Execution Copy
Arborview
(08-27-97)
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT dated as of August 25, 1997 between Caliber
Associates Limited Partnership, a Maryland limited partnership (the "Transferor
General Partner") and the individuals and entities listed on Exhibit I attached
hereto (the "Transferor Limited Partners"), with an address c/o Questar
Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208,
Attention: Mr. Stephen M. Gorn (the Transferor General Partner and the
Transferor Limited Partners are sometimes collectively referred to as the
"Transferor Partners"), and Questar Investment Corporation, a Maryland
corporation (the "Transferor Agent"), with an address of 124 Slade Avenue, Suite
200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn and BRI OP
Limited Partnership, a Delaware limited partnership (the "BRI Partnership") with
an address c/o Berkshire Realty Company, Inc., 470 Atlantic Avenue, Boston,
Massachusetts 02210, Attention: Mr. David J. Olney.
WHEREAS, the Transferor General Partner is the legal and beneficial owner
of all of the general partnership interest as set forth on Exhibit I and the
Transferor Limited Partners are the legal and beneficial owners, respectively,
of all of the limited partnership interests as set forth in Exhibit I in
Arborview Associates Limited Partnership, a Maryland Limited Partnership (the
"Transferor Partnership") pursuant to the First Amended and Restated Certificate
and Agreement of Limited Partnership dated as of November 2, 1990, as amended (a
copy of which, including all amendments, is attached hereto as Exhibit II and is
referred to as the "Transferor Partnership Agreement");
WHEREAS, Berkshire Apartments, Inc. ("Berkshire Apartments") is the general
partner and Berkshire Realty Company, Inc. ("BRI") is a special limited partner
of the BRI Partnership, pursuant to the Amended and Restated Agreement of
Limited Partnership, dated as of May 1, 1995, as amended (a copy of which,
including all amendments, is attached hereto as Exhibit 1) and as the same may
be amended hereafter from time to time (the "BRI Partnership Agreement");
WHEREAS, the Transferor Partnership is the owner of the following:
a. that certain tract or parcel of land located in the Village of Church
Creek, Harford County, Maryland, more particularly described in Schedule A
attached hereto (the "Land");
b. the 288-unit apartment complex, commonly known as Arborview Apartments,
which contains related improvements, facilities, amenities, structures,
driveways, walkways, plumbing and heating pipes, culverts, and mains, all of
which have been constructed on the Land (collectively, the "Improvements");
c. all right, title and interest of the Transferor Partnership in and to
any alleys, strips or gores adjoining the Land, and any easements, rights-of-way
or other interests in, on, under or to, any land, highway, street, road,
right-of-way or avenue, open or proposed, in, on, under, across, in front of,
abutting or adjoining the Land, and all right, title and interest of the
Transferor Partnership in and to any awards for damage thereto by reason of a
change of grade thereof;
d. the accessions, appurtenant rights, privileges, appurtenances and all
the estate and rights of the Transferor Partnership in and to the Land and the
Improvements, as applicable, or otherwise appertaining to any of the property
described in the immediately preceding clauses (a), (b) and/or (c);
e. the fixtures, equipment and other personal property listed in Schedule B
attached hereto and all other fixtures, machinery, supplies, equipment and other
personal property owned by the Transferor Partnership and located on or in or
used solely in connection with the Land and Improvements (collectively, the
"Personal Property"); and
f. all of the Transferor Partnership's interest in any intangible property
now or hereafter, owned by the Transferor Partnership and used solely in
connection with the Land, Improvements and Personal Property, including without
limitation the right to use any trade style or name now used in connection with
the same, any contract rights, escrow or security deposits, utility agreements
or other rights related to the ownership of or use and operation of the
Property, as hereinafter defined excepting (i) any cash and escrow deposits
(including escrow deposits and reserves set forth on Schedule C) and other
current assets relating to periods prior to Closing and (ii) amounts, if any,
due to the Transferor Partners pursuant to Section 12.
All of the items described in subparagraphs (a), (b), (c), (d), (e) and (f)
above are hereinafter referred to collectively as the "Property".
WHEREAS, the Transferor Partners desire to become limited partners of the
BRI Partnership and in connection therewith to contribute all of the general
partnership interest and all of the limited partnership interest in the
Transferor Partnership (collectively referred to as the "Transferor Partnership
Interests") to the BRI Partnership, and the BRI Partnership desires to admit the
Transferor Partners as limited partners in the BRI Partnership and to accept
such contribution from the Transferor Partners; and
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WHEREAS, in exchange for such contribution, the Transferor Partners desire
to receive BRI Partnership Units in accordance with the terms of this Agreement
and the BRI Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual undertakings and covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Transferor Partners and the
BRI Partnership hereby covenant and agree as follows:
SECTION 1
CONTRIBUTION OF INTEREST AND DUE DILIGENCE
1.01 Agreement to Contribute; Assignment. The Transferor Partners shall
contribute to the BRI Partnership, and the BRI Partnership shall accept from the
Transferor Partners, in exchange for BRI Partnership Units and upon the terms
and conditions set forth in this Agreement, the Transferor Partnership
Interests. At the Closing (as defined in Section 3.01), the Transferor Partners
shall, respectively, contribute, assign, transfer and deliver the Transferor
Partnership Interests to the BRI Partnership, or its designees as provided in
Section 18.01 hereof, by an Assignment and Assumption of Partnership Interest in
the form of Exhibit III attached hereto (the "Transferor Assignment").
Immediately thereafter, the Transferor Partners and the BRI Partnership, or its
designees, shall execute and deliver an Amended and Restated Agreement of
Limited Partnership in the form of Exhibit IV attached hereto (the "Amended
Transferor Partnership Agreement") and an Amended and Restated Certificate of
Limited Partnership in the form of Exhibit V attached hereto (the "Amended
Transferor Partnership Certificate") pursuant to which the BRI Partnership, or
its designees, shall be admitted and the Transferor Partners shall withdraw, as
the partners of the Transferor Partnership and be released of all liability
thereunder, and the terms of the Transferor Partnership shall be amended in
accordance with the Amended Transferor Partnership Agreement.
1.02 Property Title. On or before September 5, 1997, the BRI Partnership
shall obtain a Commitment For Title Insurance for an ALTA Form B Owner's Title
Insurance Policy (the "Commitment") from Lawyers Title Insurance Corporation
(the "Title Insurer") and copies of all instruments and plans mentioned therein
as exceptions to good and marketable fee simple title, as well as copies of any
instruments referred to in such instruments which affect the Property (all of
such items are hereinafter collectively referred to as the "Title Policy"). The
BRI Partnership shall provide a copy of the Commitment to the Transferor
Partnership promptly after its receipt thereof. The Commitment shall insure fee
simple title to the Property in the sole name of the
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Transferor Partnership and shall be in the amount of the Consideration Amount
(as defined in Section 2.01(a) hereof). The Commitment shall provide for a title
insurance policy which shall contain coverage against all mechanics' liens,
shall have full survey coverage, shall have deleted therefrom all "printed
standard exceptions", shall have a 3.1 zoning endorsement, a comprehensive
endorsement, a non-imputation endorsement and such other endorsements as are
reasonably required by the BRI Partnership (provided, that the cost of any such
other endorsements shall be paid by the BRI Partnership) and are available under
the law of the state in which the Property is located.
