Exhibit 10.2
PURCHASE CONTRACT
THIS AGREEMENT made and entered into this 21st day of May 1996,
between CORNERSTONE REALTY GROUP, INC. or its nominee, (hereinafter called
"Purchaser") and LEA COMPANY, a Virginia General Partnership, (hereinafter
called "Seller").
ARTICLE I
THE PROPERTY
1.1 Sale of Property. Seller agrees to sell and convey, and
Purchaser agrees to purchase, Seller's real property known as OAK PARK
APARTMENTS located in AUGUSTA, GA, with all buildings and improvements located
thereon, as more particularly described in the attached legal description in
Exhibit A including, but not limited to 456 individually heated and air
conditioned apartment units, with all appurtenances, together with all
appliances, drapes, carpeting, shrubbery and all other personal property used in
connection with the premises, including, the inventory of personal property to
be supplied by Seller and attached hereto as Exhibit B (all such real and
personal property hereinafter collectively referred to as the "Property" unless
the context clearly indicates otherwise).
ARTICLE II
PAYMENT OF PURCHASE PRICE
2.1 Purchase Price. The total purchase price shall be NINE MILLION
EIGHT HUNDRED FOUR THOUSAND ($9,804,000) DOLLARS as evidenced by cash or cash
equivalent at closing.
2.2 Deposit. $100,000 to be placed in escrow at the end of the
"Inspection Period" described in Article VI below. Said deposit shall be placed
in escrow with Lawyers Title Insurance Corporation or its authorized agent as an
earnest money deposit which may be credited against the purchase price or
applied as per Article XI below.
ARTICLE III
TITLE MATTERS
3.1 Marketable Title. Seller, shall convey good and marketable
title by General Warranty Deed, subject only to general taxes for the current
year not yet due and payable and utility easements which could never interfere
with the present use of the Property.
(A) Title shall be free from any and all liens or mortgages and
Seller shall be responsible for any prepayment penalties necessary to deliver
such free title.
3.2 Title Defects; Election to Cure. Purchaser, at its own cost
and expense, shall secure a commitment for Title Insurance, (the
commitment). If title is not marketable, except as stated above in the
preceding paragraph, Purchaser shall give written notice of any defects in
title to Seller's counsel within fifteen (15) days after Purchaser's receipt of
a title report. Seller may, at its option, elect whether to cure said defects or
by written notice to Purchaser indicate its intention not to cure.
3.3 Election Not to Cure Defects. Should Seller elect not to cure
title defects, this Agreement, at Purchaser's option, shall be void; each party
shall thereupon be released from all obligations hereunder; and all deposits
shall be immediately returned to Purchaser.
ARTICLE IV
PRORATIONS
4.1 Income and Expense Allocations. The following shall be
prorated, on a calendar-month basis, to date of delivery of deed: rents and
other income from the Property; operating expenses (on such service contracts
and other obligations as Purchaser may agree to assume including (i) the lease
agreement with Solon Automated Services, Inc., a copy of which is attached
hereto as Exhibit C, and (ii) the agreement with GE Rescome, Inc., a copy of
which is attached hereto as Exhibit D, which shall be assumed by Purchaser and
any advance shall be adjusted); and general and real property taxes and
personal and business property taxes for the year of closing (based on the most
recent assessment and the most recent levy).
4.2 Closing Costs. Purchaser and Seller shall pay their customary
share of all taxes, recording fees, if any, imposed on the Deed, or any other
documents executed in connection with the transfer of the Property. Purchaser
agrees to pay cost of title insurance. Seller shall pay any prepayment penalty
charged by the holders of any existing notes.
4.3 Allocation of Rents. Rents collected by Seller prior to
Closing shall be prorated as agreed in 4.1 above. Purchaser shall apply rents
received after Closing first to payment of the current rent due to Purchaser,
then to delinquent rents due to Purchaser, and last to rents due to Seller as of
the Closing but uncollected prior to settlement. Purchaser agrees to use its
best efforts in good faith to collect the amount of any rental arrears from
tenants and Purchaser agrees to remit promptly to Seller any such arrears
actually paid by such tenants to Purchaser. Seller shall retain the right to
commence legal action against a tenant for any delinquent rent apportioned to
the Seller.
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4.4 Prior Lease Concessions. Seller shall pay to Purchaser, in a
lump sum at closing, all future monetary concessions which Seller has
given to tenants under leases existing at the time of closing. There are four
(4) employees who reside in rent-free apartments and Seller agrees that if any
of them do not vacate prior to closing, to pay their rent for one month after
which they will vacate.
