EXHIBIT 10.2
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement"), is entered into as of the 14th day of
November, 1996, by and between Cornerstone Realty Group Incorporated, a Virginia
corporation ("Purchaser"), and Durham Associates, an Illinois limited
partnership ("Seller").
W I T N E S S E T H:
1. PURCHASE AND SALE. Purchaser agrees to purchase and Seller agrees to sell at
the price of TEN MILLION EIGHT HUNDRED SEVENTY FIVE THOUSAND AND NO/100 Dollars
($10,875,000.00) (the "Purchase Price"), that certain property commonly known as
Deerfield Apartments, Durham, North Carolina, legally described on Exhibit A
attached hereto (the "Property") containing 204 units. Included in the Purchase
Price is all of the personal property set forth on Exhibit B attached hereto
(the "Personal Property").
2. PURCHASE PRICE. The Purchase Price shall be paid by Purchaser as follows:
2.1. Upon the execution of this Agreement, the sum of ONE HUNDRED FIFTY
THOUSAND AND NO/100 Dollars ($150,000.00) (the "Earnest Money") to be held in
escrow by and in accordance with the provisions of the Escrow Agreement ("Escrow
Agreement") attached hereto as Exhibit C; and
2.2. On the "Closing Date" (hereinafter defined), the balance of the Purchase
Price, adjusted in accordance with the prorations, by federally wired
"immediately available" funds, on or before 12:00 p.m Chicago time.
3. TITLE COMMITMENT AND SURVEY.
3.1. Attached hereto as Exhibit D is a copy of a title commitment for an
owner's standard title insurance policy issued by First American Title Insurance
Company (hereinafter referred to as "Title Insurer") dated September 20, 1996
for the Property (the "Title Commitment"). For purposes of this Agreement,
"Permitted Exceptions" shall mean: (a) the general printed exceptions contained
in the standard title policy to be issued by Title Insurer based on the Title
Commitment; (b) general real estate taxes, association assessments, special
district taxes and related charges not yet due and payable; (c) matters shown on
the "Survey" (hereinafter defined); (d) matters caused by the actions of
Purchaser; and (e) the title exceptions set forth in Schedule B of the Title
Commitment as Numbers 2 through 10 inclusive, to the extent that same effect the
Property. All other exceptions to title shall be referred to as "Unpermitted
Exceptions". The Title Commitment shall be conclusive evidence of good title as
therein shown as to all matters to be insured by the title policy, subject only
to the exceptions therein stated. On the Closing Date, Title Insurer shall
deliver to Purchaser a standard title
policy in conformance with the previously delivered Title Commitment, subject to
Permitted Exceptions and Unpermitted Exceptions waived by Purchaser (the "Title
Policy"). Purchaser shall pay for all of the costs of the Title Commitment and
Title Policy and the cost of any endorsements to, or extended coverage on, the
Title Policy.
3.2. During the Inspection Period (hereinafter defined), Purchaser shall
receive a survey of the Property prepared by The John R. McAdams Company, Inc.
dated no earlier than October 31, 1996 (the "Survey"). Purchaser shall pay for
the costs of the Survey. Purchaser hereby acknowledges that all matters
disclosed by the Survey which are not specifically objected to by Purchaser
prior to the termination of the Inspection Period are acceptable to Purchaser.
3.3. The obligation of Purchaser to pay various costs set forth in Paragraphs
3:1 and 3.2 shall survive the termination of this Agreement.
4. PAYMENT OF CLOSING COSTS.
4.1. Seller shall pay for the costs of the documentary or transfer stamps to
be paid with reference to the "Deed" (hereinafter defined) and Purchaser shall
pay, in addition to the costs set forth in Paragraphs 3.1 and 3.2, all other
stamps, intangible, recording, sales tax and surtax imposed by law with
reference to any other sale documents delivered in connection with the sale of
the Property to Purchaser and all other charges of the Title Insurer in
connection with this transaction.
4.2. In addition to the costs set forth in Paragraphs 3.1, 3.2 and 4.1, and
excepting Seller's attorney's fees, Purchaser shall pay for all other costs
associated with title insurance, recording and survey.