Should such Commitment contain any title exceptions which are not
acceptable to the BRI Partnership, in its sole discretion, the BRI Partnership
may notify the Transferor Partnership on or before September 5, 1997 if any such
exceptions are unacceptable. If the BRI Partnership fails to so notify the
Transferor Partnership of any unacceptable exceptions as described above, the
exceptions set forth in Schedule B of the Commitment, except as otherwise herein
provided, shall be deemed accepted by the BRI Partnership and included as the
"Permitted Exceptions". If any exceptions are unacceptable to the BRI
Partnership and the BRI Partnership timely notifies the Transferor Partnership
in writing of such fact as above provided, the Transferor Partnership shall have
thirty (30) days from the date the Transferor Partnership receives notice of
such unacceptable exceptions, at the option of the Transferor Partnership, to
remove or cure such exceptions, provided further, the Transferor Agent may, but
shall not be required to, make any monetary expenditures in connection with the
removal or cure of such exceptions. All mortgages and deeds of trust, mechanics
liens, tax liens, attachments and all other monetary liens against the Property
(other than the Loan Documents and liens for real estate taxes and current water
and sewer charges for fiscal 1997 which taxes and current water and sewer
charges will be adjusted as provided in Section 12 hereof) (collectively the
"Monetary Liens") shall automatically be deemed to be unacceptable exceptions to
title and shall be paid and removed by the Transferor Partners at Closing. The
Transferor Partnership shall be deemed to have refused to cure any unacceptable
exceptions unless the Transferor Partnership, within ten (10) days after receipt
of notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable
exceptions. If the Transferor Partnership fails or refuses to cure said
unacceptable exceptions within the time period above provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable exceptions, and
(B) Closing Date, the BRI Partnership may, in accordance with the provisions of
Section 13 hereof, (i) terminate this Agreement by giving written notice to the
Transferor Partnership or (ii) waive such exceptions and accept title subject
thereto, in which event there shall be a reduction in the Consideration Amount
(as defined in Section 2.01(a)) in an amount necessary to enable the BRI
Partnership to remove all Monetary Liens.
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1.03 Survey. On or before September 5, 1997, the BRI Partnership, at the
BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of
the Land and the Improvements by a registered land surveyor (the "Surveyor")
acceptable to the BRI Partnership, which Survey shall include (i) all existing
buildings, improvements, fences, encumbrances, encroachments, conflicts, party
walls, protrusions (including the location of all highways, streets, roads,
alleys and rights-of-way upon, under, across, abutting or adjacent to the Land,
or affecting the Land or the Improvements), and any visible evidence of all
water, sewer, gas, telephone and electric lines, (ii) the exact area of the Land
to the nearest hundredth of an acre, (iii) all buildings set back and other
restriction lines, (iv) property corners and boundary lines of the Property
(including the courses and distances of each of said boundary lines), (v) the
relation of the point of beginning of the description of the Land to the
monument from which it is fixed, (vi) recorded or otherwise known easements
(stating the recording book and page references in the case of any such recorded
easements), (vii) a metes and bounds written description of the Land, and (viii)
a notation of any discrepancies between the Survey and the recorded legal
description. The BRI Partnership shall provide a copy of the Survey to the
Transferor Partnership promptly after its receipt thereof.
Should such Survey contain any encumbrances, encroachments or other survey
defects (collectively "survey matters") which are not included within the
Permitted Exceptions and are not acceptable to the BRI Partnership in its sole
discretion, the BRI Partnership may notify the Transferor Partnership on or
before September 5, 1997 if any such survey matters are unacceptable. If the BRI
Partnership fails to so notify the Transferor Partnership of the unacceptable
survey matters as described above, the Survey shall be deemed accepted by the
BRI Partnership and the survey matters shown on the Survey shall be included
within the "Permitted Exceptions." If any survey matters are unacceptable to the
BRI Partnership and the BRI Partnership timely notifies the Transferor
Partnership in writing of such fact as above provided, the Transferor
Partnership shall have thirty (30) days from the date the Transferor Partnership
receives notice of such unacceptable survey matters, at the option of the
Transferor Partnership, to cure such unacceptable survey matters. The Transferor
Partnership shall be deemed to have refused to cure any unacceptable survey
matters unless the Transferor Partnership, within ten (10) days after receipt of
notice from the BRI Partnership, shall notify the BRI Partnership in writing
that the Transferor Partnership will attempt to cure such unacceptable survey
matters. If the Transferor Partnership fails or refuses to cure said
unacceptable survey matters within the time period provided, on or before the
earlier to occur of (A) ten (10) days after the Transferor Partnership notifies
the BRI Partnership that it refuses to cure such unacceptable survey matters,
and (B) Closing Date, the BRI Partnership may, in accordance with the provisions
of Section 13 hereof, (i) terminate this Agreement by giving written notice to
the Transferor Partnership or (ii) waive such survey matters and accept title
subject thereto, in which event there shall be no reduction in the Consideration
Amount.
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1.04 Due Diligence Inspection; Waiver; AS-IS Condition.
(a) The BRI Partnership acknowledges that prior to the execution of this
Agreement, the BRI Partnership has been afforded the opportunity to inspect the
physical condition, financial condition and market condition of the Property
and, except as set forth herein with respect to the Environmental Inspection (as
defined in Section 1.04(b)), the BRI Partnership hereby waives any right to
terminate this Agreement based upon any matter which was the subject to said
inspections.
(b) Notwithstanding the provisions of Section 1.04(a), subject to the
rights of the tenants under the Leases, the BRI Partnership and their authorized
agents and representatives may, from time to time up to and including August 31,
1997 (the "Due Diligence Period") during regular business hours and on
reasonable prior notice to the Transferor Partnership, inspect the Property to
determine the presence of any Hazardous Materials (as defined in Section 5.21)
and the compliance of the Property with Environmental Laws (as defined in
Section 5.21) and in connection therewith to conduct such tests and observations
and compile such information as the BRI Partnership, in its sole discretion may
deem appropriate (the "Environmental Inspection"). The BRI Partnership shall
provide a copy of any third party environmental reports obtained by the BRI
Partnership, without representation or warranty, and subject to the limitations
on use set forth therein, to the Transferor Partnership promptly after its
receipt thereof. No such inspection, however, shall constitute a waiver or
relinquishment on the part of the BRI Partnership of its right to rely upon the
covenants, representations, warranties or agreements made by the Transferor
Partnership in this Agreement. Should the BRI Partnership decide, in its sole
judgment, during the Due Diligence Period that based upon the results of the
Environmental Inspection, it no longer desires to proceed with the transactions
contemplated hereby, the BRI Partnership shall have the right to terminate this
Agreement by giving written notice of its election to do so to the Transferor
Partnership on or before the last day of the Due Diligence Period, and upon the
giving of such notice this Agreement shall be of no further force or effect. If
the BRI Partnership shall fail to exercise such termination right within the Due
Diligence Period, the BRI Partnership shall be conclusively deemed to have
waived any right it may have had to terminate this Agreement pursuant to this
Section 1.04(b). The BRI Partnership shall pay when due all fees and expenses
incurred in the performance of the Environmental Inspection.
(c) From and after the date of this Agreement, the Transferor Partnership
shall permit the BRI Partnership's authorized agents and representatives
(including its accountants) to examine (including, without limitation, the right
to audit) the Transferor Partnership's books, financial records, Service
Contracts, Leases and
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tenant files pertaining to the operation of the Property prior to the Closing.
The BRI Partnership's agents and representatives shall be permitted access to
such records and files during regular business hours. To the extent that any of
the Transferor Partnership's financial records relating to the Property have
been audited, the Transferor Partnership agrees to deliver any reports relating
to such audits to the BRI Partnership. The Transferor Partnership shall provide
the BRI Partnership with such information as the Transferor Partnership may have
with respect to actual expenditures made for all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, to the extent in the
possession of the Transferor Partnership, all taxes and utility payments made
within three (3) years prior to the Closing and dates of construction,
installation and major repairs to the Property. All information obtained by the
BRI Partnership or its agents and representatives pursuant to this Section
1.04(c) shall be treated as confidential, shall not be disclosed to others until
and unless the Closing occurs, and if such information is in written form, such
information shall be returned to the Transferor Partnership if the Closing does
not occur.