ARTICLE V
POSSESSION OF THE PROPERTY
5.l Possession. Possession of the Property shall be delivered to
Purchaser at closing, subject to the rights of the tenants under existing leases
and rental agreements.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent. Purchaser's obligation to purchase
shall be subject to and contingent upon the satisfaction of the following
conditions precedent:
(A) Receipt by Purchaser, at its own cost and expense, of an
engineering report of building and site conditions, satisfactory to Purchaser in
its sole discretion, said-report to include in part, a description of any
hazardous waste sites, hazardous wastes and/or hazardous materials affecting the
property. Purchaser shall have twenty-one (21) days (not to exceed nine (9) days
following expiration of the period defined below) in which to review the reports
set forth herein and exercise its right to reflect the Property based thereon
or the right hereunder shall be deemed waived.
(B) The receipt by Purchaser of Seller documents described in
7.2 below.
(C) on the condition that Sellers representations and
warranties described in Article VIII below remain true and correct.
(D) On the condition that there have been no material or
adverse changes to the property or leases.
(E) Seller acknowledges that Purchaser is a public entity and
that it is required to furnish financial statements to the Securities and
Exchange Commission in connection with this acquisition. Seller agrees to make
the information available for Purchaser to audit the last 12 months of operation
of the Property 80 that a report can be generated that is in compliance with
accounting Regulation S-X of the Securities and Exchange Commission.
(F) Survey which shall show no encroachments onto
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the Land from any adjacent property, no encroachments by or from the Land onto
adjacent property and no violation of or encroachments upon any recorded
building lines, restrictions or easements affecting the Property. If the Survey
discloses any such encroachment or violation, Seller shall have thirty (30) days
from the date of delivery of the Survey (with a commensurate extension of the
closing date) to have the Title Insurer issue its endorsement insuring
against damage caused by such encroachment or violation and to provide evidence
thereof to Purchaser, and if Seller fails to or is unable to have the same
insured against within such thirty (30) day period, Purchaser may elect, on or
before the Closing Date, to (i) terminate this Agreement (in which case the
Earnest Money shall be returned to Purchaser) and neither party shall have any
further liability or obligation to the other hereunder, or (ii) accept the
property subject to any such encroachment or violation.
6.2 Inspection. This Agreement shall be further subject to
and contingent upon Purchaser's satisfactory inspection as follows herein below.
6.2.1 Preparation for Inspection. At the execution of this
Agreement, Seller shall deliver to Purchaser copies of the following: The
current rent roll for the Property; detailed statements of income and expenses
with respect to the Property for the past two years; the most recent tax bills
for the Property; utility bills for the Property for the twelve (12) months
previous to the date hereof; all contract, mortgages, and other documents
creating liens of security interest on the Property, or any part thereof and all
promissory notes secured thereby; all insurance policies applicable to the
Property to include loss runs for the last five (5) years; Plans and
Specifications for the Property, service contracts, Certificates of
Occupancy, to the extent reasonably available; a copy of the title policy and
most recent survey for the Property. A copy of any environmental or
engineering reports on the property. All these items shall be certified by
Seller to be accurate and complete to the best of its knowledge and belief.
6.2.2 Inspection of Books and Records; Access. Upon receipt by
Purchaser of all documents requested in the paragraph above, Purchaser, its
employees, agents and contractors shall have 21 days (the "Inspection Period")
to enter upon the Property subject to the rights of the tenants during normal
business hours for the purpose of making physical inspections thereof, including
but not limited to roofs, heating, cooling, electrical and plumbing systems,
swimming pool, appliances, and structural elements of the buildings. Upon the
conclusion of the Inspection Period this contract shall be deemed to be a firm
agreement of purchase and sale binding the parties hereto, except as it may be
terminated by other provisions and conditions contained herein, including but
not limited to the condition imposed by Paragraph 6.1(A) above.
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6.2.3 Right of Termination During Inspection Period. Purchaser shall also
be permitted to review all original leases, expense records, tenant cards and
occupancy data available. If Purchaser is not satisfied, in its sole and
exclusive discretion, with the state of maintenance and repair of the Property
or the rents, occupancy or expenses of the Property, then notwithstanding
anything contained herein to the contrary, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller before the end of
the Inspection Period, and no party hereto shall have any further liability
to any other party hereto, and all deposits shall be returned to Purchaser.
