EXHIBIT 10.5
EARNEST MONEY CONTRACT
by and between
CHARLESTON WESTCHASE ASSOCIATES,
A LIMITED PARTNERSHIP,
as Seller
and
CORNERSTONE REALTY GROUP INCORPORATED,
as Purchaser
Premises: Westchase Apartments
Charleston, South Carolina
Date: November 22, 1996
TABLE OF CONTENTS
Page
Parties 1
ARTICLE I
Property
Section 1.01. Property 1
ARTICLE II
Purchase Price
Section 2.01. Purchase Price 2
Section 2.02. Earnest Money 2
ARTICLE III
Review Items
Section 3.01. Survey 3
Section 3.02. Title Commitment 3
Section 3.03. Other Review Items 3
Section 3.04. Inspection 5
Section 3.05. Insurance 6
Section 3.06. Indemnity 6
ARTICLE IV
Review Period
Section 4.01. Review Period 7
Section 4:02. Purchaser's Notice 7
Section 4.03. Seller's Notice 8
Section 4.04. Termination 8
(i)
ARTICLE V
Good and Indefeasible Title
Page
Section 5.01. Conveyance 8
Section 5.02. Owner Policy 9
ARTICLE VI
Closing
Section 6.01. Closing 10
Section 6.02. Seller's Obligations 10
Section 6.03. Purchaser's Obligations 11
Section 6.04. Possession 12
ARTICLE VII
Closing Adjustments
Section 7.01. General Prorations 12
Section 7.02. Specific Prorations 13
Section 7.03. Transaction Costs 14
Section 7.04. Brokerage Commissions 15
Section 7.05. Survival 15
ARTICLE VIII
Termination and Remedies
Section 8.01. Purchaser's Default 15
Section 8.02. Seller's Default 16
Section 8.03. Survival 16
(ii)
ARTICLE IX
Representations, Warranties and Covenants
Section 9.01. Disclaimer 17
Section 9.02. Seller's Representations 18
Section 9.03. Purchaser's Representations 19
Section 9.04. Discovery 20
Section 9.05. Operating Covenants 21
ARTICLE X
Notices
Section 10.01. Notices 22
ARTICLE XI
Risk of Loss
Section 11.01. Minor Damage 24
Section 11.02. Major Damage 24
Section 11.03. Risk of Loss 25
ARTICLE XII
Miscellaneous
Section 12.01. Entire Agreement 25
Section 12.02. No Recordation 25
Section 12.03. No Rule of Construction 25
Section 12.04. Multiple Counterparts;
Governing Law 25
Section 12.05. Attorneys' Fees 25
Section 12.06. Assignment 26
Section 12.07. Interpretation 26
(iii)
Section 12.08. Exhibits and Schedules 27
Section 12.09. Modifications; Reporting Person 27
Section 12.10. Time of Essence 28
Section 12.11. No Publicity 28
Section 12.12. Partial Invalidity 28
Section 12.13. Facsimile Signatures 28
Section 12.14. Section 1031 Exchange 29
Section 12.15. Investment Committee 29
Section 12.16. Purchasers Investment Committee 29
EXHIBITS
Exhibit A - Legal Description
Exhibit B - form of Deed
Exhibit C - form of Assignment of Leases
Exhibit D - form of Bill of Sale
Exhibit E - form of Closing Memorandum
Exhibit F - form of FIRPTA Affidavit
Exhibit G - form of Tenant Letter
Exhibit H - form of Termite Bond
Exhibit I - form of Representation Letter
Schedule 1 - schedule of Personal Property
Schedule 2 - schedule of Property Contracts
(iv)
EARNEST MONEY CONTRACT
THE STATE OF SOUTH CAROLINA (SECTION)
(SECTION) KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF CHARLESTON (SECTION)
THIS EARNEST MONEY CONTRACT (the "Contract") is made and entered into as of this
22nd day of November, 1996 (the "Effective Date") by and between CHARLESTON
WESTCHASE ASSOCIATES, A LIMITED PARTNERSHIP, a South Carolina limited
partnership ("Seller"), whose business address is 7557 Rambler Road, Suite 1200,
Dallas, Texas, 75231 and CORNERSTONE REALTY GROUP INCORPORATED, a Virginia
corporation ("Purchaser"), whose business address is 306 East Main Street,
Richmond, Virginia 23219.
ARTICLE I
Property
Section 1.01. Property. Seller hereby agrees to sell and convey to
Purchaser, and Purchaser hereby agrees to purchase from Seller, upon the terms
and conditions set forth herein, the following properties and assets:
(a) That certain tract of real property located in Charleston
County, South Carolina, more particularly described in Exhibit A attached hereto
and made a part hereof for all purposes, together with all and singular the
rights, privileges, tenements, heriditaments, easements, appendages and
appurtenances pertaining to such real property (all of the foregoing being
hereinafter collectively referred to as the "Real Property").
(b) All improvements, structures and fixtures with respect to
and situated on the Real Property, including without limitation that certain 352
unit apartment complex and related surface parking areas located on the Real
Property, commonly known as the "Westchase Apartments" (all of the foregoing
being hereinafter collectively referred to as the "Improvements").
(c) All of Seller's right, title and interest, if any, in and to
all leases and occupancy agreements and all amendments, modifications and letter
agreements modifying or affecting said leases and occupancy agreements covering
all or any portion of the Real Property and/or the Improvements (the
- 1 -
"Leases"), and all contract rights, licenses, condemnation proceeds or awards
now pending or hereafter made with respect to the Real Property and/or the
Improvements and all other intangible rights which are owned by Seller, if any,
and which are appurtenant to the Real Property and/or the Improvements,
including all right, title and interest of Seller, if any, in and to the name
"Westchase Apartments" (all of the foregoing being hereinafter collectively
referred to as the "Intangible Property").
(d) All equipment, machinery, appliances, furniture,
furnishings, heating, ventilation and air conditioning systems and equipment and
all other tangible personal property now owned by Seller, if any, and situated
on the Real Property and used or to be used in connection therewith or with the
Improvements as listed on Schedule 1 attached hereto (all of the foregoing being
hereinafter collectively referred to as the "Personal Property").
All of the foregoing items purchased under this Contract shall be hereinafter
sometimes referred to collectively as the "Property".
ARTICLE II
Purchase Price
Section 2.01. Purchase Price. The purchase price ("Purchase Price") to
be paid by Purchaser to Seller shall be ELEVEN MILLION AND NO/100 DOLLARS
($11,000,000.00). The Purchase Price shall be paid by Purchaser to Seller at the
Closing (as hereinafter defined) in cash or immediately available wire
transferred funds.
Section 2.02. Earnest Money. On or before the second (2nd) business day
following the Effective Date, Purchaser shall deposit the amount of ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,000.00) as earnest money hereunder (such
amount, together with all interest accrued thereon, is collectively referred to
as the "Earnest Money Deposit"), with Lawyers Title Insurance Company (the
"Title Company") whose business address is c/o Eastern Title Agency, Inc., 1812
Lincoln Street, 2nd Floor, Columbia, South Carolina 29201 Attention: Michael W.
Tighe. The Earnest Money Deposit shall, at the option of Purchaser, be in the
form of cash, certified check, cashier's check or other immediately available
funds. The Title Company shall hold The Earnest Money Deposit in an
interest-bearing
- 2 -
account at a bank designated by Seller, with all interest being paid to
Purchaser or Seller, as the case may be, in accordance with the terms of this
Contract. At the Closing, the Earnest Money Deposit shall be applied toward the
Purchase Price, but otherwise the Earnest Money Deposit shall be held by the
Title Company, returned to Purchaser, or delivered to Seller, in accordance with
the terms of this Contract.