5. CONDITION OF TITLE.
5.1. If, prior to "Closing" (as hereinafter defined), a date-down to the
Title Commitment discloses any new Unpermitted Exception, Seller shall have
thirty (30) days from the date of the date-down to the Title Commitment, at
Seller's expense, to (i) bond over, cure and/or have any Unpermitted Exceptions
which, in the aggregate, do not exceed $100,000.00 (a "Minor Unpermitted
Exception"), removed from the Title Commitment or to have the Title Insurer
commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions, or (ii) have the right, but not the obligation, to bond
over, cure and/or have any Unpermitted Exceptions which, in the aggregate, equal
or exceed $100,000.00, removed from the Title Commitment or to have the Title
Insurer commit to insure against loss or damage that may be occasioned by such
Unpermitted Exceptions. In such event, the time of Closing shall be delayed, if
necessary, to give effect to said aforementioned time periods. If Seller fails
to cure or have said Unpermitted Exception removed or have the Title Insurer
commit to insure as specified above within said thirty (30) day period or if
Seller elects not to exercise its rights under (ii) in the preceding sentence,
Purchaser may terminate this Agreement upon notice to Seller within seven (7)
days after the expiration of said thirty (30) day period provided,
-2-
however, and notwithstanding anything contained herein to the contrary, if the
Unpermitted Exception which gives rise to Purchaser's right to terminate was
recorded against the Property as a result of the affirmative, willful action of
Seller (and not by any unrelated third party) with the intention to prevent the
sale of the Property in accordance with the terms hereof or if Seller is able to
bond over, cure or remove a Minor Unpermitted Exception for a cost not to exceed
$100,000 or the Title Insurer is willing to insure over a Minor Unpermitted
Exception for a cost not to exceed $100,000 in accordance with the terms hereof
and Seller fails to expend said funds in either case, then Purchaser shall have
the additional rights contained in Paragraph 11 herein. Absent notice from
Purchaser to Seller in accordance with the preceding sentence, Purchaser shall
be deemed to have elected to take title subject to said Unpermitted Exception.
If Purchaser terminates this Agreement in accordance with the terms of this
Paragraph 5.1, this Agreement shall become null and void without further action
of the parties and all Earnest Money theretofore deposited into the escrow by
Purchaser together with any interest accrued thereon, shall be returned to
Purchaser, and neither party shall have any further liability to the other,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in Paragraph 7.
5.2. Seller agrees to convey fee simple title to the Property to Purchaser by
special warranty deed (the "Deed") in recordable form subject only to the
Permitted Exceptions and any Unpermitted Exceptions waived by Purchaser.
6. CONDEMNATION, EMINENT DOMAIN, DAMAGE AND CASUALTY.
6.1. Except as provided in the indemnity provisions contained in Paragraph
7.1 of this Agreement, Seller shall bear all risk of loss with respect to the
Property up to the earlier of the dates upon which either possession or title is
transferred to Purchaser in accordance with this Agreement. Notwithstanding the
foregoing, in the event of damage to the Property by fire or other casualty
prior to the Closing Date, repair of which would cost less than or equal to
$100,000.00 (as determined by Seller's insurance adjuster) Purchaser shall not
have the right to terminate its obligations under this Agreement by reason
thereof, but Seller shall have the right to elect to either repair and restore
the Property (in which case the Closing Date shall be extended until completion
of such restoration) or to assign and transfer to Purchaser on the Closing Date
all of Seller's right, title and interest in and to all insurance proceeds paid
or payable to Seller on account of such fire or casualty, and Seller shall pay
to Purchaser at the Closing the amount of Seller's insurance deductible. Within
ten (10) days of such an occurrence, Seller shall notify Purchaser in writing of
any such fire or other casualty and Seller's determination of the cost to repair
the damage caused thereby. In the event of damage to the Property by fire or
other casualty prior to the Closing Date, repair of which would cost in excess
of $100,000.00 (as determined by Seller's insurance adjuster), then this
Agreement may be terminated at the option of Purchaser, which option shall be
exercised, if at all, by Purchaser's written notice thereof to Seller within
seven (7) business days after Purchaser receives written notice of such fire or
other casualty and Seller's determination of the amount of such damages, and
upon the exercise of such option by Purchaser this Agreement shall become null
and void, the Earnest Money deposited by Purchaser shall be returned to
Purchaser
-3-
together with interest thereon, and neither party shall have any further
liability or obligations hereunder. In the event that Purchaser does not
exercise the option set forth in the preceding sentence, the Closing shall take
place on the Closing Date and Seller shall assign and transfer to Purchaser on
the Closing Date all of Seller's right, title and interest in and to all
insurance proceeds paid or payable to Seller on account of the fire or casualty,
and Seller shall pay to Purchaser at the Closing the amount of Seller's
insurance deductible.
6.2. If between the date of this Agreement and the Closing Date, any
condemnation or eminent domain proceedings are initiated which might result in
the taking of any part of the Property or the taking or closing of any right of
access to the Property, Seller shall immediately, notify Purchaser of such
occurrence. In the event that the taking of any part of the Property shall: (i)
impair access to the Property; (ii) cause any non-compliance with any applicable
law, ordinance, rule or regulation of any federal, state or local authority or
governmental agencies having jurisdiction over the Property or any portion
thereof; or (iii) and adversely impair the use of the Property as it is
currently being operated (hereinafter collectively referred to as a "Material
Event"), Purchaser may:
6.2.1. terminate this Agreement by written notice to Seller, in which event
the Earnest Money deposited by Purchaser, together with interest thereon, shall
be returned to Purchaser and all rights and obligations of the parties hereunder
with respect to the closing of this transaction will cease; or
6.2.2. proceed with the Closing, in which event Seller shall assign to
Purchaser all of Seller's right, title and interest in and to any award made in
connection with such condemnation or eminent domain proceedings.