6.2.4 "Rent Ready". During the "Inspection Period", both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment shall be representative of a "rent ready" unit by which all other
units shall be judged for "rent ready" condition at closing. All vacant
apartment units, are to be in a "rent ready" condition (as defined above), at
the time of closing, containing, but not limited to the following amenities,
i.e., carpet, refrigerator, range, garbage disposal, heating, plumbing and
electrical systems.
6.2.5 Condition of Personal Property at Closing. All personal property
included in the sale and all mechanical, electrical, heating, air conditioning,
sewer, water and plumbing systems will be in the same working order at the time
of closing and in the same condition as at the time of the initial inspection
by Purchaser. If Seller fails to make reasonable efforts to conserve the
property, Purchaser shall have the option of waiving such requirement, in
writing, and proceeding to closing, or Purchaser may void this Agreement and
obtain a prompt return of its deposit.
ARTICLE VII
CLOSING
7.1 Closing. Closing will be held 14 days after the completion of the
Inspection Period at such time and place as the parties may agree. The parties
may agree to extend the closing once to no later than July 30, 1996 with
prorations as of July 1st. However, in the event closing takes place after
July 1st, Seller agrees to increase the Purchase Price by $2,830 per day.
7.2 Seller's Deliveries. At closing, Seller shall execute and deliver to
Purchaser the General Warranty Deed referred to in Paragraph 3 hereof and shall
also execute, where necessary, and deliver to Purchaser, the following:
(A) A Bill of Sale, with warranty of title transferring the personal
property (as shown in Schedule B) to Purchaser free of all liens, charges and
encumbrances.
(B) Originals or copies of all signed leases and rental agreements
in effect with tenants of the Property.
(C) All security deposits made by such tenants.
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Seller will give the tenants the required notice of such transfer in compliance
with the laws of GEORGIA.
(D) An affadavit of Seller in such form as will cause the Title
Company to omit from the title insurance policy the exclusion relating to
unrecorded mechanic's and materialmen's liens.
(E) A rent roll certified by Seller to be true and correct as of the
date of closing showing the name of, and the amount of monthly rental payable,
by each tenant of the Property, the apartment occupied by the tenant, the date
to which rent has been paid, any advance payment of rent, and the amount of any
escrow, or security deposit of tenant.
(F) An affidavit of Seller that to the best of its information and
belief there are, on the date of closing, no unsatisfied judgments, creditor's
claims, tax liens, or pending bankruptcies involving Seller.
(G) Seller shall provide, a certificate from a licensed extermination
contractor, who is regularly engaged in the business of pest control, that all
buildings are free from any termite or other wood-boring insect infestation.
Said certificate shall be dated within 90 days of closing, bearing the
Contractor's name, contractors license number, the signature of the party
authorized to sign for the Contractor and the date of the inspection. Should
damage exist, Seller shall proceed to have any corrective work completed prior
to closing or Purchaser, at its option, may either proceed to settlement and
have such sums required for repairs deducted from Seller's proceeds, or may in
its sold discretion terminate this Agreement. Seller shall promptly return
Purchaser's deposit upon such termination.
(H) Assignments of all Seller's interest in the following: (1) all
assignable licenses, and permits relating to the operation of the Property, (2)
the leases and rental agreements with tenants of the Property, (3) the existing
Property telephone number and (4) the business and trade name as set forth in
Par. 1.1.
(I) Assignments of all warranties and guarantees to the extent such
are still in effect and provide Purchaser with copies of all such warranties
and guarantees without limitation for all appliances, dishwashers, disposals,
refrigerators, heating and air conditioning units, washers and dryers.
(J) To the best of Seller's knowledge and belief, a representation
to Purchaser that all water, sewer, gas, electric, telephone, and drainage
facilities and all other utilities required by law or by the normal use and
operation of the Property are and at the time of closing will be installed to
the property line, are and at the time of closing will be connected pursuant
to valid permits, and are and at the time of closing adequate to service the
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Property and to permit full compliance with all requirements of law and normal
usage of the Property by the tenants thereof and their licensees and invitees.
(K) Consent of the Seller's authorized officer to the sale of the
Property and any other approvals required under Seller's articles or by-laws,
which may affect Seller's ability to convey marketable title.
(L) Provide documents for the transfer of the telephone, electric,
water and sewer, and gas utilities, as may be required by the utility, for
execution at closing (any existing security deposits to be refunded to Seller).