ARTICLE III
Review Items
Section 3.01. Survey. Seller agrees to deliver, within ten (10) days
from the Effective Date, one (1) print of Seller's most recent survey of the
Property. Purchaser has the right, at Purchaser's expense, to obtain a new or
recertified survey of the Property (the "Survey"). Purchaser may instruct the
surveyor to (a) locate all easements, rights-of-way and building lines on the
Real Property (identified by recording data, if applicable); (b) show the
location and size of all Improvements on the Real Property and streets, roads
and utility lines on or immediately adjacent to the Real Property; (c) reflect
any encroachments and protrusions; (d) certify, if applicable, that no portion
of the Real Property lies within the 100 year flood plain or within a flood
prone area; (e) include an appropriate metes and bounds description of the Real
Property; and (f) include a certification by the surveyor to Seller, Purchaser
and the Title Company in form reasonably satisfactory to Purchaser and the Title
Company. Subject to approval of the Survey by Seller. Purchaser and the Title
Company, the metes and bounds description of the Real Property contained in the
Survey, if applicable, shall be the description of the Real Property used in the
Deed (as hereinafter defined).
Section 3.02. Title Commitment. Seller agrees to deliver, within ten
(10) days from the Effective Date, to Purchaser a current commitment for an ALTA
Owner's Policy of Title Insurance issued by the Title Company (the "Title
Commitment"), which sets forth the state of title of the Property and all
exceptions, including easements, restrictions, rights-of-way, covenants,
reservations or other conditions or matters affecting the Property which would
appear in an owner's policy of title insurance, together with legible copies of
such easements, restrictions, rights-of-way, covenants, reservations or other
matters.
Section 3.03. Other Review Items. In addition to the Survey and the
Title Commitment, Seller will, to the extent available to and currently in
Seller's possession, make available to Purchaser the following:
- 3 -
(a) Copies of any hazardous materials reports in Seller's
possession prepared for Seller during the thirty (30) months preceding the
Effective Date. By providing copies of hazardous materials reports to Purchaser,
Seller is not making any representations or warranties, implied or otherwise, as
to the accuracy of the factual information provided or the conclusions formed by
the consultants who prepared the hazardous materials reports. Further, Seller is
making no representations or warranties as to the skill and care taken by the
consultant in preparing the hazardous materials reports. Seller will not be
responsible for conditions or consequences arising from relevant facts that were
concealed, withheld, or not fully disclosed by the consultant, any regulatory or
governmental agency, or from persons interviewed as part of the preparation of
the hazardous materials report. Purchaser also acknowledges that the facts and
conditions referenced in the hazardous materials report may change over time and
the conclusions and recommendations set forth therein are applicable only to the
facts and conditions as described in the hazardous materials report. Purchaser
should use good faith efforts in determining whether the hazardous materials
reports are accurate.
(b) Operating statements for the Property in the format
customarily prepared for Seller for the calendar year prior to the Effective
Date and the most recently available interim period, including, without
limitation, records of income, expenses, and capital expenditures.
(c) Copies of all management, service, maintenance and other
contracts in force with respect to the Property (collectively, the "Property
Contracts") as listed on Schedule 2 attached hereto.
(d) Copies of all Leases and other occupancy agreements in force
with respect to the Property.
(e) Copies of the ad valorem and personal property tax
statements covering the Property for the current tax year (if available) and the
tax year immediately preceding the Effective Date.
(f) An original rent roll for the Property for the month
preceding the Effective Date in the format customarily prepared for Seller and
showing tenant names, vacant premises, expiration dates of all Leases, and a
current schedule of rent for each lease.
- 4 -
(g) A current schedule of all refundable security and other
tenant deposits paid by tenants at the Property under existing Leases.
(h) Copies of all insurance loss claims relating to the Property
for the thirty (30) months preceding the Effective Date.
(i) Seller has been advised by Purchaser that Purchaser is a
public entity and that it is required to furnish statements to the Securities
and Exchange Commission in connection with this acquisition. In the event
Purchaser closes and purchases the Property, Seller agrees to make the
information described in Section 3.03(a)-(h) above available for Purchaser to
audit the last twelve (12) months of operation of the Property so that a report
can be generated that is in compliance with accounting Regulation S-X of the
Securities and Exchange Commission. This Section 3.03(i) shall survive Closing.
Seller will instruct Seller's property manager to cooperate fully with Purchaser
with respect to the foregoing review items subject to the provisions of this
Section 3.03. Notwithstanding the foregoing, Purchaser shall have no right to
inspect (i) any internal memoranda or reports prepared by or on behalf of Seller
which Seller deems confidential, nor (ii) any appraisals of the Property
prepared by or on behalf of Seller. SUBJECT TO SECTION 9.02 HEREOF, PURCHASER
ACKNOWLEDGES AND AGREES THAT ANY AND ALL REPORTS, AGREEMENTS, LEASES AND OTHER
INFORMATION DELIVERED OR OTHERWISE MADE AVAILABLE TO PURCHASER UNDER THIS
CONTRACT OR OTHERWISE HAVE BEEN DELIVERED AND MADE AVAILABLE BY OR ON SELLER'S
BEHALF WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, BY
SELLER - IT BEING AGREED THAT SELLER DOES NOT VERIFY THE ACCURACY THEREOF. In
the event this Contract shall terminate for any or no reason, Purchaser agrees
to return to Seller, no later than two (2) days after request, all documents and
other materials delivered to Purchaser hereunder.
Section 3.04. Inspection. Purchaser shall have the right, upon
reasonable notice to Seller, subject to the rights of tenants in possession, if
any, pursuant to the Leases, to conduct on-site physical inspections of the
Property (including, without limitation, termite inspections and environmental
assessments) during the Review Period (hereinafter defined), including, without
limitation, the right to enter and inspect all portions of the Property and all
of Seller's books and records at the Property relating solely to the property.
Seller hereby directs the manager of the Property to reasonably cooperate with
Purchaser in the exercise of Purchaser's inspection rights, subject to the terms
of this
- 5 -
Contract. A representative of Seller shall have the right to be present during
any physical tests, inspections and investigations at or about the Property.
Purchaser has no right to make any alterations to the Property without Seller's
prior written consent. Purchaser shall, at Purchaser's sole expense, promptly
fill and compact any holes and otherwise restore any damage to the Property
caused as a result of any test, inspection or investigation by or on Purchaser's
behalf. Any soil, waste or materials removed during any environmental testing
must be properly disposed of by Purchaser at Purchaser's sole cost, even though
Purchaser may elect to terminate the Contract. Purchaser shall not permit any
liens or encumbrances to arise against the Property in connection with or as a
result of such inspections, studies or investigations. The foregoing obligations
shall survive the termination of this Contract.
Section 3.05. Insurance. Purchaser has furnished Seller with evidence
acceptable to Seller that Purchaser maintains public liability insurance with
limits of at least $1,000,000 for bodily or personal injury or death, property
damage insurance in an amount of at least $500,000, and contractual liability
insurance with respect to Purchaser's indemnification obligations under Section
3.06(c) with respect to damage to the Property and/or injury to persons or
property. Purchaser agrees to maintain such insurance policies in effect for a
period of at least six (6) months following the earlier to occur of the Closing
or the date of termination of this Contract.