(d) The BRI Partnership shall indemnify the Transferor Partners against and
from all damage to the Property and/or claims of tenants or other third parties
resulting from any entry on the Property by the BRI Partnership or any agent,
contractor, consultant or other representative of the BRI Partnership, or any
tests or other activities conducted in or on the Property by them, or any of
them, together with all expenses incurred by the Transferor Partners by reason
thereof including, without limitation, reasonable attorneys' fees and
disbursements; provided, however, that nothing contained herein is intended to
obligate the BRI Partnership to indemnify, pay or otherwise reimburse the
Transferor Partners for any costs of remediation or clean-up, fines, penalties,
assessments or similar charges for any condition existing at the Property solely
by reason of the fact that the BRI Partnership or its agents, contractors,
consultants or other representatives discover the existence of such condition
during the course of conducting tests or other activities on the Property. The
provisions of this Section 1.04(d) shall survive the Closing or any termination
of this Agreement; provided, however, that no claim by the Transferor Partners
under this Section 1.04(d) for damage to the Property shall be made if (i) the
Closing occurs or (ii) more than 90 days after the termination of this Agreement
if the Closing does not occur, except for damage claims made by tenants as to
which the time for asserting any such claim shall be not later than 180 days
after the termination of this Agreement. If the Closing occurs, the BRI
Partnership shall not have any claim against the Transferor Partners by reason
of any damage to the Property of the nature specified above or by reason of any
claim against which the BRI Partnership is indemnifying the Transferor Partners
hereunder.
1.05 Tax Treatment. The parties intend that the contribution of the
Transferor Partnership Interests by the Transferor Partners to the BRI
Partnership in accordance with Section 1.01 of this Agreement be treated for
federal (and applicable state) income
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tax purposes as a tax-free contribution to capital pursuant to Section 721 of
the Internal Revenue Code of 1986, as amended (the "Code") (and any analogous
state income tax provisions). The BRI Partnership and the Transferor Partners
agree to report such transaction for federal and applicable state income tax
purposes consistently with the intent set forth in this Section 1.05.
SECTION 2
CONSIDERATION, ACCEPTABLE FUNDS
AND ESCROW DEPOSITS
2.01 Consideration; Partnership Units.
(a) The Transferor Partners and the BRI Partnership agree that, subject to
the prorations and adjustments as provided in this Agreement, the consideration
(the "Consideration") for the contribution of the Transferor Partnership
Interests by the Transferor Partners to the BRI Partnership pursuant to this
Agreement shall be the total of a number of BRI Partnership Units, to be issued
by the BRI Partnership to the Transferor Partners as of the Closing, equal in
value (as such value is determined at the time and in the manner provided
hereinbelow) to the excess of (X) $18,262,099, subject to the prorations and
adjustments as provided in this Agreement, (the "Consideration Amount") minus
(Y) the outstanding principal balance of the Note (as hereinafter defined) as of
the Closing and, minus (Z) the amount required to pay the various outstanding
loans owed by the Transferor Partnership to the Transferor Partners or their
affiliates or to other third-party lenders (the "Other Loans"), but in any
event, the total amount to be deducted under this clause (Z) shall not exceed an
amount equal to the difference between the Consideration Amount minus the
outstanding principal balance of the Note (the "Other Loans BRI Cap").
In addition, as of Closing, the Transferor Partnership shall remain as
obligor of the outstanding principal balance of the Note dated January 10, 1991,
in the original principal amount of $17,938,000 (the "Note") evidencing the loan
(the "Loan") made to the Transferor Partnership by Greystone Servicing
Corporation ("Lender") and secured by the Loan Documents which shall be an
obligation of the Transferor Partnership as of the Closing subject to any
exculpation from liability provisions therein.
At the Closing, the BRI Partnership shall pay the amount required to satisfy the
Other Loans, provided that the amount to be paid by the BRI Partnership shall
not exceed the Other Loans BRI Cap. If the amount paid by the BRI Partnership is
not sufficient to pay the Other Loans in full, the Transferor Partnership shall
pay, from funds otherwise allocable under this Agreement to the Transferor
Partners, all additional amounts
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required to pay off the Other Loans in full. At least fifteen (15) days prior to
the Closing, the Transferor Agent shall deliver a pay-off letter from each
holder of an Other Loan stating the amount required to pay-off such Other Loan
in full, and at Closing, the Transferor shall deliver the original note
evidencing each such Other Loan marked "Paid in Full," or in the event that the
original of any such note is not available, such other evidence of the
satisfaction of such note and release of liability under such Other Loan as the
BRI Partnership may require.
At Closing, certain of the Transferor Partners listed on the Transferor
Allocation Schedule (hereinafter defined) will receive BRI Partnership Units
which shall not be entitled to distributions for a one-year period from the date
of issuance (the "Restricted Distribution BRI Partnership Units") and all other
Transferor Partners will receive BRI Partnership Units which shall be entitled
to distributions effective from date of issuance (the "Unrestricted Distribution
BRI Partnership Units"). Unless expressly stated to the contrary herein, the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units are collectively referred to herein as the "BRI
Partnership Units."
Attached hereto as Exhibit I is a schedule (the "Preliminary Transferor
Allocation Schedule") prepared by the Transferor Agent setting forth (i) the
name of each Transferor Partner, (ii) the percentage interest of each Transferor
Partner, (iii) the identity of each Transferor Partner who will receive
Unrestricted Distribution BRI Partnership Units and (iv) the identity of each
Transferor Partner who will receive Restricted Distribution BRI Partnership
Units. The final Transferor Allocation Schedule (as defined in Section 12.01)
shall be prepared by the Transferor Agent based upon the Preliminary Transferor
Allocation Schedule and shall be delivered to the BRI Partnership prior to
Closing in accordance with the provisions of Section 12.01 hereof, together with
an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI
Questionnaire") for each Transferor Partner. In the event that any Transferor
Partner would be entitled to a fractional BRI Partnership Unit, the number of
BRI Partnership Units shall be rounded up or down, as the case may be, to the
nearest whole BRI Partnership Unit. At Closing, the BRI Partnership shall
deliver to the Transferor Agent all of the BRI Partnership Confirmations
evidencing the issuance of the BRI Partnership Units to the Transferor Partners
in accordance with the Transferor Allocation Schedule. In addition, if pursuant
to Section 12, the BRI Partnership owes any amounts to the Transferor Partners
as a result of prorations and apportionments (the "BRI Additional Payment"), at
Closing, the BRI Partnership shall pay the BRI Additional Payment to the
Transferor Agent in accordance with the election made by each Transferor Partner
pursuant to Section 12.04. The Transferor Agent shall be liable to distribute
the BRI Partnership Units and if applicable, a pro-rata share of the BRI
Additional Payment to each of the Transferor Partners in accordance with the
Transferor Allocation Schedule. The BRI Partnership shall have no obligation or
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liability with respect to the preparation or accuracy of the Preliminary
Transfer Allocation Schedule or the Transferor Allocation Schedule or the
distribution of the BRI Partnership Units or the BRI Additional Payment, if
applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
The parties agree that, for purposes of this Agreement, the value of each
BRI Partnership Unit (the "BRI Unit Value") shall be the average of the closing
price per share, rounded to the nearest one-thousandth, of one share of common
stock of BRI as such price is published by The Wall Street Journal for the
period from, and including, August 1, 1997 through and including, the date of
pricing of the Public Offering contemplated under Section 17.04 hereof, provided
that in any event the BRI Unit Value shall be not less than $10.50 per share
(the "Fixed Floor") and not greater than $11.75 per share (the "Fixed Ceiling").
The foregoing calculation of BRI Unit Value (including the Fixed Floor and Fixed
Ceiling) will be adjusted as appropriate and customary upon the occurrence of
any of the following events to reflect a stock split, dividend (outside of the
ordinary course), recapitalization or other similar event outside of the
ordinary course.