6.3. Purchaser shall then notify Seller, within seven (7) business days after
Purchaser's receipt of Seller's notice, whether Purchaser elects to exercise its
rights under Paragraph 6.2.1 or Paragraph 6.2.2. Closing shall be delayed, if
necessary, until Purchaser makes such election. If Purchaser fails to make an
election within such seven (7) business day period, Purchaser shall be deemed to
have elected to exercise its rights under Paragraph 6.2.2. If between the date
of this Agreement and the Closing Date, any condemnation or eminent domain
proceedings are initiated which do not constitute a Material Event, Purchaser
shall be required to proceed with the Closing, in which event Seller shall
assign to Purchaser all of Seller's right, title and interest in and to any
award made in connection with such condemnation or eminent domain proceedings.
7. INSPECTION AND AS-IS CONDITION.
7.1. During the period commencing on October 21, 1996 and ending at 5:00 p.m.
Chicago time on November 15, 1996 (said period being herein referred to as the
"Inspection Period"), Purchaser and the agents, engineers, employees,
contractors and surveyors retained by Purchaser may enter upon the Property, at
any reasonable time and upon reasonable prior notice to Seller, to inspect the
Property, including a review of leases located at the Property, and
-4-
to conduct and prepare such studies, tests and surveys as Purchaser may deem
reasonably necessary and appropriate. In connection with Purchaser's review of
the Property, Seller agrees to deliver to Purchaser copies of the current rent
roll for the Property, the most recent tax and insurance bills, utility account
numbers and service contracts.
All of the foregoing tests, investigations and studies to be conducted under
this Paragraph 7.1 by Purchaser shall be at Purchaser's sole cost and expense
and Purchaser shall restore the Property to the condition existing prior to the
performance of such tests or investigations by or on behalf of Purchaser.
Purchaser shall defend, indemnify and hold Seller and any affiliate, parent of
Seller, and all shareholders, employees, officers and directors of Seller or
Seller's affiliate or parent (hereinafter collectively referred to as "Affiliate
of Seller") harmless from any and all liability, cost and expense (including
without limitation, reasonable attorney's fees, court costs and costs of appeal)
suffered or incurred by Seller or Affiliates of Seller for injury to persons or
property caused by Purchaser's investigations and inspection of the Property.
Seller shall notify Purchaser if Seller receives written notice of threatened,
or actually instituted claims, for injury to persons or property caused by
Purchaser's investigations and inspection of the Property. Purchaser shall
undertake its obligation to defend set forth in the preceding sentence using
attorneys selected by Seller, in Seller's sole discretion.
Prior to commencing any such tests, studies and investigations, Purchaser
shall furnish to Seller a certificate of insurance evidencing comprehensive
general public liability insurance insuring the person, firm or entity
performing such tests, studies and investigations and listing Seller and
Purchaser as additional insureds thereunder.
If Purchaser is dissatisfied with the results of the tests, studies or
investigations performed or information received pursuant to this Paragraph 7.1,
Purchaser shall have the right to terminate this Agreement by giving written
notice of such termination to Seller at any time prior to the expiration of the
Inspection Period. If written notice is not received by Seller pursuant to this
Paragraph 7.1 prior to the expiration of the Inspection Period, then the right
of Purchaser to terminate this Agreement pursuant to this Paragraph 7.1 shall be
waived. If Purchaser terminates this Agreement by written notice to Seller prior
to the expiration of the Inspection Period: (i) Purchaser shall promptly deliver
to Seller copies of all studies, reports and other investigations obtained by
Purchaser in connection with its due diligence during the Inspection Period; and
(ii) the Earnest Money deposited by Purchaser shall be immediately paid to
Purchaser, together with any interest earned thereon, and neither Purchaser nor
Seller shall have any right, obligation or liability under this Agreement,
except for Purchaser's obligation to indemnify Seller and restore the Property,
as more fully set forth in this Paragraph 7.1. Notwithstanding anything
contained herein to the contrary, the terms of this Paragraph 7.1, shall survive
the Closing and the delivery of the Deed and termination of this Agreement.