Section 3.06. Indemnity. Purchaser shall (a) hold any and all materials
delivered to Purchaser under this Contract in confidence subject to the terms
hereof; (b) not unreasonably interfere with the operation of the Property, or
the business conducted by any tenant of the Property during any testing,
inspection or investigation performed with respect to the Property; and (c)
indemnify, protect, defend and hold Seller, its partners and their respective
officers, directors, trustees, employees, agents, affiliates, successors and
assigns harmless from and against any and all loss (including, without
limitation, damage to the Property or injury to persons or property), cost,
claim, liability or expense (including, without limitation, reasonable
attorneys' fees) arising or resulting, directly or indirectly, from any
unauthorized disclosure, test, investigation, inspection or contact made by
Purchaser, or anyone acting on behalf of Purchaser, pursuant to this Contract,
or otherwise. Seller agrees to promptly notify Purchaser of any claims as soon
as they are made. Notwithstanding anything to the contrary contained herein, the
provisions of this Section shall survive the termination of
- 6 -
this Contract by either Purchaser or Seller, and/or the Closing and delivery of
the Deed for a period of six (6) months following Closing. For purposes of this
Section 3.06, unauthorized disclosure shall be a disclosure of proprietary and
confidential information by Purchaser regarding the Property to a person or
entity other than Purchaser's lending sources, investors, third parties
performing Purchaser's due diligence review, and Purchaser's accountants,
investment advisors and attorneys.
ARTICLE IV
Review Period
Section 4.01. Review Period. Purchaser shall have from the date of this
Contract until 12:00 noon Dallas, Texas time, on the twenty first (21st) day
following the Effective Date (the "Review Period") to review the Survey, the
Title Commitment, and the items delivered by Seller to Purchaser under Section
3.03, and to conduct physical, mechanical, environmental and other inspections
of the Property.
Section 4.02. Purchaser's Notice. If for any reason Purchaser, in its
sole and absolute discretion, is not satisfied with the condition of the
Property or any portion thereof, or any matter in or pertaining to the items
delivered or to be delivered by Seller to Purchaser pursuant to Article III of
this Contract, or any other fact or situation with respect to the Property, then
in such event Purchaser shall have the right to terminate this Contract by
giving Seller written notice thereof (the "Purchaser's Notice"), and this
Contract shall be immediately terminated upon Purchaser's delivery of the
Purchaser's Notice to Seller and (except as otherwise provided below) the
Earnest Money Deposit shall be returned to Purchaser, as Purchaser's sole and
exclusive remedy. The Purchaser's Notice need not set forth the reason for such
termination; provided, however, that if Purchaser, in its sole and absolute
discretion, desires to give Seller an opportunity to cure Purchaser's
dissatisfaction before Purchaser terminates this Contract, then Purchaser may
state such intention in the Purchaser's Notice and shall set forth in reasonable
detail the basis for any such dissatisfaction, in which event this Contract
shall not be immediately terminated and Seller shall have the right, but not the
obligation, to cure Purchaser's dissatisfaction or reduce the Purchase Price as
set forth in Section 4.03 below. In the event Purchaser fails to deliver the
Purchaser's Notice on or before the expiration of the Review Period then this
Contract shall be immediately terminated and the Earnest Money Deposit shall be
returned to Purchaser, as Purchaser's sale and exclusive remedy.
- 7 -
Section 4.03. Seller's Notice. If Purchaser states in the Purchaser's
Notice its intention to give Seller an opportunity to cure Purchaser's
dissatisfaction before Purchaser terminates this Contract and includes therein
the basis for Purchaser's dissatisfaction, then Seller shall have the right, but
not the obligation, by delivery of written notice (the "Seller's Notice") to
Purchaser within five (5) business days after Seller's receipt of the
Purchaser's Notice, to elect either to (i) cure any such matter to the
reasonable satisfaction of Purchaser at Seller's sole cost and expense, (ii)
proceed to Closing, and reduce the Purchase Price by an amount equal to the cost
to Purchaser of any such cure, or (iii) terminate the Contract. In the event
Seller fails to deliver the Seller's Notice within such five (5) business day
period, Seller shall be deemed to have waived Seller's rights to cure; the
Earnest Money Deposit shall be returned to Purchaser, as Purchaser's sole and
exclusive remedy; and this Contract shall be deemed terminated. If Seller
delivers a Seller's Notice, Seller and Purchaser agree in good faith to
reasonably determine, within five (5) business days after delivery of the
Seller's Notice, the method, timing, cost and means to cure any such
objectionable item, or the cost to Purchaser of any such cure, as the case may
be. In the event Seller and Purchaser are unable, after the exercise of good
faith efforts, to agree in writing on the curative action required or the amount
to be reduced from the Purchase Price as a credit for the cost to cure, as the
case may be, within such five (5) business day period, then, this Contract shall
be deemed automatically terminated, and the Earnest Money Deposit shall be
returned to Purchaser, as Purchaser's sole and exclusive remedy.
Section 4.04. Termination. In the event that Purchaser elects to
terminate this Contract in accordance with, and subject to the terms of this
Article IV, the parties hereto shall be relieved of all liabilities and
obligations hereunder (expressly, excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto) and the Earnest Money Deposit shall be refunded fully
and promptly to Purchaser as Purchaser's sole and exclusive remedy.
ARTICLE V
Good and Indefeasible Title
Section 5.01. Conveyance. At the Closing, Seller shall convey title to
the Real Property and the Improvements to Purchaser by the Deed, free and clear
of any and all deeds of
- 8 -
trust, mortgages or other liens or indebtedness, encumbrances, conditions,
easements, rights-of-way, assessments and restrictions, except for the following
(collectively, the "Permitted Exceptions"):
(a) Real estate taxes and assessments for the year in which the
Closing occurs and subsequent years not yet due and payable.
(b) All easements, restrictions, rights-of-way, party wall
agreements, encroachments, covenants, reservations, agreements, licenses,
conditions and other matters affecting all or any portion of the Property to the
extent (i) reflected on Schedule B to the Title Commitment and approved or
deemed approved by Purchaser; (ii) reflected on the Survey and approved or
deemed approved by Purchaser; and/or (iii) created by or consented and agreed to
in writing by Purchaser prior to or at the Closing.
(c) All building restrictions, zoning regulations and other
laws, rules and regulations, now or hereafter in effect, to the extent adopted
by any municipal, governmental or other public authority and applicable to all
or any portion of the Property.
(d) The rights of tenants in possession as tenants only under
the Leases.
Section 5.02. Owner Policy. At the Closing, Seller shall, at Purchaser's
sole cost and expense, purchase an Owner Policy of Title Insurance (the "Owner
Policy"), in the standard ALTA form, issued by the Title Company in Purchaser's
favor in an amount equal to the Purchase Price, insuring Purchaser's fee simple
title to the Property subject only to the Permitted Exceptions, and the standard
printed exceptions; provided, however, (a) the exception for restrictive
covenants shall, as applicable, be deleted or shall list only those restrictive
covenants as may be Permitted Exceptions; (b) any exception for parties in
possession of the Real Property or the Improvements shall be limited to the
rights of tenants in possession, as tenants only, pursuant to unrecorded
leases; and (c) there shall be no general exception for visible and apparent
easements, roads and highways or any other matters which would be disclosed by a
current survey of the Property.
9
ARTICLE VI
Closing
Section 6.01. Closing. The purchase and sale of the Property (the
"Closing") shall be held at the offices of the Title Company or at such other
place as shall be agreed upon by Seller and Purchaser, and shall occur, subject
to satisfaction of all conditions precedent set forth in this Contract, at 9:00
a.m. Dallas, Texas time on January 15, 1997, or such earlier date as may be
mutually agreeable to Seller and Purchaser (the "Closing Date").
Section 6.02. Seller's Obligations. At the Closing, Seller shall execute
and deliver to Purchaser, and/or cause the execution and delivery by all parties
other than Purchaser of, the following:
(a) That certain special warranty deed (the Deed") in the form
attached hereto as Exhibit B and made a part hereof for all purposes, or as
approved by the Title Company.
(b) That certain assignment of leases (the "Assignment of
Leases") in the form attached hereto as Exhibit C and made a part hereof for all
purposes.
(c) That certain blanket conveyance, bill of sale and assignment
("Bill of Sale") in the form attached hereto as Exhibit D and made a part hereof
for all purposes.
(d) That certain closing memorandum and indemnification
agreement (the "Closing Memorandum") in the form attached hereto as Exhibit E
and made a part hereof for all purposes.