(b) As used in this Agreement, a "BRI Partnership Unit" shall mean a unit
of limited partnership interest in the BRI Partnership as specified in the BRI
Partnership Agreement and for purposes of this Agreement shall include the
Unrestricted Distribution BRI Partnership Units and the Restricted Distribution
BRI Partnership Units. At the time that any Transferor Partner elects to convert
BRI Partnership Units to shares as provided in the BRI Partnership Agreement,
the holder of each BRI Partnership Unit shall have the right to have the BRI
Partnership Unit either (i) exchanged for one share of common stock of BRI
pursuant to the transfer provisions of the BRI Partnership Agreement, or (ii)
redeemed for cash at the option of BRI on such terms and conditions as are
specified in the BRI Partnership Agreement. Each Transferor Partner shall have
such additional rights with respect to its BRI Partnership Units as are
contained in the Registration Rights Agreement, the form of which is attached
hereto as Exhibit 4; at Closing, the Transferor Partners and BRI Apartments
shall execute and deliver an Amendment to the BRI Partnership, in the form and
substance of Exhibit 3 attached hereto (the "BRI Partnership Amendment") and the
BRI Partnership shall deliver to the Transferor Partners a certified copy of the
Registration Rights Agreement.
(c) The Transferor Partners, acknowledge and agree that after the execution
hereof, the price of the common stock of BRI may increase or decrease in value
as the result of market fluctuations prior to the Public Offering, and that any
such fluctuations will have an impact on the value of the BRI Partnership Units.
Notwithstanding these fluctuations, once the value and number of BRI Partnership
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Units have been established as provided in Section 2.01(a), the BRI Partnership
will not be required to increase or permitted to decrease the number of BRI
Partnership Units to be issued to the Transferor Partners in the event of a
decrease or increase in the market value of the common stock of BRI subsequent
to the closing of the Public Offering and the fixing of the Offering Price.
2.02 Payment of Monies. Any other monies payable under this Agreement,
unless otherwise specified in this Agreement, shall be paid by wire transfer.
2.03 Reimbursement of Escrow. At the Closing, the BRI Partnership shall
replace the escrow deposits set forth on Schedule C attached hereto in the
amounts and to the parties set forth on Schedule C in accordance with wire
instructions provided by the Transferor Agent.
SECTION 3
THE CLOSING
3.01 Closing. Except as otherwise provided in this Agreement, the delivery
of all documents necessary for the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place in the offices of Hale and Dorr
LLP, 60 State Street, Boston, Massachusetts 02109, or such other place as the
Transferor Partnership and the BRI Partnership shall mutually agree, at 10:00
A.M. local time on a date mutually agreed to in writing by the parties but in
any event not later than October 31, 1997 the ("Closing Date"). The "Time of
Closing" shall be at such time as all recordable instruments necessary for the
closing of the transactions contemplated by this Agreement shall be placed in
escrow with the Title Insurer, who will thereupon issue the Title Policy
referred to in the Commitment in reliance on the execution by the Transferor
Agent pursuant to a Power of Attorney for all Transferor Partners granted under
Section 19.04 of a so-called Gap Indemnity in the form of Exhibit VI with
respect to the gap in time period between policy issuance and recording, all as
provided in a letter of instruction executed by counsel for the BRI Partnership
and counsel for the Transferor Partners. It is agreed that time is of the
essence of this Agreement.
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SECTION 4
TRANSFEROR'S PRE-CLOSING DELIVERIES
The Transferor Partnership has previously delivered or otherwise has
made available to the BRI Partnership the following:
4.01 Leases. Copies of the Leases (as defined in Section 5.18 below),
together with all modifications and amendments thereto and any memoranda of
leases or other documents of record relating thereto. In addition, the
Transferor Partnership shall provide the BRI Partnership with access on-site to
the originals of all leases and related lease files.
4.02 Permits. Copies of all material building permits, zoning variances (if
any), certificates of occupancy (if any), subdivision plats, governmental
permits, approvals, certificates and other licenses lawfully required for the
construction, use, occupancy and operation of the Property and all other
correspondence with governmental authorities (including, without limitation, any
default notices), to the extent in the Transferor Partnership's possession.
4.03 Taxes. To the extent in the Transferor Partnership's possession, a
copy of real estate and personal property tax statements and special assessments
for the Property for the past three (3) years and, all correspondence, notices
or other written communication with taxing authorities relating to the taxes
currently assessed and/or to be assessed against the Property.
4.04 Plans and Specifications. To the extent in the Transferor
Partnership's possession, a copy of the plans and specifications, and a copy of
all unexpired guaranties and warranties made by any person for the benefit of
the Transferor Partnership with respect to all or any part of the Property in
connection with the construction and equipping of the Property.
4.05 Financial Records. Copies of all financial statements for the use,
operation and maintenance of the Property and copies of all income and expense
records relating thereto for 1995 and 1996 and all months of operation of 1997,
and detailed operating statements for 1995 and 1996 and all months of operation
of 1997.
4.06 Lawsuit Papers. Copies of all pleadings, motions and related documents
and agreements in respect of all pending litigation, if any, relating to the
Property (excluding litigation commenced against tenants in the ordinary course
of business for evictions or collections).
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4.07 Current Rent Roll. The Rent Roll (as that term is defined in Section
5.18 hereof) containing a list of the current rents now being collected on each
of the apartment units in the Improvements which includes: apartment number,
unit status, tenant name, commencement and termination dates, lease rent,
deposits and details of any concessions.
4.08 Standard Form Lease. A copy of the standard form apartment lease used
in connection with the leasing of each unit of the Improvements.
4.09 Service Contracts. Copies of all service, maintenance, supply and
management contracts affecting the use, ownership, maintenance and/or operation
of the Property.
4.10 Utility Bills. Copies of all utility bills (gas, electric, water and
sewer) relating to the Property for the immediately prior 24 month period
(excluding bills for utilities which are directly metered and sent to tenants)
to the extent in the possession of the Transferor Partnership, the Transferor
Agent or any of Transferor Agent's affiliates.
4.11 Reports. Copies of any material existing hazardous waste or
environmental reports, soil reports and engineering reports or studies in the
possession of the Transferor Partnership conducted with respect to the Property.
4.12 Personal Property. A complete list of all material furniture,
fixtures, appliances, equipment and other personal property owned by the
Transferor Partnership which shall be attached hereto as Schedule B.
4.13 Loan Documents. True, correct and complete copies of all notes,
instruments, agreements, mortgages, deeds of trust and other documents in
connection with the Loan, together with any and all modifications and amendments
thereto as set forth on Schedule H attached hereto (collectively, the "Loan
Documents").
SECTION 5
A. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR PARTNERSHIP
The Transferor Partnership represents, warrants and covenants to the BRI
Partnership as of the date hereof as follows:
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5.01 Organization and Standing of the Transferor Partnership. The
Transferor Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Maryland. The Transferor
Partnership has all requisite power to own and operate the Property and to carry
on its business as presently being conducted and as proposed to be conducted.
The Transferor Partnership is duly qualified to do business in all jurisdictions
in which the failure to be so qualified would have a material adverse effect on
the Transferor Partnership's business (a "Material Adverse Effect").
5.02 Compliance with Other Instruments, etc. Except as set forth in Section
5.05 hereof, the Transferor Partnership is not in violation of any term
contained in the Transferor Partnership Agreement, or to the Transferor
Partnership's knowledge in any other material instrument or contract to which
the Transferor Partnership is a party relating to the Property, and to the
Transferor Partnership's knowledge the Transferor Partnership is not in
violation of any order, statute, rule or regulation applicable to it, except for
such violations which would not have a Material Adverse Effect. Neither the
execution, delivery and performance of this Agreement by the Transferor
Partners, nor the contribution of the Transferor Partnership Interests by the
Transferor Partners hereunder, will result in any Material Adverse Effect or be
in conflict with or constitute a default under the Transferor Partnership
Agreement or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Transferor Partnership,
except for Permitted Exceptions.