7.2. Purchaser acknowledges and agrees that it will be purchasing the
Property and the Personal Property based solely upon its inspections and
investigations of the Property and the Personal Property, and that Purchaser
will be purchasing the Property and the Personal Property "AS IS" and "WITH ALL
FAULTS", based upon the condition of the Property and the Personal
-5-
Property as of the date of this Agreement, wear and tear and loss by fire or
other casualty or condemnation excepted. Without limiting the foregoing,
Purchaser acknowledges that, except as may otherwise be specifically set forth
elsewhere in this Agreement, neither Seller nor its consultants, brokers or
agents have made any representations or warranties of any kind upon which
Purchaser is relying as to any matters concerning the Property or the Personal
Property, including, but not limited to, the condition of the land or any
improvements comprising the Property, the existence or non-existence of
"Hazardous Materials" (as hereinafter defined), economic projections or market
studies concerning the Property, any development rights, taxes, bonds,
covenants, conditions and restrictions affecting the Property, water or water
rights, topography, drainage, soil, subsoil of the Property, the utilities
serving the Property or any zoning or building laws, rules or regulations or
"Environmental Laws" (hereinafter defined) affecting the Property. Seller makes
no representation or warranty that the Property complies with Title III of the
Americans with Disabilities Act or any fire code or building code. Purchaser
hereby releases Seller and the Affiliates of Seller from any and all liability
in connection with any claims which Purchaser may have against Seller or the
Affiliates of Seller, and Purchaser hereby agrees not to assert any claims for
contribution, cost recovery or otherwise, against Seller or the Affiliates of
Seller, relating directly or indirectly to the existence of asbestos or
Hazardous Materials on, or environmental conditions of, the Property, whether
known or unknown. As used herein, "Environmental Laws" means all federal, state
and local statutes, codes, regulations, rules, ordinances, orders, standards,
permits, licenses, policies and requirements (including consent decrees,
judicial decisions and administrative orders) relating to the protection,
preservation, remediation or conservation of the environment or worker health or
safety, all as amended or reauthorized, or as hereafter amended or reauthorized,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss 9601 et seq., the
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss 6901 et
seq., the Emergency Planning and Community Right-to-Know Act ("Right-to-Know
Act"), 42 U.S.C. ss 11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss
7401 et seq., the Federal Water Pollution Control Act ("Clean Water Act"), 33
U.S.C. ss 1251 et seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. ss
2601 et seq., the Safe Drinking Water Act ("Safe Drinking Water Act"), 42 U.S.C.
ss 300f et seq., the Atomic Energy Act ("AEA"), 42 U.S.C. ss 2011 et seq., the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. ss 651 et seq., and the
Hazardous Materials Transportation Act (the "Transportation Act"), 49 U.S.C. ss
1802 et seq. As used herein, "Hazardous Materials" means: (1) "hazardous
substances," as defined by CERCLA; (2) "hazardous wastes," as defined by RCRA;
(3) any radioactive material including, without limitation, any source, special
nuclear or by-product material, as defined by AEA; (4) asbestos in any form or
condition; (5) polychlorinated biphenyls; and (6) any other material, substance
or waste to which liability or standards of conduct may be imposed under any
Environmental Laws. Notwithstanding anything contained herein to the contrary,
Purchaser's obligations, as more fully set forth in this Paragraph 7.2 shall
survive the Closing and the delivery of the Deed and termination of this
Agreement.
Purchaser's Initials /s/ Seller's Initials /s/
--------- ---------
-6-
7.3. Seller has provided to Purchaser certain unaudited historical financial
information regarding the Property relating to certain periods of time in which
Seller owned the Property. Seller and Purchaser hereby acknowledge that such
information has been provided to Purchaser at Purchaser's request solely as
illustrative material. Seller makes no representation or warranty that such
material is complete or accurate or that Purchaser will achieve similar
financial or other results with respect to the operations of the Property, it
being acknowledged by Purchaser that Seller's operation of the Property and
allocations of revenues or expenses may be vastly different than Purchaser may
be able to attain. Purchaser acknowledges that it is a sophisticated and
experienced purchaser of real estate and further that Purchaser has relied upon
its own investigation and inquiry with respect to the operation of the Property
and releases Seller and the Affiliates of Seller from any liability with respect
to such historical information. Notwithstanding anything contained herein to the
contrary, Purchaser's obligations, as more fully set forth in this Paragraph 7.3
shall survive the Closing and the delivery of the Deed and termination of this
Agree:
Purchaser's Initials /s/ Seller's Initials /s/
-------- ---------
7.4. Seller has provided to Purchaser the following existing report: Final
Report: Environmental Site Evaluation Pursuant to FNMA Multifamily Delegated
Underwriting and Servicing (DUS) Transaction, prepared by Environmental Risk
Consultants, Inc., dated August 29, 1990 ("Existing Report"). Seller makes no
representation or warranty concerning the accuracy or completeness of the
Existing Report. Purchaser hereby releases Seller and the Affiliates of Seller
from any liability whatsoever with respect to the Existing Report, or,
including, without limitation, the matters set forth in the Existing Report, and
the accuracy and/or completeness of the Existing Report. Furthermore, Purchaser
acknowledges that it will be purchasing the Property with all faults disclosed
in the Existing Report. Notwithstanding anything contained herein to the
contrary, Purchaser's obligations, as more fully set forth in this Paragraph 7.4
shall survive the Closing and the delivery of the Deeds and termination of this
Agreement.