(e) That certain affidavit (the "FIRPTA Affidavit") in the form
attached hereto as Exhibit F and made a part hereof for all purposes.
(f) That certain tenant notification letter (the "Tenant
Letter") in the form attached hereto as Exhibit G and made a part hereof for all
purposes.
(g) All keys to all locks on the Property and, to the extent in
Seller's possession, original counterparts of all Leases, Property Contracts and
other documents included within the Property. The items referred to in this
clause (g) may be delivered at the Property rather than at the Closing.
-10-
(h) A current rent roll in the form described in Section 3.03(f)
certified by Seller as being true, correct and complete in all material respects
as of the date thereof.
(i) The Owner Policy, provided that the Title Company may
deliver the Owner Policy to Purchaser following the Closing in accordance with
the Title Company's customary practices.
(j) The termite bond set forth on Exhibit H attached hereto.
(k) Appropriate evidence of Seller's authority to consummate the
transactions contemplated by this Contract.
(1) An affidavit 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.
(m) Seller shall provide a termination of management agreement
executed by Seller and Paragon Residential Services, Inc., without cost to
Purchaser.
(n) Such other documents as are normally transferred at Closing
in South Carolina or are reasonably requested by Purchaser or its counsel.
(o) A representation letter as normally required by auditors of
a public company in the form attached hereto as Exhibit I executed by Seller.
This clause shall survive Closing for one year.
Section 6.03. Purchaser's Obligations. At the Closing, Purchaser shall
deliver the balance of the Purchase Price (the Earnest Money Deposit being
applied thereto) to Seller by wire transfer of immediately available funds, and
shall execute and deliver to Seller, and/or cause the execution and delivery by
all parties other than Seller of, the following:
(a) The Assignment of Leases.
(b) The Bill of Sale.
(c) The Closing Memorandum.
- 11 -
(d) The Tenant Letter.
(e) Appropriate evidence of Purchaser's authority to consummate
the transactions contemplated by this Contract.
(f) Such other documents as are normally transferred at Closing
in South Carolina or are reasonably requested by Seller or its counsel.
Section 6.04. Possession. Possession of the Property shall be delivered
by Seller to Purchaser at the Closing, subject to the Permitted Exceptions.
ARTICLE VII
Closing Adjustments
Section 7.01. General Prorations. The following shall be apportioned at
the Closing:
(a) rents, if any, as and when collected (the term "rents" as
used in this Contract including all rent and other payments due and payable
under any Lease) and all other revenue from the Property;
(b) taxes and other assessments (including personal property
taxes on the Personal Property), on the basis customarily followed in the
locality of the Property, any apportionment of real estate taxes to be made with
respect to a tax year for which either the tax rate or assessed valuation or
both have not yet been fixed, to be upon the basis of the tax rate and/or
assessed valuation last fixed; provided that the parties hereto agree that to
the extent the actual taxes for the current year differ from the amount so
apportioned at the Closing, the parties hereto will make all necessary
adjustments by appropriate payments between themselves following the Closing,
and this provision shall survive delivery of the Deed;
(c) payments under any service and/or other contracts that are
not otherwise terminated at or prior to Closing;
- 12 -
(d) gas, electricity and other utility charges, if any, to be
apportioned on the basis of meter readings on the day immediately prior tO the
Closing; and
(e) other operating expenses of the Property incurred during the
month in which the Closing occurs, including, without limitation, costs due and
payable by Seller under, or with respect to, any Lease of all or any portion of
the Property.
In making such apportionments, Purchaser shall be entitled to rents and other
income paid with respect to the day of the Closing, and Purchaser shall be
responsible for taxes and other expenses incurred with respect to the day of the
Closing. All such apportionments shall be subject to post-closing adjustments as
necessary to reflect later relevant information not available at the Closing and
to correct any errors made at the Closing with respect to such apportionments;
provided, however, that such apportionments shall in any event (i.e., regardless
of whether later relevant information becomes available or errors are
discovered) be deemed final and not subject to further post-closing adjustment
on the sixtieth (60th) day following the Closing Date. Seller and Purchaser
agree that, except as otherwise set forth herein, all costs and expenses
actually incurred in connection with the ownership, operation, leasing, repair,
maintenance or management of the Property shall, to the extent attributable to
the period prior to the Closing Date, be the sole responsibility of Seller, and
shall, to the extent attributable to the period from and after the Closing Date,
be the sole responsibility of Purchaser.
Section 7.02. Specific Prorations. Anything hereinabove contained to the
contrary notwithstanding:
(a) Seller and Purchaser agree that all rents received after the
Closing shall be applied first to any rent unpaid for the month of the Closing,
then to current rentals, if any, in the order of their maturity, and then to
delinquent rentals in inverse order of maturity (i.e., to be applied to the most
recent delinquent rental first, and so on, until the oldest delinquent rental
has been paid), and Purchaser shall promptly deliver to Seller any such
delinquent rentals received after the Closing which remain to be applied to rent
obligations which accrued prior to the Closing. Purchaser has no obligation to
collect any past due rents owed Seller as of the Closing Date. Seller may, at
Seller's option, institute an action to
- 13 -
collect any delinquent rentals after the Closing from tenants who are no longer
in occupancy at the Closing, but not otherwise.
(b) At the Closing, Seller shall credit to the account of
Purchaser against the Purchase Price any security and other tenant deposits paid
by tenants at the Property under then existing Leases, including interest
thereon as required by South Carolina law, less any security deposits previously
applied by Seller to rents or other charges accruing pursuant to the Leases.
(c) As to gas, electricity and other utility charges, Seller may
elect to pay one or more of said items accrued to the date hereinabove fixed for
apportionment directly to the person or entity entitled thereunto and to the
extent Seller so elects, such item shall not be apportioned hereunder, and
Seller's obligation to pay such item directly in such case shall survive the
Closing.
(d) At the Closing, Seller shall receive a credit from
Purchaser equal to one-half the prepayment fee or premium required to prepay
the $4,440,000 Prudential loan which currently encumbers the Property; provided,
however, that the aforesaid credit to Seller shall not exceed S150,000.
(e) At the Closing, Purchaser shall receive a credit from Seller
in an amount equal to $500 for each apartment unit which is not "rent ready" as
required by Section 9.05(e); provided, however, such aggregate credit shall not
exceed $5,000.
Section 7.03. Transaction Costs. With the exception of (a) any fees or
real estate commissions (which are subject to and governed by the provisions of
Section 7.04); (b) all attorneys' fees and expenses, if any, of counsel to
Purchaser (which shall be borne by Purchaser); (c) any inspection or other cost
incurred by Purchaser (which shall be borne by Purchaser); (d) all attorneys'
fees and expenses of counsel to Seller (which shall be borne by Seller); (e) the
cost of an update of the Survey (which shall be borne by Purchaser); (f) the
cost of the Owner Policy (which shall be borne by Purchaser); and (g) the cost
of any recording fee under Chapter 14 of Title 12, South Carolina Code of Laws
(which shall be borne by Seller), all other transaction costs actually incurred,
including, without limitation, any
- 14 -
escrow and other charges of the Title Company, and recording fees shall be
apportioned in accordance with local custom in the State of South Carolina.
Section 7.04. Brokerage Commissions. Seller agrees to pay to Gables
Residential Trust ("Broker") a real estate commission equal to one and
one-quarter percent (1.25%) of the purchase price if, and only if, the Closing
occurs in accordance with this Contract, but not otherwise. Except for Broker,
Seller and Purchaser acknowledge and agree that neither has dealt with any other
real estate broker, agent or salesman, and any other fees or real estate
commissions occasioned by the execution and/or consummation of this Contract
shall be the sole responsibility of the party contracting therefor, and such
party agrees to indemnify and hold harmless the other party for any and all
losses or expenses attributable to such other fees or real estate commissions.