5.03 Governmental Consent, etc. Except for filing the Amended Transferor
Partnership Certificate to reflect the transactions contemplated hereby and the
requirement for the receipt of the Lender approval in accordance with the
provisions of Section 17.03 and issuance of TPA Approval (as defined in Section
17.06), no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part of the Transferor Partners or the Transferor Partnership in
connection with the valid execution and delivery of this Agreement by the
Transferor Partners and the performance of the Transferor Partners' obligations
hereunder.
5.04 Partnership Capitalization. The Transferor Partnership Agreement (i)
is the only agreement among the partners relating to the organization,
operation, or management of the Transferor Partnership, (ii) is in full force
and effect and (iii) has not been amended or modified. Exhibit I sets forth an
accurate and complete list of the names of all of the Transferor Partners and
the Transferor Partners' respective partnership interests in the Transferor
Partnership. Except as set forth on Exhibit I, no other person or party owns any
partnership interest in the Transferor Partnership. Except as set forth on
Schedule 5.04, no Transferor Partner is in default with respect to any capital
contribution required to be paid by him or it pursuant to the Transferor
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Partnership Agreement. A true, correct and complete copy of the Transferor
Partnership Agreement is attached hereto as Exhibit II. The Transferor
Partnership has no commitment to issue any right to purchase or acquire or to
issue or distribute to any of the Transferor Partners, any evidences of
indebtedness or assets; and the Transferor Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the Transferor Partnership or any interest therein or to make any
distribution in respect thereof.
5.05 Litigation, etc. Except as set forth on Schedule 5.05, there is no
material action, suit or, to the Transferor Partnership's knowledge, proceeding
or investigation pending or, to the Transferor Partnership's knowledge, any
threat thereof, against the Transferor Partners, the Transferor Partnership or
the Property or any part thereof which questions the validity of this Agreement
or the right of the Transferor Partners to enter into it, or which might result
in or have, either individually or in the aggregate, a material adverse effect
on (i) the business of the Transferor Partnership as such is presently
contemplated; or (ii) the rights represented by the Transferor Partnership
Interests. During the period commencing on the date hereof and ending on the
Closing Date, the Transferor Partnership will promptly inform the BRI
Partnership in writing of any material action, suit, proceeding or investigation
pending, or to the Transferor Partnership's knowledge, threat thereof against
the Transferor Partners, the Transferor Partnership or the Property or any part
thereof.
5.06 Agreements; Affiliated and Extraordinary Transactions. Attached as
Schedule E hereto is a list of all material agreements (including all amendments
thereto), oral or written, other than the Leases, to which the Transferor
Partnership is a party or to which any agent of the Transferor Partnership is a
party on behalf of the Transferor Partnership or has entered into on behalf of
the Transferor Partnership, relating to the Transferor Partnership or all or a
portion of the Property or otherwise affecting the Property, including without
limitation, all material management, maintenance, brokerage, supply and service
contracts and any material contract, agreement or other arrangement providing
for the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to or by the Transferor
Partnership (collectively "Service Contracts"). Except as noted on Schedule E,
each Service Contract is cancelable on thirty (30) days notice. Transferor
Partnership has no knowledge of any material breach or material default under
any Service Contract. As of Closing, the Transferor Partnership will have paid
all amounts due under each Service Contract, other than payments for which an
adjustment shall be made pursuant to Section 12 hereof.
5.07 Financial Statements. Attached hereto as Schedule F are audited
financial statements of the Transferor Partnership, including balance sheets,
statements of operations and statements of partners' capital for the fiscal year
ended December 31,
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1996 and on or before August 31, 1997 the Transferor Partnership shall provide
unaudited financial statements for the six-month period ending June 30, 1997
(collectively, the "Financial Statements"). The Financial Statements fairly
present the financial condition of the Transferor Partnership as of the
respective statement dates in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto), and reflect all liabilities, fixed, contingent or otherwise, required
to be disclosed in such Financial Statements in accordance with generally
accepted accounting principles (subject, in the case of any unaudited interim
financial statements, to normal year end adjustments).
5.08 Title to Properties and Assets. The Transferor Partnership is the sole
owner of the Property. Except as disclosed on the Financial Statements, the
Transferor Partnership does not own, or otherwise hold any interest in, any
material assets other than the Property.
5.09 License; Permits; etc. Except for licenses, permits or authorizations
previously obtained by the Transferor Partnership, no other material license,
permit or authorization is necessary to own and operate the Transferor
Partnership's business as such is presently conducted and neither the conduct of
the Transferor Partnership's business nor any material portion thereof is
dependent on the issuance or obtaining of any other license, permit or
authorization.
5.10 Liabilities. Except for the Loan and the indebtedness for borrowed
money described on Schedule 5.10 or in the Transferor Partnership's fiscal 1996
audited financial statements, the Transferor Partnership has no indebtedness for
borrowed money and the Transferor Partnership has not, directly or indirectly,
created, incurred, assumed or guaranteed or otherwise become directly or
indirectly liable for the payment of any borrowed money. Except as disclosed on
Schedule 5.10 or in the Transferor Partnership's fiscal 1996 audited financial
statements, no Transferor Partner, nor any affiliate of any Transferor Partner
nor any employee of the Transferor Partnership is presently indebted to the
Transferor Partnership for borrowed money and the Transferor Partnership is not
presently indebted for borrowed money to any of the foregoing persons. Prior to
Closing, the Transferor Partnership shall pay-off and discharge in full all
indebtedness and liabilities other than the Loan and the Other Loans described
in Schedule 5.10 and in such audited financial statements and provide evidence
thereof to the BRI Partnership. As of the Closing Date the Transferor
Partnership shall have no liabilities or obligations (absolute or contingent) of
any kind, other than (a) liabilities and obligations incurred in the ordinary
course of the Transferor Partnership's business which are either (i) in the
aggregate, not in excess of $50,000, or (ii) approved by the BRI Partnership in
writing; and (b) liabilities resulting from or incurred in the ordinary course
of business arising under the Service Contracts and (c) liabilities under the
Loan Documents. The Transferor Partnership has
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conducted its business only in the ordinary course and, except for the Loan and
the matters disclosed on Schedule 5.10 or in the Transferor Partnership's fiscal
1996 audited financial statements, the Transferor Partnership has not:
(a) created, permitted or allowed any mortgage, pledge, lien, security
interest, encumbrance, restriction or charge of any kind with respect to any of
its properties, businesses or assets; or
(b) received notice of any damage, destruction or loss in excess of $10,000
(whether or not covered by insurance) to any assets or properties.
5.11 Insurance. Set forth on Schedule G hereto is a true and complete list
of all insurance policies of the Transferor Partnership (the "Insurance
Policies") and a list of all presently outstanding claims thereunder. The
Transferor Partnership has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Transferor Partnership's knowledge,
there are no material disputes with underwriters of any such Insurance Policies
and there are no pending or threatened terminations with respect to any of such
policies.
5.12 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the Transferor Partnership or
for which the Transferor Partnership may have any liability have been accurately
prepared in all material respects and duly and timely filed (or requests for
extensions have been timely filed, granted and have not expired). As of the date
hereof, there is no audit examination, deficiency or refund litigation or matter
in controversy with respect to any taxes that might result in a determination
materially adverse to the Transferor Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The Transferor Partnership has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The Transferor Partnership does not know of (A) any audit or
investigation of the Transferor Partnership with respect to any liability for
taxes relating to the Transferor Partnership for which any Transferor Partner
may be liable, or (B) any threatened claims or assessments for taxes against or
relating to the Transferor Partnership.
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(d) Attached hereto as Schedule I is a true and complete copy of the
Transferor Partnership Federal Income Tax Return for 1996, as filed with the
Internal Revenue Service.
5.13 Employees. The Transferor Partnership has no employees, has not
entered into any employment contracts, and has no obligations to pay any wages,
withholding, social security taxes, unemployment insurance premiums or other
similar employee benefits, payments or obligations.