Purchaser's Initials /s/ Seller's Initials /s/
----------- ----------
8. CLOSING.
The closing of this transaction (the "Closing") shall be on November 20, 1996
(the "Closing Date"), at the office of Title Insurer, Durham, North Carolina at
which time Seller shall deliver possession of the Property to Purchaser. This
transaction shall be closed through an escrow with Title Insurer, in accordance
with the general provisions of the usual and customary form of deed and money
escrow for similar transactions in North Carolina, or at the option of either
party, the Closing shall be a "New York style" closing at which the Purchaser
shall wire the Purchase Price to Title Insurer on the Closing Date and prior to
the release of the Purchase Price to Seller, Purchaser shall receive the Title
Policy or marked up commitment dated the date of the Closing Date. In the event
of a New York style closing, Seller shall
-7-
deliver to Title Insurer any customary affidavit in connection with a New York
style closing. All closing and escrow fees shall be divided equally between the
parties hereto.
9. CLOSING DOCUMENTS.
9.1. On the Closing Date, Seller and Purchaser shall execute and deliver to
one another a joint closing statement. In addition, Purchaser shall deliver to
Seller the balance of the Purchase Price, an assumption of the documents set
forth in Paragraph 9.2.3 and 9.2.4 and such other documents as may be reasonably
required by the Title Insurer in order to consummate the transaction as set
forth in this Agreement.
9.2. On the Closing Date, Seller shall deliver to Purchaser the following:
9.2.1. the Deed (in the form of Exhibit E attached hereto), subject to
Permitted Exceptions and those Unpermitted Exceptions waived by Purchaser;
9.2.2. a bill of sale conveying the Personal Property (in the form of
Exhibit F attached hereto);
9.2.3. assignment and assumption of intangible property (in the form
attached hereto as Exhibit G), including, without limitation, the service
contracts listed in Exhibit H;
9.2.4. an assignment and assumption of leases and security deposits (in
the form attached hereto as Exhibit I;
9.2.5. non-foreign affidavit (in the form of Exhibit J attached
hereto);
9.2.6. original, and/or copies of, leases affecting the Property in
Seller's possession;
9.2.7. all documents and instruments reasonably required by the Title
Insurer to issue the Title Policy;
9.2.8. possession of the Property to Purchaser;
9.2.9. evidence of the termination of the management agreement;
9.2.10. notice to the tenants of the Property of the transfer of title
and assumption by Purchaser of the landlord's obligation under the leases and
the obligation to refund the security deposits (in the form of Exhibit K);
9.2.11. a certified updated rent roll; and
-8-
9.2.12. a standard termite bond.
10. DEFAULT BY PURCHASER. ALL EARNEST MONEY DEPOSITED INTO THE
ESCROW IS TO SECURE THE TIMELY PERFORMANCE BY PURCHASER OF ITS
OBLIGATIONS AND UNDERTAKINGS UNDER THIS AGREEMENT. IN THE EVENT OF
A DEFAULT OF THE PURCHASER UNDER THE PROVISIONS OF THIS AGREEMENT,
SELLER SHALL RETAIN ALL OF THE EARNEST MONEY AND THE INTEREST
THEREON AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY,
EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY SELLER AND RESTORE
THE PROPERTY AS SET FORTH IN PARAGRAPH 7.1 HEREOF. THE PARTIES HAVE
AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY
PURCHASER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO
DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES
ACKNOWLEDGE THAT THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER
NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S DAMAGES.