By its signature hereto, Broker represents to Seller and Purchaser that such
broker has not entered into any arrangement with any other party whereby such
other party is entitled to any commission or finder's fee in connection with
this transaction, and such broker agrees that should any claim be made for
brokerage commissions or finder's fees by any other party claiming by, through
or on account of any acts of such broker or its representatives, such broker
shall hold Purchaser and Seller free and harmless from and against any and all
loss, cost, damage and expense in connection therewith. In the event the
transaction envisioned hereby fails to close for any reason, including without
limitation either party's default, neither party shall have any obligation for
the payment to Broker or any other person of any commission or similar type fee
hereunder, or otherwise. Purchaser has been and is hereby advised that
Purchaser should have the abstract covering the Property examined by an attorney
of Purchaser's selection or Purchaser should be furnished with a policy of title
insurance.
Section 7.05. Survival. The terms of this Article shall survive the
Closing and delivery of the Deed or, if applicable, the earlier termination of
this Contract.
ARTICLE VIII
Termination and Remedies
Section 8.01. Purchaser's Default. In the event that Purchaser should
fail to consummate this Contract for any reason, except Seller's default or the
permitted termination of this Contract by Purchaser or Seller as herein
expressly
- 15 -
provided, Seller shall be entitled, as Seller's sole and exclusive remedy, to
terminate this Contract and receive the Earnest Money Deposit and Seller's
acceptance (by negotiation, deposit or otherwise) of the Earnest Money Deposit
shall conclusively operate to terminate this Contract and release and fully
discharge Seller and Purchaser from any and all liability hereunder (expressly
excluding, however, Purchaser's indemnity of Seller under Section 3.06 which
shall survive termination of this Contract by either party). Seller and
Purchaser acknowledge and agree that delivery of the Earnest Money Deposit shall
be deemed liquidated damages for Purchaser's breach of this Contract, it being
further agreed that the actual damages to Seller in the event of such breach are
impractical to ascertain and the amount of the Earnest Money Deposit is a
reasonable estimate thereof. Prior to delivery of the Earnest Money to Seller,
Seller shall give Purchaser seventy-two hours prior notice of same.
Section 8.02. Seller's Default. In the event that Seller should fail to
consummate this Contract for any reason, except Purchaser's default or the
permitted termination of this Contract by either Seller or Purchaser as herein
expressly provided, Purchaser shall be entitled, as Purchaser's sole and
exclusive remedies, to either (a) the return of the Earnest Money Deposit and
Purchaser's acceptance (by negotiation, deposit or otherwise) of the Earnest
Money Deposit shall conclusively operate to terminate this Contract and release
and fully discharge Seller and Purchaser from any and all liability hereunder
(expressly excluding, however, Purchaser's indemnity of Seller under Section
3.06 which shall survive any termination of this Contract by either party
hereto); or (b) enforce specific performance of Seller's obligations hereunder,
subject, however, to all conditions and termination rights set forth herein and
Purchaser shall be entitled to all costs or expenses (including reasonable
attorneys' fees) incurred by Purchaser in pursuing its remedy under this Section
8.02(b). Purchaser shall have no right to sue for or seek, whether at law, in
equity or otherwise, any monetary award or judgment and/or any consequential,
incidental or other damages against Seller, any officer, trustee, director,
employee or agent of Seller, or their respective successors and assigns all of
which are hereby knowingly, voluntarily and intentionally waived, released and
discharged by Purchaser.
Section 8.03. Survival. The terms of this Article shall survive the
Closing and delivery of the Deed or, if applicable, the earlier termination of
this Contract.
- 16 -
ARTICLE IX
Representations. Warranties and Covenants
Section 9.01. Disclaimer. PURCHASER AGREES THAT PURCHASER IS BEING
AFFORDED THE RIGHT TO PERFORM EXAMINATIONS AND INVESTIGATIONS OF THE PROPERTY
PRIOR TO THE EXPIRATION OF THE REVIEW PERIOD, INCLUDING, WITHOUT LIMITATION,
EXAMINATION AND INVESTIGATION FOR THE PRESENCE OF ASBESTOS, PCB EMISSIONS,
CLEANING SOLVENTS (E.G., PCE), UNDERGROUND STORAGE TANKS AND HAZARDOUS WASTES ON
ALL OR ANY PORTION OF THE PROPERTY, AND FOR THE PROPERTY'S COMPLIANCE WITH ANY
AND ALL HANDICAPPED ACCESSIBILITY LAWS, RULES AND REGULATIONS (E.G., AMERICANS
WITH DISABILITIES ACT OF 1990, OR ANY OTHER LAW, RULE OR REGULATION). PURCHASER
WILL RELY SOLELY UPON SUCH EXAMINATIONS AND INVESTIGATIONS IN PURCHASING THE
PROPERTY. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AND EXCEPT AS
PROVIDED IN SECTION 9.02, IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT PURCHASER
IS ACQUIRING THE PROPERTY "AS IS" AND "WHERE IS", AND WITH ALL FAULTS AND THAT,
EXCEPT AS SET FORTH IN SECTION 9.02 AND THE DOCUMENTS TO BE DELIVERED AT THE
CLOSING, SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR
WARRANTIES, STATUTORY, EXPRESSED OR IMPLIED, WITH RESPECT TO THE QUALITY,
PHYSICAL CONDITION, EXPENSES, VALUE OF THE PROPERTY OR IMPROVEMENTS THEREON,
HANDICAPPED ACCESSIBILITY LAW COMPLIANCE, PRESENCE/ABSENCE OF HAZARDOUS
MATERIALS, ELECTROMAGNETIC FIELD EXPOSURE LEVELS OR ANY OTHER MATTER OR THING
AFFECTING OR RELATED TO THE PROPERTY OR THIS CONTRACT (INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF HABITABILITY, WARRANTIES OF MERCHANTABILITY AND/OR OF
FITNESS FOR A PARTICULAR PURPOSE), WHICH MIGHT BE PERTINENT IN CONSIDERING THE
MAKING OF THE PURCHASE OF THE PROPERTY OR THE ENTERING INTO OF THIS CONTACT, AND
PURCHASER DOES HEREBY RELEASE AND FOREVER DISCHARGE SELLER, ITS OFFICERS,
TRUSTEES, DIRECTORS, AND THEIR RESPECTIVE AGENTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS FROM ANY AND ALL CLAIM, OBLIGATION AND LIABILITY (WHETHER BASED IN TORT,
UNDER CONTRACT OR OTHERWISE) ATTRIBUTABLE, IN WHOLE OR IN PART, TO ANY SUCH
REPRESENTATION, EXCEPT FOR THOSE PROVIDED IN SECTION 9.02 AND THE DOCUMENTS TO
BE DELIVERED AT THE CLOSING, AND/OR ALLEGED REPRESENTATION, AND FURTHER
PURCHASER DOES HEREBY EXPRESSLY ACKNOWLEDGE THAT, EXCEPT AS SET FORTH IN SECTION
9.02 AND THE DOCUMENTS TO BE DELIVERED AT THE CLOSING, NO SUCH REPRESENTATIONS
HAVE BEEN MADE. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY WARRANTIES,
EITHER EXPRESSED OR IMPLIED, GUARANTEES, PROMISES, STATEMENTS, REPRESENTATIONS
OR INFORMATION PERTAINING TO THE PROPERTY MADE OR FURNISHED BY BROKER, OR ANY
AGENT, BROKER, EMPLOYEE, SERVANT OR OTHER PERSON REPRESENTING OR PURPORTING TO
REPRESENT SELLER. PURCHASER HEREBY RELEASES, ACQUITS AND FOREVER DISCHARGES
SELLER FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF ACTION THAT PURCHASER MAY
- 17 -
HAVE AGAINST SELLER WITH RESPECT TO ANY COSTS, LOSSES, EXPENSES OR OTHER
LIABILITIES INCURRED IN CONNECTION WITH PROPERTY, INCLUDING, WITHOUT LIMITATION,
ANY RIGHT OF CONTRIBUTION, INDEMNITY OR REIMBURSEMENT PROVIDED UNDER THE
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980,
THE RESOURCE CONSERVATION AND RECOVERY ACT OR ANY OTHER FEDERAL, STATE OR LOCAL
ENVIRONMENTAL LAW, RULE OR REGULATION. THE TERMS OF THIS SECTION 9.01 SHALL BE
DEEMED INCORPORATED INTO EACH DOCUMENT EXECUTED BY SELLER AT THE CLOSING
REGARDLESS OF WHETHER A SPECIFIC REFERENCE TO THIS SECTION IS MADE THEREIN.