5.14 Retirement Obligations. The Transferor Partnership has not established
any pension, retirement, profit sharing or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
5.15 Powers of Attorney. Except for the Lender, as provided in the Loan
Documents, no person holds a power of attorney from or agency agreement with the
Transferor Partnership.
5.16 Bank Accounts. On or before Closing, the Transferor Partnership shall
have closed every bank account and safe deposit box of the Transferor
Partnership for which the Transferor Partners or their representatives are
signatories, and no representative of the Transferor Partners shall be a
signatory on any other account or safe deposit box of the Transferor Partnership
or shall have the power to borrow, discount debt obligations, cash or draw
checks, or otherwise act on behalf of the Transferor Partnership in any dealings
with any banks or other financial institutions.
5.17 Ownership. The Transferor Partnership has not received any written
notice challenging the validity of the Transferor Partnership's title to the
Property. The Transferor Partnership has not granted any rights, options, rights
of first refusal or entered into other agreements of any kind which are
currently in effect for the acquisition of the Property or any part thereof,
except for the rights of the BRI Partnership under this Agreement.
5.18 Leases. As of the date of this Agreement there are no leases,
subleases, licenses or other rental agreements or occupancy agreements (written
or verbal) which grant any possessory interest in and to any space situated on
or in the Improvements or that otherwise give rights with regard to use of the
Improvements other than the leases (the "Leases") described in the Rent Roll
attached hereto as Schedule D (the "Rent Roll"). The Rent Roll is true, accurate
and correct in all material respects as of the date hereof. Except as otherwise
specifically set forth in the Rent Roll or elsewhere in this Agreement:
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(a) to the Transferor Partnership's knowledge, the Leases are in full force
and effect and none of them has been modified, amended or extended;
(b) no tenant, or any other person, entity or association has an option to
purchase, right of first refusal, right of first offer or other similar right in
respect of all or any unit in the Property;
(c) no leasing commission shall be due for any period subsequent to the
Closing Date other than for tenants who have executed a lease prior to Closing
but do not move in until after the Closing Date, which commissions shall be paid
by the Transferor Partnership;
(d) no tenant is entitled to rental concessions or abatements for any
period subsequent to the Closing Date;
(e) to the best knowledge of the Transferor Partnership, except as set
forth on Schedule 5.18 hereof, no action or proceeding instituted against the
Transferor Partnership by any tenant of any unit in the Property is presently
pending;
(f) there are no security deposits or other deposits other than those set
forth in the Rent Roll;
(g) no rent has been paid more than thirty (30) days in advance under any
lease of any unit in the Property other than as shown on the Rent Roll;
(h) all brokerage commissions with respect to the Leases shall have been
paid in full by the Closing Date.
5.19 No Rent Subsidies. The apartment units in the Improvements are not
subject to nor do said apartment units receive the benefit of any rent subsidies
or rental assistance programs. To the best knowledge of the Transferor
Partnership, no apartment unit is subject to any rent control law, ordinance or
regulation.
5.20 Loan. Schedule H contains a complete list of the Loan Documents. True
and complete copies of the Loan Documents, including each modification and
amendment thereof, have been furnished heretofore to the BRI Partnership. There
are no notes, instruments, agreements, mortgages, deeds of trust or other
documents evidencing any material agreement or obligation of the Transferor
Partnership to Lender or any other lender with respect to the Property other
than as listed on Schedule H. The Loan Documents are in full force and effect
and none of the Loan Documents have been modified, amended or extended except as
disclosed on Schedule H. All payments of principal, interest, and, if
applicable, real estate tax escrow,
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insurance escrow and any other payments required under the Loan Documents which
are due and payable, through the Closing Date, have been, and will be, paid in
full and no default exists thereunder which extends beyond applicable grace or
cure periods. The Transferor Partnership has not received any written notice of
default under any of the Loan Documents. The Lender is the sole holder or
designated servicer of the Note. The only security taken or held in connection
with the Note is evidenced in the Loan Documents. The Loan Documents secure no
other indebtedness but the Loan. To the best knowledge of the Transferor
Partnership, the amounts of any real estate tax escrow, insurance escrow and any
other escrows and reserves held by Lender are as set forth on Schedule H.
5.21 Environmental Compliance. Attached as Schedule J is a Schedule of
Environmental Reports (the "Schedule of Environmental Reports"), which Schedule
sets forth a list of all material reports, studies, analyses, notices from any
governmental authority, or agreements with any person or governmental authority
and similar material documents relating to environmental matters in the
possession of the Transferor Partnership, the Transferor Agent or any of the
Transferor Agent's affiliates, with respect to the Property (collectively, the
"Environmental Reports"). The Transferor Partnership has heretofore either
furnished to the BRI Partnership or made available to the BRI Partnership for
inspection complete and accurate copies of the Environmental Reports. Except as
disclosed in the Environmental Reports and the reports to be obtained by the BRI
Partnership in accordance with Section 1.04 hereof (the "BRI Environmental
Reports"), the Transferor Partnership has not received any written notice from
any governmental entity or other person that the Property, or current or former
operations on the Property, are not or have not been in material compliance with
any Environmental Laws or that the Transferor Partnership has any material
liability with respect thereto. To the Transferor Partnership's knowledge,
except as set forth in the Environmental Reports or in the BRI Environmental
Reports, there are no underground tanks for Hazardous Materials, active or
abandoned, at the Property and no Hazardous Materials are present or have been
released in a reportable quantity, where such a quantity has been established by
statute, ordinance, rule, regulation or order, at, on or under the Property. To
the Transferor Partnership's knowledge, except as disclosed in the Environmental
Reports or in the BRI Environmental Reports, neither the Transferor Partnership
nor the Property is in violation in any material respect of any Environmental
Laws and there is no asbestos, PCB's or lead paint on the Property or any part
thereof. For purposes of this Agreement, "Environmental Laws" shall mean the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), as amended
by the Hazardous and Solid Waste Amendments of 1984; the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et
seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986;
the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.); the
Toxic Substance Control Act (15 U.S.C. ss. 2601 et seq.; the Clean Air Act (42
U.S.C. ss. 9402 et seq.); the
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Clean Water Act (33 U.S.C. ss. 1251 et seq.); the Federal Insecticide, Fungicide
and Rodenticide Act (7 U.S.C. ss. 136 et seq.); the Occupational Safety and
Health Act (29 U.S.C. ss. 651 et seq.); and all other applicable federal, state
and local environmental laws (including, without limitation, obligations under
the common law), ordinances, orders, rules and regulations, as any of the
foregoing may have been amended, supplemented or supplanted prior to the
Closing, relating to regulation or control of hazardous, toxic or dangerous
substances, materials or wastes (collectively, "Hazardous Materials"), or their
handling, storage or disposal or to environmental health and safety.
5.22 Permits and Compliance with Laws. The Transferor Partnership has not
received written notice, and the Transferor Partnership has no actual knowledge,
that (i) any approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of the Property have not been granted, effected, renewed or performed and
completed (as the case may be) or have been or are about to be revoked; (ii) any
fees and charges therefor have not been fully paid; (iii) the Property,
including the current use and occupancy thereof, is in violation in any material
respect of any laws or (iv) any governmental authority has a current plan,
including without limitation, a condemnation, a widening change of grade or
limitation on use of streets, a special assessment or a change in zoning
classification, that would adversely affect the continued use and operation of
the Property as currently used and operated except, in the case of clauses (i),
(ii), (iii) and (iv) as would not have a Material Adverse Effect. To the
Transferor Partnership's knowledge the Property and the current use thereof
comply in all material respects with (a) all applicable laws and (b) all
restrictive covenants and title encumbrances affecting the Property. The
Transferor Partnership holds all material licenses, permits and authorizations
required for the lawful use, operation and occupancy of the Property. The
parties agree that all matters relating to compliance with Environmental Laws
shall be covered by Section 5.21 and not by this Section 5.22.
