Section 10(I), shall have been
60
<PAGE>
waived by Purchaser (in which event Seller shall have no liability
whatsoever to Purchaser arising from the failure of said conditions to
be satisfied).
(2) The conditions precedent set forth in Sections 10(K) and
10(L) of this Agreement shall have been satisfied.
Nothing in this Section 14 shall detract from or modify Seller's obligations
pursuant to Section 4(K) above.
61
<PAGE>
IN WITNESS WHEREOF, Purchaser and Seller have executed and delivered the
Agreement as of the date set forth hereinabove.
PURCHASER:
ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, a
Maryland real estate investment trust
Name: /s/ Bruce C. Strohm
-------------------------------
Title: Executive Vice President
-------------------------------
Date: 10-09-97
-------------------------------
SELLER:
CAPITAL APARTMENT PROPERTIES, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
---------------------------------------
Name: Richard L. Kadish
-------------------------------
Title: President
-------------------------------
AP CAPREIT PARTNERS, L.P., a Delaware limited
partnership
By: AP-GP CAPREIT PARTNERS, L.P., its general
partner
By: APOLLO REAL ESTATE ACQUISITION
CORPORATION, ITS GENERAL PARTNER
By: /s/ Stuart Koenig
----------------------------
Name: Stuart Koenig
-------------------
Title: Vice President
-------------------
62
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND
LIMITED PARTNERSHIP, a Delaware limited
partnership
By: CAPREIT GP, INC., a Delaware
corporation, its general partner
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT LIMITED PARTNERSHIP, a Maryland
limited partnership,
By: CAPITAL APARTMENT PROPERTIES, INC., a
Maryland corporation, its general partner
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT OF FOUNTAIN PLACE, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT OF WOODLAND PLACE, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
63
<PAGE>
CAPREIT OF ROYAL OAKS, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT OF TRAILWAY POND I, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT OF TRAILWAY POND II, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT OF VALLEY CREEK I, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
--------------------------
Title: President
-------------------------
CAPREIT OF VALLEY CREEK II, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
64
<PAGE>
CAPREIT OF WHITE BEAR WOODS I, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF JAMES STREET, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF REGENCY WOODS, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF OCEAN WALK, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF GEARY COURTYARD, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
65
<PAGE>
CAPREIT OF ETHAN'S I, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF ETHAN'S II, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT FINANCE CORPORATION, a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT FINANCE CORPORATION TWO, a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT FINANCE CORPORATION THREE, a
Maryland corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
66
<PAGE>
CAPREIT FINANCE CORPORATION FOUR, a
Maryland corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF ARBOR GLEN, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF WOODCREST VILLA, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF FARMINGTON GATES, INC., a Maryland
Corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF RIDGEWAY COMMONS, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
67
<PAGE>
CAPREIT OF RIVER OAK, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF CEDARS, INC., a Maryland corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
CAPREIT OF WESTWOOD PINES, INC., a Maryland
corporation
By: /s/ Richard L. Kadish
----------------------------------
Name: Richard L. Kadish
-------------------------
Title: President
-------------------------
68
<PAGE>
JOINDER
TO AGREEMENT FOR PURCHASE
OF PARTNERSHIP INTERESTS
AND RELATED INTERESTS
---------------------------------
The undersigned, APOLLO REAL ESTATE INVESTMENT FUND, L.P., a Delaware
limited partnership ("AREIF"), hereby joins in the execution and delivery of the
attached Agreement for Purchase of Partnership Interests and Related Interests
(the "Agreement"), solely for the purpose of obligating itself (subject to the
limitations set forth in the Agreement) for the performance and payment, as and
when the same shall be due under the Agreement, of all obligations which,
pursuant to the operation of Section 9 of the Agreement or Section 13(V) of the
Agreement, are expressly provided under the Agreement as being obligations of
AREIF. AREIF agrees that AREIF's obligations pursuant to this Joinder shall not
be conditioned or contingent upon Purchaser's pursuit of any remedies against
CAPREIT or any other party.
AREIF hereby represents and warrants to Purchaser that (a) AREIF (i) has
received valuable consideration for the execution and delivery of this Joinder;
(ii) has examined or has had an opportunity to examine the Agreement (iii) has
full power, authority and legal right to execute and deliver this Joinder; and
(b) this Joinder constitutes AREIF's binding legal obligation (provided that
ARIEF's obligations pursuant to this Joinder shall be subject to the limitations
set forth in the Agreement), except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
creditors' rights generally at the time in effect or by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
All capitalized terms not defined in this Joinder shall have the meanings
ascribed thereto in the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Joinder to Agreement
for Partnership Interests and Related Interests as of this 9th day of October,
1997.
APOLLO REAL ESTATE INVESTMENT FUND, L.P., a
Delaware limited partnership
By: APOLLO REAL ESTATE ADVISORS, L.P., its
general partner
By: APOLLO REAL ESTATE MANAGEMENT, INC.,
its general partner
By: /s/ Stuart Koenig
--------------------------------
Name: Stuart Koenig
----------------------
Title: Vice President
---------------------
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-12213) of ERP Operating Limited Partnership and the related
Prospectus of our report dated November 12, 1997, with respect to the combined
Statement of Revenue and Certain Expenses of the CAPREIT Acquired and Probable
Properties for the year ended December 31, 1996 included in the Current Report
of ERP Operating Limited Partnership on Form 8-K, as amended by Form 8-K/A,
dated October 9, 1997.
Ernst & Young LLP
Chicago, Illinois
November 12, 1997