FURTHER, THE TERMS OF THIS SECTION 9.01 SHALL SURVIVE THE TERMINATION OF THIS
CONTRACT AND/OR THE CLOSING AND DELIVERY OF THE DEED. NOTHING CONTAINED IN THIS
SECTION 9.01 SHALL LIMIT OR IMPAIR THE SPECIAL WARRANTY OF TITLE SET FORTH IN
THE DEED, EXCEPT WHERE OTHERWISE AGREED UPON.
Section 9.02. Seller's Representations. Seller hereby represents and
warrants to Purchaser as follows:
(a) Seller has all requisite power and authority to carry on its
business as now conducted.
(b) Seller has the capacity and complete authority to enter into
and perform this Contract, and no consent, approval or other action by any other
person or entity (other than the persons signing this Contract on behalf of
Seller) will be needed thereafter to authorize Seller's execution and
performance of this Contract. The execution and performance of this Contract is
not prohibited by, and does not constitute a default under, any agreement to
which Seller is a party or by which Seller is bound.
(c) Seller is not a "foreign person", "foreign partnership", nor a
"foreign corporation" as those terms are defined in Section 7701 of the Internal
Revenue Code of 1986, as amended.
(d) To Seller's knowledge, there is no pending litigation filed
with respect to the Property.
(e) To Seller's knowledge, Seller has not received written notice
from any governmental authority reflecting eminent domain or condemnation
proceedings covering the Property.
(f) To Seller's knowledge, Seller has not received written notice
from any governmental
- 18 -
authority that the Property is currently in violation of any zoning, building,
fire or health statute, ordinance or regulation.
(g) To Seller's knowledge, Seller has not received written notice
from any governmental, or regulatory authority reflecting an existing
environmental hazard on the Property.
(h) To Seller's knowledge, the items delivered to Purchaser under
Section 3.03(b), (c), (d), (e), (f), (g) and (h) are true and correct in all
material respects.
(i) The Personal Property is owned by Seller free and clear of any
liens or encumbrances subject to the Permitted Exceptions.
(j) To the best of Seller's knowledge, there are no unsatisfied
judgments or pending bankruptcies against Seller with respect to the Property.
References to the "knowledge" of Seller above shall refer only to the
actual knowledge (as opposed to constructive, deemed or imputed knowledge) of
Brenda Meetze and shall not be construed, by imputation or otherwise, to refer
to the knowledge of Seller, or any affiliate of Seller, to any property manager,
or to any officer, agent, manager, representative or employee of Seller or any
affiliate thereof or to impose upon Brenda Meetze any duty to investigate the
matter to which such actual knowledge, or the absence thereof, pertains. Seller
represents that Brenda Meetze is a Vice President of Paragon Residential
Services, Inc., the current manager of the Property.
Section 9.03. Purchaser's Representations. Purchaser hereby represents
and warrants to Seller as follows:
(a) Purchaser is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Virginia, has duly qualified
to conduct business in the State of South Carolina, and has all requisite power
and authority to carry on its business as now conducted.
(b) Purchaser has the capacity and complete authority to enter
into and perform this Contract, and no consent, approval or other action by any
person or entity (other than the person signing this Contract on
- 19 -
behalf of Purchaser) will be needed thereafter to authorize Purchaser's
execution and performance of this Contract. The execution and performance of
this Contract is not prohibited by, and does not constitute a default under, any
agreement to which Purchaser is a party or by which Purchaser and its assets may
be bound.
(c) Purchaser has knowledge and experience in financial and
business matters that enables it to analyze the merits and risks of the
transactions contemplated hereby, and Purchaser is not in a significantly
disparate bargaining position with respect to Seller or such transaction.
Section 9.04. Discovery. In the event that either Seller or Purchaser
discovers, prior to or at the Closing, that any representation or warranty of
the other party under this Article IX is false, misleading or inaccurate in any
material respect, the discovering party may, at its option, terminate this
Contract and the parties hereto shall be relieved of all liabilities and
obligations hereunder (expressly excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto) and (a) if Purchaser discovers that a representation or
warranty made by Seller under Section 9.02 is materially false, misleading or
inaccurate, Purchaser shall have the right to pursue its rights and remedies
under Section 8.02 of this Contract, but (b) if Seller discovers that a
representation or warranty made by Purchaser under Section 9.03 materially
false, misleading or inaccurate, Seller shall be entitled to pursue its remedies
under Section 8.01 of this Contract. Neither Seller nor Purchaser shall have the
right to rely on any representation or warranty of the other party set forth
herein, in any document delivered at the Closing, or otherwise, to the extent
that the relying party, on the Closing Date, knows that such representation or
warranty is false, misleading or inaccurate. Representations and warranties
under this Article IX shall fully survive the Closing and the delivery of the
Deed, but to the extent that neither Seller nor Purchaser has made any claim as
to the breach of any such representation or warranty within six (6) months after
the Closing Date, such representations and warranties will terminate and be of
no further force and effect. In the event Purchaser discovers after the Closing
that any representation or warranty is false, misleading or inaccurate in any
material respect, Purchaser shall have no right to request a rescission of this
Contract for failure of a condition precedent nor to otherwise pursue an action
against
- 20 -
Seller for punitive, treble or other damages, if any, incurred by Purchaser as a
result thereof, but Purchaser shall otherwise be entitled to pursue an action
against Seller for actual damages incurred by Purchaser, if any, as a result
thereof.
Section 9.05. Operating Covenants. Seller agrees to operate and maintain
or cause to be operated and maintained the Property prior to the Closing in a
prudent and reasonable manner consistent with its current operating procedures.
In connection with the foregoing, Seller covenants for so long as this Contract
remains in effect as follows:
(a) Seller shall not create nor permit to exist any lien,
encumbrance or charge on the Real Property or the Improvements, other than liens
or encumbrances either noted in the Title Commitment or those which shall be
released at Closing at Seller's expense; provided, however, Seller shall have
the right to contest any such liens and encumbrances so long as a bond is posted
by Seller and/or other procedures reasonably acceptable to the Title Company and
Purchaser, so as to permit the Title Company to issue the Owner Policy without
exception to any such lien or encumbrance, and in such event Purchaser shall
have no right to terminate this Contract as a result of any such lien or
encumbrance.
(b) Seller shall neither transfer nor remove any Personal Property
or fixtures from the Property subsequent to the date hereof, except in the
ordinary course of business or for purposes of replacement thereof, in which
case such replacements shall be promptly installed prior to Closing and shall be
reasonably comparable in quantity and quality to the item(s) being replaced.
(c) Seller shall conduct its leasing activities substantially
consistent with its normal, customary and ordinary leasing practice. Seller
covenants to Purchaser that there are no authorized rent concessions with
respect to the Leases except as set forth in the Rent Roll or the Leases.
(d) Seller shall keep the Property insured at all times prior to
the Closing under Seller's existing blanket-type insurance policy.