5.23 Utilities. To the knowledge of the Transferor Partnership, all
utilities and all public and quasi-public improvements upon or adjacent to the
Property (including, without limitation, all applicable electric lines, sewer
and water lines, and telephone lines) are adequate to service the requirements
of the Property. To the knowledge of the Transferor Partnership, all necessary
easements, permits, licenses and agreements in respect of any of the foregoing
are installed and operating and all installation and connection charges, to the
extent due and payable, have been paid for in full.
5.24 Assessments. Except as disclosed in the tax bills delivered to the BRI
Partnership pursuant to Section 4.03 hereof, to the knowledge of the Transferor
Partnership, no special assessments for public improvements have been made
against the Property which are unpaid, including, without limitation, those for
construction of sewer and water lines, streets, sidewalks and curbs.
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5.25 Pre-Closing Deliveries Accurate. All of the materials delivered by the
Transferor Partnership to the BRI Partnership pursuant to Section 4 or attached
hereto as Schedules or Exhibits are true, accurate and complete in all material
respects.
5.26 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the Transferor Partnership's knowledge,
threatened against the Transferor Partnership, nor are any of such proceedings,
against or by the Transferor Partnership, anticipated or contemplated by the
Transferor Partnership.
5.27 Liens. To the Transferor Partnership's knowledge, and subject to such
matters as may be disclosed by the Commitment, the Property currently is free
from mechanics' and materialmen's liens or other liens other than the Permitted
Exceptions.
5.28 Essential Facilities. Except as set forth in Schedule 5.28, the
Property is an independent unit which does not now rely on any facilities (other
than facilities covered by Permitted Exceptions or facilities of municipalities
or public or private utility and water companies) located on any property not
included in the Property to fulfill any municipal or governmental requirement or
for the furnishing to the Property of any essential building systems or
utilities. Except as set forth on Schedule 5.28, no property not included in the
Property relies for its operation, maintenance or legal compliance on any
facilities located on the Property.
5.29 Legal Access. There is direct legal access from a public way to the
Property. To the best knowledge of the Transferor Partnership, all necessary
curb cuts, access permits and other governmental approvals required to provide
such access have been issued and are in full force and effect.
5.30 Public Improvements. To the best knowledge of the Transferor
Partnership, there are no written or proposed plans to widen, modify, or realign
any street or highway or any existing or proposed eminent domain proceedings
which would affect the Property in any way whatsoever. To the best knowledge of
the Transferor Partnership, there are no presently planned public improvements
which would result in the creation of a special improvement or similar lien upon
the Property.
5.31 HUD Audit. Neither the Transferor Partnership nor the Property is the
subject of any pending audit by the United States Department of Housing and
Urban Development ("HUD") except for the HUD audit pending as more particularly
described in the HUD letters listed on Schedule 5.31 attached hereto (the "HUD
Audit"). The Transferor Partnership has delivered to the BRI Partnership a true,
correct and
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complete copy of all material correspondence submitted to and issued by HUD in
connection with the HUD Audit.
B. REPRESENTATIONS AND WARRANTIES OF THE
TRANSFEROR PARTNERS
Each of the Transferor Partners on behalf of itself, severally and not
jointly, represents and warrants to the BRI Partnership, as of the date hereof
as follows:
5.32 Authorization. Such Transferor Partner has full power and authority to
enter into and deliver this Agreement and on the Closing Date will have full
power and authority to enter into each of the Transferor Partners Closing
Documents (as defined in Section 10.01 hereof) required to be executed and
delivered by such Transferor Partner under this Agreement, each in accordance
with their respective terms, and on the Closing Date the Transferor Partners
Closing Documents will constitute valid and binding obligations, enforceable
against such Transferor Partner in accordance with their respective terms.
5.33 Additional Authorization. Except as disclosed on Schedule 5.33 and
except for the Lender Estoppel Letter and TPA Approval, no approval of any
person not a party to this Agreement is necessary for the contribution by such
Transferor Partner of the Transferor Partnership Interests held by such
Transferor Partner and the performance of such Transferor Partner's obligations
under this Agreement.
5.34 Partnership Interest. Except as provided in this Agreement and the
Transferor Partnership Agreement, no right (contingent or otherwise) to purchase
or acquire the Transferor Partnership Interests held by such Transferor Partner
is authorized or outstanding. Except as disclosed on Schedule 5.34, such
Transferor Partner owns and holds the Transferor Partnership Interests set forth
opposite its name on Schedule I beneficially and of record free and clear of any
liens, pledges and encumbrances of any kind whatsoever and free of any rights of
assignment of any third party. Prior to the Closing, all liens disclosed on
Schedule 5.34 will be paid in full. Upon the Closing, good, valid, marketable,
and indefeasible title to such Transferor Partnership Interests shall be vested
in the BRI Partnership free and clear of any lien, claim, charge, pledge,
encumbrance, limitation, agreement or instrument whatsoever. The provisions of
this Section 5.34 shall survive the Closing indefinitely.
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5.35 Investment Representations and Warranties. Each Transferor Partner for
itself, severally and not jointly, represents, warrants, acknowledges and agrees
as follows:
(a) Such Transferor Partner is acquiring the BRI Partnership Units for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act") and it will not sell or otherwise
dispose of such BRI Partnership Units except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the BRI Partnership Agreement and the Registration
Rights Agreement.
(b) Such Transferor Partner understands that the BRI Partnership Units to
be issued to each Transferor Partner will not be registered under the Act, or
the securities laws of any state ("Blue Sky Laws") by reason of a specific
exemption or exemptions from registration under the Act and applicable Blue Sky
Laws and that BRI's and the BRI Partnership's reliance on such exemptions is
predicated in part on the accuracy and completeness of the representations and
warranties of such Transferor Partner.
(c) Such Transferor Partner acknowledges and agrees that, for the reasons
set forth in Sections 5.35(a) and (b) above, the BRI Partnership Units (or
shares of common stock issued upon exchange of the BRI Partnership Units) may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Transferor Partner except (i) pursuant to an effective registration statement
under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action
letter issued by the Securities and Exchange Commission to the effect that a
proposed transfer of the BRI Partnership Units (or shares of common stock issued
upon exchange of the BRI Partnership Units) may be made without registration
under the Act, together with either registration or an exemption under
applicable Blue Sky Laws, or (iii) upon the BRI Partnership or BRI, as the case
may be, receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to both the BRI
Partnership and BRI) to the effect that the proposed transfer is exempt from the
registration requirements of the Act and any applicable Blue Sky Laws, and that,
accordingly, such Transferor Partner must bear the economic risk of an
investment in the BRI Partnership Units (and the shares of common stock issued
upon exchange of the BRI Partnership Units) for an indefinite period of time.
Such Transferor Partner acknowledges, represents and agrees that (i) its
economic circumstances are such that it is able to bear all risks of the
investment in the BRI Partnership and BRI for an indefinite period of time,
including the risk of a complete loss of its investment in the BRI Partnership
Units (or shares of common stock issued upon exchange of the BRI Partnership
Units), (ii) it has knowledge and experience in financial and business
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matters sufficient to evaluate the risks of investment in the BRI Partnership
Units and BRI, and (iii) it has consulted with its own separate counsel and tax
advisor, to the extent deemed necessary by it, as to all legal and taxation
matters covered by this Agreement and has not relied upon the BRI Partnership or
the Transferor Agent, its affiliates or its other legal counsel and advisors for
any explanation of the application of the various United States or state
securities laws or tax laws with regard to its acquisition of the BRI
Partnership Units. Such Transferor Partner further acknowledges and represents
that it has made its own independent investigation of the BRI Partnership and
the business conducted or proposed to be conducted by the BRI Partnership.
(d) Such Transferor Partner is an "accredited investor" within the meaning
of Rule 501(a) promulgated under the Act.