(M) Satisfactory evidence of the power and authority of Seller to
enter into and consummate this agreement, including but not limited to:
(i) An opinion of Seller's counsel, in a form satisfactory to
Purchaser, stating that:
(a) The individual(s) executing the deed and related
documents are duly authorized to do all such acts as are necessary to consummate
this sale, without further consent of any other party.
(b) That the partner or officer can bind the Partnership or
Corporation.
(N) Affidavit that Seller has no actual knowledge of the presence of
asbestos and/or any other hazardous material at the Property, other that vinyl
asbestos tile in the kitchen and bathrooms of a few apartments and in some
laundry areas.
(O) Seller shall provide a satisfactory and valid written termination
of the management agreement executed by the existing management and rental agent
for the Property, without cost to the Purchaser.
(P) A notice letter to all the residents of the apartment complex as
to change of ownership in the form prepared by the Purchaser.
(Q) All such other documents as are normally transferred at
settlement in the jurisdiction in which the property is located or are
reasonably requested by Purchaser or its counsel.
(R) A representation letter as normally required by auditors for a
public company, a copy of which is attached hereto as Exhibit E. This clause
shall survive closing for one year.
7.3 Purchaser's Deliveries. At closing and contemporaneously with the
Seller's compliance with the provisions
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of Section 7.2, Purchaser shall:
(A) Pay to Seller the cash portion of the purchase price, adjusted
for the prorations herein provided for in Article IV.
(B) Execute and deliver an assumption of obligations under leases,
securities, any contracts which may be accepted by the Purchaser and any other
obligations specifically set forth herein.
(C) Deliver to the Seller a resolution of the Purchaser that:
(i) This Agreement has been duly authorized, executed and
delivered by the Purchaser and is a valid and binding agreement of Purchaser,
and
(ii) Purchaser has complete unrestricted power to buy the
Property from the Seller and to execute any documents required to effectuate
the transfer.
ARTICLE VIII
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations of the Parties. Seller warrants (which warranties
shall not survive settlement unless designated to the contrary) that as of the
date of closing hereof:
(A) That Seller, is the owner in fee simple of the Property and has
the power to convey same.
(B) That Seller is not subject to any other agreements or
arrangements, with the exception of those contained in any existing mortgage
documents which would prevent Seller from selling the Property to Purchaser.
This warranty shall survive for six months following closing.
(C) All necessary action has been taken by Seller to authorize the
execution of this Agreement and the performance of the obligations contemplated
hereunder, which are not excluded elsewhere in existing mortgage documents.
This warranty shall survive for six months following closing.
(D) Seller has no actual knowledge and has not been advised in
writing that it is in default under any lease, rental agreement service or
equipment contract, or mortgage or other encumbrances relating to the Property.
This warranty shall survive for six months the following closing.
(E) Seller has no actual knowledge of any existing or threatened
litigation which relates to or which would affect the
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Property. This warranty shall survive for six months following closing.
(F) The Property abuts on and has direct vehicular access to a public
road.
(G) All building and other improvements at the Property are located
entirely within the boundary lines of the Property.
(H) Seller has no actual knowledge that any part of the Property or
the operation of the Property, is in violation or may violate any governmental
statute, regulation, ordinance or building code or of any private restriction,
that any governmental authority requires any work to be done on or affecting
the Property, or that any governmental authority has expressed an intent to
condemn or to make special improvements for the benefit of the Property or any
part thereof. This warranty shall survive for six months following closing.
(I) That to the best knowledge of the Seller, the drainage within
the project is satisfactory and complies in all respects with all government
regulation. This warranty shall survive for six months following closing.
(J) That Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), and that Seller will
furnish to Purchaser prior to closing an affidavit in form satisfactory to
Purchaser confirming the same.
(K) That to the best of Seller's knowledge, the Property was never
utilized as a disposal site for hazardous waste products and will furnish to
Purchaser an affidavit confirming same.
(L) Seller covenants and agrees that, between this date and the date
of closing, Seller shall continue to maintain, operate and manage the Property
in a manner consistent with its prior practices, making every reasonable effort
to do nothing which might damage the reputation of the Property or the
relationships with the tenants. Seller shall not permit the modification,
extension or cancellation of any tenant lease (except in accordance with the
terms of such lease) or any dealing with any tenant other than the ordinary
course of managing the Property, without the prior written consent of
Purchaser. If the leases of any tenants expire before thirty (30) days after
the date of closing, Seller shall, up to the date of closing and without cost
to the Purchaser, continue its normal course of operation with respect to
causing tenants to be obtained for apartments which are unrented.