Purchaser's Initials /s/ Seller's Initials /s/
-------- --------
11. SELLER'S DEFAULT. IF THIS SALE IS NOT COMPLETED BECAUSE OF
SELLER'S DEFAULT, PURCHASER'S SOLE REMEDY SHALL BE THE RETURN OF ALL
EARNEST MONEY TOGETHER WITH ANY INTEREST ACCRUED THEREON, AND
THIS AGREEMENT SHALL THEN BECOME NULL AND VOID AND OF NO EFFECT
AND THE PARTIES SHALL HAVE NO FURTHER LIABILITY TO EACH OTHER AT
LAW OR IN EQUITY, EXCEPT FOR PURCHASER'S OBLIGATIONS TO INDEMNIFY
SELLER AND RESTORE THE PROPERTY AS SET FORTH MORE FULLY IN
PARAGRAPH 7 AND PURCHASER'S RIGHT TO RECEIVE FROM SELLER ITS ACTUAL,
DOCUMENTED THIRD PARTY EXPENSES INCURRED IN THE PERFORMANCE OF ITS
DUE DILIGENCE HEREUNDER AND THE PREPARATION OF THIS AGREEMENT, NOT
TO EXCEED $25,000. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE
CONTRARY, IF SELLER'S DEFAULT IS (1) ITS (AND NOT AN UNRELATED THIRD
PARTY'S) AFFIRMATIVE, WILLFUL ACTION WHICH RESULTS IN THE RECORDING
OF AN ENCUMBRANCE AGAINST THE PROPERTY WITH THE INTENTION TO
PREVENT THE SALE OF THE PROPERTY IN ACCORDANCE WITH THE TERMS
HEREOF AND WHICH GIVES RISE TO PURCHASER'S RIGHT TO TERMINATE THIS
AGREEMENT PURSUANT TO PARAGRAPH 5 HEREOF; (II) ITS FAILURE TO EXPEND
UP TO $100,000 IF (A) SELLER IS ABLE TO BOND OVER, CURE OR REMOVE A
MINOR UNPERMITTED EXCEPTION FOR A COST NOT TO EXCEED $100,000 OR (B)
THE TITLE INSURER IS WILLING TO INSURE OVER A MINOR UNPERMITTED
EXCEPTION FOR A COST NOT TO EXCEED $100,000 IN ACCORDANCE WITH THE
TERMS HEREOF OR (III) ITS WILLFUL REFUSAL TO DELIVER THE DEED, THEN
PURCHASER WILL BE ENTITLED TO SUE FOR SPECIFIC PERFORMANCE.
Purchaser's Initials /s/ Seller's Initials /s/
-------- ----------
-9-
12. PRORATIONS.
12.1. Rents (exclusive of delinquent rents, but including prepaid rents);
refundable security deposits (which will be assigned to and assumed by Purchaser
and credited to Purchaser at Closing); water and other utility charges; fuels;
prepaid operating expenses; incentive fees paid pursuant to any laundry
contract; provided, however, such fee shall only be prorated if actually
received by Seller and only to the extent any fee was not used to improve the
laundry facilities at the Property; real and personal property taxes and other
similar items shall be adjusted ratably as of 11:59 p.m. on the Closing Date,
and credited to the balance of the cash due at Closing. Assessments payable in
installments which are due subsequent to the Closing Date shall be paid by
Purchaser. If the amount of any of the items to be prorated is not then
ascertainable, the adjustments thereof shall be on the basis of the most recent
ascertainable data. All prorations will be final except as to delinquent rent
referred to in Paragraph 12.2 below.
12.2. All basic rent paid following the Closing Date by any tenant of the
Property who is indebted under a lease for basic rent for any period prior to
and including the Closing Date shall be deemed a "Post-Closing Receipt" until
such time as all such indebtedness is paid in full. Within ten (10) days
following each receipt by Purchaser of a Post-Closing Receipt, Purchaser shall
pay such Post-Closing Receipt to Seller. Purchaser shall use its best efforts to
collect all amounts which, upon collection, would constitute Post-Closing
Receipts hereunder. Within 120 days after the Closing Date, Purchaser shall
deliver to Seller a reconciliation statement of Post-Closing Receipts through
the first 90 days after the Closing Date. Upon the delivery of the Post-Closing
Receipts reconciliation, Purchaser shall deliver to Seller any Post-Closing
Receipts owing to Seller and not previously delivered to Seller in accordance
with the terms hereof. Seller retains the right to conduct an audit, at
reasonable times and upon reasonable notice, of Purchaser's books and records to
verify the accuracy of the Post-Closing Receipts reconciliation statement and
upon the verification of additional funds owing to Seller, Purchaser shall pay
to Seller said additional Post-Closing Receipts and the cost of performing
Seller's audit. Paragraph 12.2 of this Agreement shall survive the Closing and
the delivery and recording of the deed.
13. RECORDING. Neither this Agree.ment nor a memorandum thereof shall be
recorded and the act of recording by Purchaser shall be an act of default
hereunder by Purchaser and subject to the provisions of Paragraph l0 hereof.
14. ASSIGNMENT. The Purchaser shall not have the right to assign its interest in
this Agreement without the prior written consent of the Seller. Any assignment
or transfer of, or attempt to assign or transfer, Purchaser's interest in this
Agreement shall be an act of default hereunder by Purchaser and subject to the
provisions of Paragraph 10 hereof. Notwithstanding the foregoing, Purchaser may
assign its interest in this Agreement without the consent of Seller to
Cornerstone Realty Income Trust, Inc. provided that Purchaser remains liable for
and the assignee assumes the obligations of Purchaser hereunder.