(e) All vacant apartment units at Closing, other than apartment
units vacated within five (5) days prior to Closing, will be "rent ready".
Seller and Purchaser agree that during the Review Period, both Seller and
Purchaser will inspect an apartment unit at the Property and mutually agree that
said apartment
- 21 -
unit shall be representative of a "rent ready" unit by which all other units
shall be judged for "rent ready" condition at Closing. In the event Seller and
Purchaser can not mutually agree prior to expiration of the Review Period as to
a representative apartment for purposes of defining "rent ready", either party
shall have the right to terminate the Contract upon notice to the other and upon
such event, the Contract shall terminate and the Earnest Money shall be returned
to Purchaser, as Purchaser's sole and exclusive remedy.
Notwithstanding the foregoing, Seller has no obligation, express or implied, to
make or otherwise pay for any capital improvements to all or any portion of the
Property, including, without limitation, any parking lot repairs, painting,
handicapped accessibility modifications, Personal Property repair or
replacement, roof repair or replacement or any deferred maintenance item;
provided, however, Seller will perform all of Seller's routine maintenance
obligations.
ARTICLE X
Notices
Section 10.01. Notices. Any notice, demand or other communication which
may or is required to be given under this Contract shall be in writing and shall
be: (a) personally delivered; (b) transmitted by United States postage prepaid
mail, registered or certified mail, return receipt requested; (c) transmitted by
reputable overnight courier service, such as Federal Express; or (d) transmitted
by legible facsimile (with answer back confirmation) to Purchaser and Seller as
listed below. Except as otherwise specified herein, all notices and other
communications shall be deemed to have been duly given on (i) the date of
receipt if delivered personally, (ii) two (2) calendar days after the date of
posting if transmitted by registered or certified mail, return receipt
requested, (iii) the first (1st) business day after the date of deposit, if
transmitted by reputable overnight courier service, or (iv) the date of
transmission with confirmed answer back if transmitted by facsimile, whichever
shall first occur. A notice or other communication not given as herein provided
shall only be deemed given if and when such notice or communication and any
specified copies are actually received in writing by the party and all other
persons to whom they are required or permitted to be given. Purchaser and Seller
may change its address for purposes hereof by notice given to the other parties
in accordance with the provisions of this Section, but such notice
- 22 -
shall not be deemed to have been duly given unless and until it is actually
received by the other parties. Notices hereunder shall be directed as follows:
If to Purchaser: Cornerstone Realty Group Incorporated
306 East Main Street
Richmond, Virginia 23219
Attention: Gus G. Remppies
Telecopy: (804) 782-9302
with copies at the
the same time to: Zuckerbrod & Taubenfeld
575 Chestnut St., P.O. Box 488
Cedarhurst, New York 11516
Attention: Harry S. Taubenfeld
Telecopy: (516) 374-3490
and
Callison Tighe Robinson & Hawkins, LLP
1812 Lincoln Street, 2nd Floor
Columbia, South Carolina 29201
Attn: Michael W. Tighe
Telecopy: (803) 256-6431
If to Seller: Charleston Westchase Associates,
A Limited Partnership
7557 Rambler Road,
Suite 1200
Dallas, Texas 75231
Attention: John Berry
Telecopy: (214) 891-2065
with copies at
the same time to: Stutzman & Bromberg,
A Professional Corporation
2323 Bryan Street, Suite 2200
Dallas, Texas 75201
Attention: Aguinaldo Valdez
Telecopy: (214) 969-4999
and
Paragon Residential Services, Inc.
7557 Rambler Road,
Suite 1200
Dallas, Texas 75231
Attention: Lynn T. Caldwell
Telecopy: (214) 891-2065.
- 23 -
ARTICLE XI
Risk of Loss
Section 11.01. Minor Damage. In the event of "minor" loss or damage
(being defined for the purpose of this Contract as damage to the Property which
is such that the Property could be repaired or restored, in the opinion of an
architect reasonably satisfactory to both Seller and Purchaser, to a condition
substantially identical to that of the Property immediately prior to the event
of damage at a cost equal to or less than $250,000.000), this Contract shall
continue in full force and effect and Seller shall assign all of Seller's right,
title and interest to any claims and proceeds Seller may have with respect to
any casualty insurance policies, including, rental interruption insurance
proceeds, or condemnation awards relating to the Property and Purchaser shall
receive a credit against the Purchase Price in an amount equal to the deductible
under any such insurance policy to the extent such deductible is applicable to
any such minor loss or damage, but not otherwise.
Section 11.02. Major Damage. In the event of a "major" loss or damage
(being defined as any loss or damage which is not "minor" as defined hereinabove
or a condemnation not minor and of a portion of the Property whereby five
percent (5%) or more of the parking spaces on the Property are lost), Purchaser
shall have the option of either: (a) terminating this Contract by written notice
to Seller, in which event the Earnest Money Deposit shall, to the extent
delivered to the Title Company, be returned to Purchaser as Purchaser's sole and
exclusive remedy, and Seller and Purchaser shall be released from any and all
liability hereunder (expressly excluding, however, Purchaser's indemnity of
Seller under Section 3.06 which shall survive any termination of this Contract
by either party hereto); or (b) proceeding with the Closing, provided Seller
shall assign all of Seller's right, title and interest to any claims and
proceeds Seller may have with respect to any casualty insurance policies,
including, rental interruption insurance proceeds, or condemnation awards
relating to the Property and Purchaser shall receive a credit against the
Purchase Price in an amount equal to the deductible under any such insurance
policy to the extent such deductible is applicable to any such major loss or
damage, but not otherwise. Seller agrees to furnish Purchaser written notice of
any such damage or loss, including any claims adjuster's estimate, within ten
(10) days after the occurrence of any such damage or loss. In the event
Purchaser fails to deliver written notice to Seller of Purchaser's election
hereunder, within ten (10) days after Purchaser's receipt of
- 24 -
written notice from Seller of the occurrence of a "major" loss or damage,
Purchaser shall be deemed to have elected the option set forth under
subparagraph (a) of this Section.
Section 11.03. Risk of Loss. Prior to Closing, full risk of loss with
respect to the Property shall remain with Seller. Upon the Closing, full risk of
loss with respect to the Property shall pass to Purchaser. There shall be no
reduction in the Purchase Price as a result of any loss or damage except as
expressly set forth in Section 11.01 or Section 11.02.
ARTICLE XII
Miscellaneous
Section 12.01. Entire Agreement. This Contract constitutes the entire
agreement between the parties hereto and supersedes any prior understanding or
written or oral agreements between the parties concerning the Property.
Section 12.02. No Recordation. Neither this Contract nor any memorandum
of the terms hereof shall be recorded or otherwise placed of public record and
any breach of this covenant shall, unless the party not placing same of record
is otherwise in default hereunder, entitle the party not placing same of record
to pursue its rights and remedies under Article VIII.
Section 12.03. No Rule of Construction. This Contract has been drafted
by both Seller and Purchaser and no rule of construction shall be invoked
against either party with respect to the authorship hereof or of any of the
documents to be delivered by the respective parties at the Closing.
Section 12.04. Multiple Counterparts; Governing Law. This Contract may
be executed in multiple counterparts each of which shall be deemed an original
but together shall constitute one and the same instrument, and shall be
construed and interpreted under the laws of the State of South Carolina and all
obligations of the parties created hereunder are performable in Charleston
County, South Carolina.
Section 12.05. Attorneys' Fees. In the event of any litigation or other
proceeding brought by either party hereunder, the prevailing party shall be
entitled to recover its reasonable attorneys' fees and costs of suit, and in
addition to the foregoing, the non-prevailing party shall, if the dispute
involves the return of the Earnest Money Deposit,
- 25 -
be solely obligated, without contribution, to pay all reasonable attorneys'
fees, costs and expenses incurred by, or asserted against, the Title Company.