8.2 Continuation of Representations, Warranties and Convenants to the
Date of Closing. If each of the warranties set forth in this section does not
remain true up to and including the
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time of closing as to any material matters, this Agreement, at Purchaser's
election, shall be terminated, Seller shall return all payments made by
Purchaser, or Purchaser may elect to close the sale and waive failure of the
warranties.
8.3 Breach of Representations, Warranties and Covenants. Nothwithstanding
the provisions of 8.2 above, Seller shall indemnify Purchaser for all reasonable
costs incurred as a result of the failure of any of Seller's representations,
warranties or covenants contained herein to remain true as of the date of
closing.
ARTICLE IX
CONDEMNATION; RISK OF LOSS
9.1 Property Damage. If, prior to closing, any part of the Property is
damaged by fire or other casualty, Seller shall repair such damage before the
date provided herein for closing. If such damage cannot be repaired by such
time, this Agreement may be canceled at the option of the Purchaser. In the
event of cancellation as aforesaid, this Agreement shall become null and void
and the parties shall be released and all payments made shall be returned.
Should Purchaser elect to carry out this Agreement despite such damage Seller
shall assign to Purchaser all insurance proceeds arising from such damage and
will compensate Purchaser for lost rent collections to the extent of insurance
proceeds received. Seller shall promptly notify Purchaser in writing upon the
occurrence of any such damage.
9.2 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, all or any part thereof, or any actual
or proposed sale in lieu thereof, the Seller shall give written notice thereof
to the Purchaser promptly after Seller learns or receives notice thereof. Upon
a taking of a material part of the Property (any part of the building or more
than 5% of the parking area), Purchaser may elect to either (a) terminate this
Agreement, in which event the Deposit shall be immediately returned to Purchaser
and all other rights and obligations of the parties hereunder shall terminate
immediately, or (b) to waive its right to terminate this Agreement and proceed
to closing, in which event all proceeds, awards and other payments arising out
of such condemnation or sale (actual or threatened) shall be paid to the
Purchaser at closing, if such payment has been received or Seller shall assign
to Purchaser the rights to such payments.
9.3 Risk of Loss. Prior to closing, all risks of loss or damage by every
casualty shall be borne by the Seller.
ARTICLE X
BROKER'S COMMISSION
10.1 Commission. Seller agrees to pay a brokerage
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fee to WINDSOR PROPERTIES, pursuant to a separate agreement between Seller and
Brokers. Said brokerage fee shall be deemed earned if, and only if, settlement
occurs hereunder, and shall not be deemed earned even if Purchaser and/or Seller
wrongfully fail(s) to consummate the purchase and sale herein contemplated.
Purchaser shall not be obligated for any brokerage fees to any broker, and
Seller agrees to hold Purchaser harmless in connection with such fees. Seller
and Purchaser represent and warrant to each other that no other brokerage fees
are or shall be owing in connection with this transaction or in any way with
the Apartments and Seller and Purchaser hereby indemnify and hold the other
harmless from any and all claims of any other person so claiming.
ARTICLE XI
DEFAULT
11.1 Default Defined. Default for the purpose of this Agreement shall
mean any failure by Seller or Purchaser to fulfill all the terms, conditions
and covenants contained herein, however, it shall not be an event of default
for either party to exercise its rights to terminate this contract as contained
in other provisions herein.
11.2 Seller's Default. Upon Seller's default, the Purchaser, at it's
election, may either (1) require specific performance of Seller, or pursue
its other remedies at law or equity , (2) cancel this Agreement and obtain
a prompt return of the deposit, in which case this Agreement shall be
terminated and the parties released from all obligations hereunder, or (3) the
Purchaser may waive such defaults and proceed to settlement. Seller shall
indemnify Purchaser for any reasonable costs incurred by Purchaser if Purchaser
elects to pursue its option (1) noted above, to include reasonable attorney
fees.
11.3 Purchaser's Default. Upon Purchaser's default, this Agreement shall
be terminated and both parties released from all obligations hereunder, and the
deposit shall be retained by the Seller as liquidated damages. Seller shall have
no other remedy against Purchaser in the event of Purchaser's default.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Entire Agreement. This Agreement sets forth the entire understanding
between the parties; it supersedes all previous agreements and representations
which are deemed merged herein and may not be modified except in writing.
12.2 Assignment. Purchaser may assign this Agreement without the consent
of Seller.
12.3 Severability. If any provision, sentence, phrase or word of this
Agreement or the application thereof to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision,
sentence, phrase, or word to persons or circumstances, other than those as to
which it is held invalid, shall remain in full force and effect.