-10-
15. BROKER. The parties hereto represent and warrant that no broker commission
or finder fee is due and payable in connection with this transaction other than
to CB Commercial Real Estate Group, Inc. (to be paid by Seller). Seller's
commission to CB Commercial Real Estate Group, Inc. shall only be payable out of
the proceeds of the sale of the Property in the event the transaction set forth
herein closes. Purchaser and Seller shall indemnify, defend and hold the other
party hereto harmless from any claim whatsoever (including without limitation,
reasonable attorney's fees, court costs and costs of appeal) from anyone
claiming by or through the indemnifying party any fee, commission or
compensation on account of this Agreement, its negotiation or the sale hereby
contemplated other than to CB Commercial Real Estate Group, Inc. The
indemnifying party shall undertake its obligations set forth in this Paragraph
15 using attorneys selected by the indemnifying party and reasonably acceptable
to the indemnified party. The provisions of this Paragraph l5 will survive the
Closing and delivery of the Deed.
16. REPRESENTATIONS AND WARRANTIES.
16.1. Any reference herein to Seller's knowledge or notice of any matter or
thing shall only mean such knowledge or notice that has actually been received
by Mike Becker (the "Seller's Representative"), and any representation or
warranty of the Seller is based upon those matters of which the Seller's
Representative has actual knowledge. Any knowledge or notice given, had or
received by any of Seller's agents, servants or employees shall not be imputed
to Seller, the general partner or limited partners of Seller, the subpartners of
the general partner or limited partners of Seller or Seller's Representative.
16.2. Subject to the limitations set forth in Paragraph 16.1, Seller hereby
makes the following representations and warranties, which representations and
warranties are made to Seller's knowledge and which shall, subject to Paragraph
16.4, be remade at Closing: (i) Seller has no knowledge of any pending or
threatened litigation, claim, cause of action or administrative proceeding
concerning the Property; (ii) Seller has the power to execute this Agreement and
consummate the transactions contemplated herein; (iii) the rent roll (which
includes a list of actual security deposits) attached hereto as Exhibit L which
Seller will update as of the Closing Date is accurate as of the date set forth
thereon; (iv) Seller has not received written notice from any governmental
agency that the Property is in violation of any government statute or
regulation; (v) except as may be set forth in the Existing Report, Seller has
not received any notice from any governmental authority having jurisdiction over
the Property of any uncured violation of any Environmental Law with respect to
the Property; and (vi) except as may be set forth on the rent roll, Seller has
not delivered any coupons or similar items to any of the tenants at the Property
which would allow any such tenant to remit to the owner of the Property
following the Closing such coupon or similar item in complete or partial
satisfaction of said tenant's monthly rental obligation.
16.3. Purchaser hereby represents and warrants to Seller that Purchaser has
the full right, power and authority to execute this Agreement and consummate the
transactions contemplated herein.
- 11 -
16.4. If at any time after the execution of this Agreement, either Purchaser
or Seller become aware of information which makes a representation and warranty
contained in this Agreement to become untrue in any material respect, said party
shall promptly disclose said information to the other party hereto. Provided the
party making the representation or warranty did not take any deliberate actions
to cause the representation or warranty in question to become untrue in any
material respect, said party shall not be in default under this Agreement and
the sole remedy of the other party shall be to terminate this Agreement.
Notwithstanding anything contained herein to the contrary, if the status of any
of the tenancies changes from the date of the rent roll attached hereto and the
date of the rent roll delivered at Closing, provided the change in status is not
caused by a breach of Seller's covenants contained in Article 16 herein, then
Purchaser shall not have the right to terminate this Agreement or make any claim
for a breach of a representation or warranty hereunder involving the rent roll
or tenancies thereunder. Purchaser and Seller are prohibited from making any
claims against the other party hereto after the Closing with respect to any
breaches of the other party's representations and warranties contained in this
Agreement that the claiming party has actual knowledge of prior to the Closing.
16.5. The parties agree that the representations contained herein shall
survive Closing for a period of sixty (60) days (i.e., the claiming party shall
have no right to make any claims against the other party for a breach of a
representation or warranty after the expiration of sixty (60) days immediately
following Closing).
16.6. Seller covenants to operate and manage the Property in the same manner
that it has managed, maintained and operated the Property during the period of
Seller's ownership, subject to reasonable wear and tear and casualty.
17. LIMITATION OF LIABILITY. Neither Seller, norany of its respective
baneficiaries, shareholders, partners, officers, agents or employees, heirs,
successors or assigns shall have any personal liability of any kind or nature
for or by reason of any maker or thing whatsoever under, in connection with,
arising out of or in any way related to this Agreement and the transactions
contemplated herein, and Purchaser hereby waives for itself and anyone who may
claim by, through or under Purchaser any and all rights to sue or recover on
account of any such alleged personal liability.