Section 12.06. Assignment. Purchaser may not assign, without the consent
of Seller, any of Purchaser's rights and obligations under this Contract, but
Purchaser may assign this Contract, without Seller's consent, to Cornerstone
Realty Income Trust, Inc. or an entity controlled by one or more of Purchaser's
affiliates and/or any of Purchaser's principals. Except as provided in the
preceding sentence, Purchaser has no right to assign this Contract and no
interest held, directly or indirectly, in Purchaser may be sold, transferred or
otherwise conveyed without in each instance the prior written consent of Seller.
No such assignment, however, shall release or otherwise relieve Purchaser from
its obligations hereunder and under the documents to be executed at the Closing.
This Contract and all rights hereunder shall inure to and be binding upon the
respective heirs, executors, successors and permitted assigns of Seller and
Purchaser.
Section 12.07. Interpretation. This Contract shall, unless otherwise
specified herein, be subject to the following rules of interpretation: (a) the
singular includes the plural and the plural the singular; (b) words importing
any gender include the other genders; (c) references to persons or entities
include their permitted successors and assigns; (d) words and terms which
include a number of constituent parts, things or elements, including the terms
Improvements, Permitted Exceptions, Personal Property, Intangible Property and
Property, shall be construed as referring separately to each constituent part,
thing or element thereof, as well as to all of such constituent parts, things or
elements as a whole; (e) references to statutes are to be construed as including
all rules and regulations adopted pursuant to the statute referred to and all
statutory provisions consolidating, amending or replacing the statute referred
to; (f) references to agreements and other contractual instruments shall be
deemed to include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms; (g) the words "approve" or
"consent" or "agree" or derivations or said words or words of similar import
mean, unless otherwise expressly provided herein or therein, the prior approval,
consent, or agreement in writing of the person holding the right to approve,
consent, or agree with respect to the matter in question, and the words
"require" or "judgment" or "satisfy" or derivations of said words or words of
similar import mean the requirement, judgment or satisfaction of the person who
may make a requirement or exercise judgment or who must be satisfied, which
approval, consent, agreement, requirement,
- 26 -
judgment or satisfaction shall, unless otherwise expressly provided herein or
therein, be in the reasonable discretion of the person holding the right to
approve, consent or agree or who may make a requirement or judgment or who must
be satisfied; (h) the words "include" or "including" or words of similar import
shall be deemed to be followed by the words "without limitation"; (i) the words
"hereto" or "hereby" or "herein" or "hereof" or "hereunder," or words of
similar import, refer to this Contract in its entirety; (j) references to
sections, articles, paragraphs or clauses are to the sections, articles,
paragraphs or clauses of this Contract; and (k) numberings and headings of
sections, articles, paragraphs and clauses are inserted as a matter of
convenience only and shall not affect the construction of this Contract.
Section 12.08. Exhibits and Schedules. The following exhibits and
schedules attached hereto shall be deemed to be an integral part of this
Contract and are hereby incorporated for all purposes:
Exhibit A - legal description of the Real Property
Exhibit B - form of Deed
Exhibit C - form of Assignment of Leases
Exhibit D - form of Bill of Sale
Exhibit E - form of Closing Memorandum
Exhibit F - form of FIRPTA Affidavit
Exhibit G - form of Tenant Letter
Exhibit H - form of Termite Bond
Exhibit I - form of Representation Letter
Schedule 1 - list of Personal Property
Schedule 2 - list of Property Contracts
Section 12.09. Modifications; Reporting Person. This Contract cannot be
changed orally, and no executory agreement shall be effective to waive, change,
modify or discharge it in whole or in part unless such executory agreement is in
writing and is signed by the parties against whom enforcement of any waiver,
change, modification or discharge is sought. Neither Broker nor the Title
Company shall be necessary signatories to any such written agreement. Purchaser
and Seller hereby
- 27 -
designate the Title Company as the "reporting person" pursuant to the
provisions of Section 6045(e) of the Internal Revenue Code, as amended.
Section 12.10. Time of Essence. Time is of the essence to both Seller
and Purchaser in the performance of this Contract, and they have agreed that
strict compliance by both of them is required as to any date and/or time set out
herein, including, without limitation, the dates and times set forth in Article
IV of this Contract. If the final day of any period of time set out in any
provision of this Contract falls upon a Saturday, Sunday or a holiday observed
by federally insured banks in the State of South Carolina or by the United
States Postal Service, then and in such event, the time of such period shall be
extended to the next day which is not a Saturday, Sunday or holiday. Unless
otherwise specified, in computing any period of time described in this Contract,
the day of the act or event after which the designated period of time begins to
run is not to be included and the last day of the period so computed is to be
included, unless such last day is a Saturday, Sunday or holiday in which event
the period shall run until the end of the next day which is neither a Saturday,
Sunday or holiday. Notwithstanding the foregoing, Purchaser shall have a
one-time right to extend the Closing Date for up to thirty (30) days upon five
(5) days prior written notice to Seller.
Section 12.11. No Publicity. Purchaser agrees that, prior to divulging
the transactions described in this Contract or publicizing them in any way, it
will secure the prior written consent of Seller; provided that the foregoing
does not require Seller's consent to any disclosures by Purchaser to Purchaser's
lenders, equity owners, attorneys and other advisors.
Section 12.12. Partial Invalidity. If any term, provision, condition or
covenant of this Contract or the application thereof to any party or
circumstance shall, to any extent, be held invalid or unenforceable, the
remainder of this Contract, or the application of such term, provision,
condition or covenant to persons or circumstances other than those as to whom or
which it is held invalid or unenforceable shall not be affected thereby, and
each term and provision of this Contract shall be valid and enforceable to the
fullest extent permitted by law, and said invalid or unenforceable term,
provision, condition or covenant shall be substituted by a term, provision,
condition or covenant as near in substance as may be valid and enforceable.
Section 12.13. Facsimile Signatures. The parties hereto hereby agree
that facsimile signatures by any party shall be fully binding upon and
enforceable against such party.
- 28 -
Section 12.14. Section 1031 Exchange. Purchaser agrees to cooperate with
Seller in effecting a (Section) 1031 exchange, including executing documents
required by the exchange trustee or intermediary, provided, however, such
cooperation shall be at no cost or liability to Purchaser. Seller agrees to hold
Purchaser harmless from any claims resulting from said (Section) 1031 exchange,
including reasonable attorneys' fees. This Section 12.14 shall survive Closing.
Section 12.15. Seller's Investment Committee. Notwithstanding anything
to the contrary contained herein, this Contract and Seller's obligation under
this Contract are expressly conditioned upon obtaining the consent and approval
of this Contract and the transactions contemplated hereby by Seller's Investment
Committee and Seller's Board of Directors. Seller agrees to obtain such approval
within ten (10) days of the Effective Date.
Section 12.16. Purchaser's Investment Committee. Notwithstanding
anything to the contrary contained herein, this Contract and Purchaser's
obligation under this Contract are expressly conditioned upon obtaining the
consent and approval of this Contract and the transactions contemplated hereby
by Purchaser's Board of Directors. Purchaser agrees to obtain such approval
prior to the expiration of the Review Period.
- 29 -
IN WITNESS WHEREOF, this Contract has been executed by Purchaser and
Seller on the dates written below.
SELLER:
CHARLESTON WESTCHASE ASSOCIATES,
A LIMITED PARTNERSHIP,
a South Carolina limited partnership
By: Paragon Group L.P.,
a Delaware limited partnership
By: Paragon Group
GP Holdings, Inc.,
a Delaware corporation
By: ___________________________
Name: _________________________
Title: ________________________
PURCHASER:
CORNERSTONE REALTY GROUP INCORPORATED,
a Virginia corporation
By: /s/ S. J. Olander
-------------------------------
Name: S. J. Olander
Title: Senior Vice President
- 30 -