12.4 Binding Effect. The parties to the Agreement mutually agree that it
shall be binding upon and inure to the benefit of their respective heirs,
representatives, successors in interest and assigns.
12.5 Controlling Law. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties shall be determined in accordance with the provisions
of the laws of the State set forth in Par. 1.1.
12.6 Counterparts. To facilitate execution, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature on behalf of both parties hereto appear in each counterpart
hereof, and it shall be sufficient that the signature on behalf of both parties
hereto appear on one or more such counterparts. All counterparts shall
collectively constitute a single contract.
12.7 Incorporation by Reference. All of the Exhibits referred to herein
and/or attached hereto shall be deemed to constitute a part of the Agreement.
12.8 Headings. The headings of the Articles and sections hereof are
inserted for convenience only and shall not be deemed to constitute a part of
the Agreement.
12.9 Construction of Contract. Each party hereto have reviewed and
revised (or requested revisions of) this Agreement, and therefore the normal
rule of construction that any ambiguities are to be resolved against a
particular party shall not be applicable in the construction and interpretation
of this Contract or any amendments or exhibits hereto.
ARTICLE XIII
NOTICE
13.1 Notice. All notices required or permitted to be given under this
Agreement shall be in writing and shall be sent or delivered to the address set
forth below (or such other address as may be hereafter specified in writing):
To Seller: LEA Company
397 Little Neck Road
3400 Building, Suite 200
Virginia Beach, VA 23452
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With a copy to
Seller's Attorneys: Wilks & Alper, P.C.
Suite 700
Town Point Center
150 Boush Street
Norfolk, VA 23510
To Purchaser: S. J. Olander
Cornerstone Realty Group, Inc.
306 E. Main Street
Richmond, VA 23219
With a copy to
Purchaser's Attorneys: Harry S. Taubenfeld, Esq.
Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, NY 11516
13.2 Delivery of Notice. Notices sent either by Registered or Certified
Mail, Return Receipt Requested, or by overnight express mail shall be deemed
given when deposited in the United States Mail, postage prepaid, or delivered
to a reliable overnight courier. Notices sent in any other manner shall be
deemed given only when actually delivered at the specified address.
ARTICLE XIV
LIKE-KIND EXCHANGE
14.1 Like-Kind Exchange. Seller may wish to effect a tax free exchange
pursuant to Section 1031 of the Internal Revenue Code of 1986 (the ("Tax Code")
in connection with Seller's conveyance of the Property to Purchaser.
Consequently, if prior to Settlement, Seller designates a property or
properties (collectively the "Exchange Property"), Purchaser will use reasonable
efforts to contract to acquire the Exchange Property for use in an exchange with
Seller. Purchaser's obligation to contract to purchase the Exchange Property
is specifically contingent upon (1) the conditions precedent set forth in
paragraph 6.1 being satisfied, (ii) the costs of acquisition (including
apportionments being equal to or less than the Purchase Price (including
apportionments) for the Property, or if in excess of such Purchase Price,
Seller's commitment and agreement to pay such excess in cash (the "Excess")
at the closing of the acquisition of the Exchange Property, (iii) Seller's
approval of the Exchange Property, (iv) Purchaser not becoming subject to any
additional liability in connection with such exchange, (v) Purchaser assigning
the contract to acquire the Exchange Property to a qualified Intermediary of the
excess, if any, of the Purchase Price for the Property plus apportionments
(over the purchase price for the Exchange Property plus acquisition costs and
apportionments). Upon request of Seller, Purchaser will execute an appropriate
escrow agreement deemed necessary by Seller's counsel to obtain for Seller the
tax benefits
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allowed under Section 1031 of the Internal Revenue Code of 1986 (Purchaser not
to bear any of such tax benefits), provided that such escrow agreement clearly
limits Purchaser's obligations and liability to the delivery of the proceeds
of the Purchase Price to the qualified Intermediary.
14.2 Hold Harmless. At closing, Seller will deliver to Purchaser an
agreement to hold the Purchaser harmless as to any claims as a result of the
Like-Kind Exchange set forth in paragraph 14.1 and an opinion of counsel as to
the validity of the transaction.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed this day and date first written above.
SELLER:
LEA COMPANY
By: /s/ SIGNATURE ILLEGIBLE
-------------------------------
Its: Managing Partner
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PURCHASER:
CORNERSTONE REALTY GROUP, INC.
By: /s/ S. J. Olander
-------------------------------
Its: Senior Vice President
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