18. TIME OF ESSENCE. Time is of the essence of this Agreement.
19. NOTICES. Any notice or demand which either party hereto is required or may
desire to give or deliver to or make upon the other party shall be in writing
and may be personally delivered or given or made by overnight courier such as
Federal Express, by facsimile transmission or made by United States registered
or certified mail addressed as follows:
-12-
TO SELLER: c/o The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: Ilona Adams
with copies to: The Balcor Company
Bannockburn Lake Office Plaza
2355 Waukegan Road
Suite A-200
Bannockburn, Illinois 60015
Attention: James E. Mendelson
(708) 317-4360
(708) 317-4462 (FAX)
and to: Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Daniel J. Perlman, Esq.
(312) 902-5532
(312) 902-1061 (FAX)
TO PURCHASER: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Mr. Gus Remppies and
Mr. Jay Olander
(804) 643-1761
(804) 782-9302 (FAX)
-13-
and one copy to:
Zuckerbrod & Taubenfeld
575 Chestnut Street
Cedarhurst, New York 11516
Attention: Harry Taubenfeld, Esq.
(516) 374-3133
(516) 374-3490 (FAX)
and one copy to: Manning, Fulton & Skinner, P.A.
3605 Glenwood Avenue, Suite 500
Raleigh, North Carolina 27612
Attention: Ted Oliver, Esq.
(919) 787-8880
(919) 781-0811 (FAX)
subject to the right of either party to designate a different address for itself
by notice similarly given. Any notice or demand so given shall be deemed to be
delivered or made on the next business day if sent by overnight courier, or the
same day as given if sent by facsimile transmission and received by 5:00 p.m.
Chicago time or on the 4th business day after the same is deposited in the
United States Mail as registered or certified matter, addressed as above
provided, with postage thereon fully prepaid. Any such notice, demand or
document not given, delivered or made by registered or certified mail, by
overnight courier or by facsimile transmission as aforesaid shall be deemed to
be given, delivered or made upon receipt of the same by the party to whom the
same is to be given, delivered or made. Copies of all notices shall be served
upon the Escrow Agent.
20. EXECUTION OF AGREEMENT AND ESCROW AGREEMENT. Purchaser will execute two (2)
copies of this Agreement and three (3) copies of the Escrow Agreement and
forward them to Seller for execution, accompanied with the Earnest Money payable
to the Escrow Agent set forth in the Escrow Agreement. Seller will forward one
(1) copy of the executed Agreement to Purchaser and will forward the following
to the Escrow Agent:
(A) Earnest Money;
(B) One (1) fully executed copy of this Agreement; and
(C) Three (3) copies of the Escrow Agreement signed by the parties with a
direction to execute two (2) copies of the Escrow Agreement and deliver a fully
executed copy to each of the Purchaser and the Seller.
21. GOVERNING LAW. The provisions of this Agreement shall be governed by the
laws of the state of North Carolina, except that with respect to the retainage
of the Earnest Money as liquidated damages the laws of the State of Illinois
shall govern.
-14-
22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all other negotiations, understandings and
representations made by and between the parties and the agents, servants and
employees.
23. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same instrument.
24. CAPTIONS. Paragraph titles or captions contained herein are inserted as a
matter of convenience and for reference, and in no way define, limit, extend or
describe the scope of this Agreement or any provision hereof.
25. AUDIT. Seller will make available to Purchaser such books, accounts and
records necessary for Purchaser to conduct an audit of the Property's preceding
fiscal year. This audit will be conducted solely at Purchaser's expense for the
purpose of satisfying its requirements as a publicly held entity. Seller agrees
to execute and deliver a disclosure letter prepared by the auditors of Purchaser
in substantially the form attached hereto as Exhibit M. The terms of this
Paragraph 25 shall survive the Closing for a period of one (1) year from the
Closing Date.
26. LITIGATION COSTS. In the event of any action or proceeding at law or in
equity between Seller and Purchaser 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 shall pay the prevailing party all
lidgation 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) shall be included in and as a part of such judgment.
-15-
IN WITNESS WHEREOF, the parties hereto have put their hand and seal as
of the date first set forth above.
PURCHASER:
CORNERSTONE REALTY GROUP
INCORPORATED, a Virginia corporation
By: /s/ S. J. Olander
---------------------------------
Name: S. J. Olander
-------------------------------
Its: Senior Vice President
-------------------------------
SELLER:
DURHAM ASSOCIATES, an Illinois limited
partnership
By: Balcor Realty Associates-VI,
an Illinois general partnership,
the general partner
By: The Balcor Company, a Delaware
corporation, a partner
By: /s/ James E. Mendelson
---------------------------
Name: JAMES E. MENDELSON
--------------------------
Its: AUTHORIZED REPRESENTATIVE
-------------------------
-16-