(e) Such Transferor Partner understands that an investment in the BRI
Partnership and BRI involves substantial risks. Such Transferor Partner
acknowledges that it has (i) been given full and complete access to the BRI
Partnership and its management in connection with this Agreement and the
transactions contemplated hereby, (ii) received and read the BRI Partnership
Agreement, as amended to date, and has had the opportunity to review all
documents and information relevant to its decision to enter into this Agreement
and to invest in the BRI Partnership and BRI, including, without limitation, the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of the BRI Partnership and BRI and
its management concerning its investment in the BRI Partnership and the
transactions contemplated hereby, which questions were answered to its
satisfaction.
(f) Such Transferor Partner acknowledges and agrees that:
(i) the BRI Partnership Units to be acquired by it hereunder will not
be registered under the Act in reliance upon the exemption afforded by
Section 4(2) thereof for transactions by an issuer not involving any public
offering, and will not be registered or qualified under any other
applicable securities laws;
(ii) any shares of common stock issued upon exchange of the BRI
Partnership Units, unless registered under the Act pursuant to an effective
Registration Statement, will bear a legend substantially to the effect of
the following:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
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"Act"), or the securities laws of any state. The securities may not be
offered, sold, transferred, pledged or otherwise disposed of without
an effective registration statement under the Act and under any
applicable state securities laws, receipt of a no-action letter issued
by the Securities and Exchange Commission (together with either
registration or an, exemption under applicable state securities laws)
or an opinion of counsel (which opinion and which counsel shall be
acceptable to Berkshire Realty Company, Inc.) that the proposed
transaction will be exempt from registration under the Act and its
applicable state securities laws"; and
(iii) unless such shares have been registered under the Act as
aforesaid, BRI reserves the right to place a stop order against the
transfer of the BRI Partnership Units, (and any shares of common stock
issued upon exchange of the BRI Partnership Units) and to refuse to effect
any transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address set forth in Exhibit I is the address of such Transferor
Partner's principal residence or principal place of business, and such
Transferor Partner has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal residence or principal place of business is situated.
(h) The provisions of this Section 5.35 shall survive the Closing
indefinitely.
5.36 Receipt of Documents. Such Transferor Partner has received all
Exhibits and Schedules described herein as attached hereto.
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP
The BRI Partnership represents, and warrants and covenants to the
Transferor Partners as of the date hereof as follows:
6.01 Partnership Agreement. The copy of the BRI Partnership Agreement
attached hereto as Exhibit 1, a copy of which was furnished to the Transferor
Agent prior to the execution of this Agreement, is a true, correct and complete
copy of said BRI Partnership Agreement as amended to date. The BRI Partnership
Agreement, as so
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delivered or made available, has not been modified and is in full force and
effect in accordance with its terms as of the date hereof.
6.02 Partnership Authority. (i) The BRI Partnership is a limited
partnership duly organized and validly existing and in good standing under the
laws of the State of Delaware with full power and authority to carry on its
business; (ii) the BRI Partnership has the right, power and authority to issue
the BRI Partnership Units and to operate its properties and to carry on its
business as is presently being conducted and to enter into and perform all of
the agreements and covenants contained in this Agreement and contemplated hereby
and any other documents and instruments relating hereto or thereto; (iii) this
Agreement and the documents to be executed and delivered by the BRI Partnership
at Closing, upon execution and delivery will have been duly and validly
authorized and executed by the BRI Partnership and will constitute the valid and
binding obligations of the BRI Partnership, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws for the relief of debtors theretofore
or hereafter enacted to the extent that the same may be constitutionally
applied; and (iv) assuming compliance with the terms of this Agreement and the
BRI Partnership Agreement by the parties hereto and thereto other than the BRI
Partnership, the execution and delivery by the BRI Partnership of the BRI
Partnership Units, this Agreement and all other documents and instruments
contemplated hereby and the performance by the BRI Partnership of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the BRI Partnership
Agreement or any other material agreement to which the BRI Partnership is a
party or by which the BRI Partnership is bound.
6.03 Annual and Quarterly Reports. The BRI Partnership has delivered to the
Transferor Partnership true and complete copies of the Annual Report on Form
10-K (and those portions of the Annual Report to Stockholders which are
incorporated by reference therein) of the general partner of the BRI Partnership
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, and all Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K filed by the general partner of the Partnership with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of the general partner of the BRI Partnership included or
incorporated by reference in the SEC Filings and the PPM have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated assets,
liabilities and financial position of the general partner of the BRI Partnership
as of the dates thereof and the consolidated results of its operations and
changes in cash flow for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year end adjustments).
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6.04 Governmental Consent, etc. Except as disclosed in the PPM, no consent,
approval or authorization of, or designation, declaration or filing with, any
governmental agency, commission, board or public authority is required on the
part of the BRI Partnership in connection with the valid execution and delivery
of this Agreement by the BRI Partnership and the performance of the BRI
Partnership's obligations hereunder.
6.05 Partnership Capitalization. The BRI Partnership Agreement (i) is the
only agreement among the partners relating to the organization, operation, or
management of the BRI Partnership, (ii) is in full force and effect and (iii)
has not been amended or modified. A true, correct and complete copy of the BRI
Partnership Agreement is attached hereto as Exhibit 1. Except as contemplated
hereby or set forth in the SEC Filings, the BRI Partnership has no commitment to
issue any right to purchase or acquire or to issue or distribute to any of the
owners of partnership interests in the BRI Partnership (the "BRI Partners"), any
evidences of indebtedness or assets and the BRI Partnership has no obligation,
contingent or otherwise, to purchase, redeem or otherwise acquire any interest
in the BRI Partnership or to make any distribution in respect thereof. Upon the
Closing, good, valid and marketable title to the BRI Partnership Units shall be
vested in the Transferor Partners free and clear of any lien, claim, charge,
pledge encumbrance, limitation, agreement or instrument whatsoever.
6.06 Tax Matters.
(a) All federal, state, local and foreign tax returns and information
statements required to be filed by or on behalf of the BRI Partnership or for
which the BRI Partnership may have any liability have been accurately prepared
in all material respects and duly and timely filed (or requests for extensions
have been timely field, granted and have not expired). As of the date hereof,
there is no audit examination, deficiency or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to the BRI Partnership. All taxes due with respect to
completed and settled examinations or concluded litigation have been paid.
(b) The BRI Partnership has not executed an extension or waiver that is
currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) The BRI Partnership does not know of (A) any audit or investigation of
the BRI Partnership with respect to any liability for taxes relating to the BRI
Partnership for which any BRI Partner may be liable, or (B) any threatened
claims or assessments for taxes against or relating to the BRI Partnership.
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(d) The BRI Partnership has previously delivered to the Transferor
Partnership a true and complete copy of the BRI Partnership's Federal Income Tax
Return for 1996, as filed with the Internal Revenue Service.
6.07 Bankruptcy. No attachments, execution proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other similar
proceedings are pending or, to the BRI Partnership's knowledge, threatened
against the BRI Partnership, nor are any of such proceedings anticipated or
contemplated by the BRI Partnership.
6.08 Private Placement Memorandum. The PPM, as of the date thereof and as
of the dates of any amendment thereof, did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
6.09 REIT Status. Commencing with BRI's taxable year ending December 31,
1991, BRI has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its method of operation
has enabled and to BRI's knowledge should enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the
Internal Code of 1986, as amended.
6.10 Issuance of Units. The BRI Partnership Agreement provides, or prior to
Closing will provide, for the issuance of the BRI Partnership Units. The BRI
Partnership Units to be issued in connection with the transactions herein
contemplated have been, or prior to their issuance will have been, duly
authorized for issuance by the BRI Partnership to the Transferor Partners, and
on the date of their issuance pursuant to the terms and conditions hereof will
be validly issued, fully paid and non-assessable, free and clear of any liens,
pledges and encumbrances of any kind whatsoever. Any and all shares of common
stock of BRI exchangeable for BRI Partnership Units issued in connection with
the transactions herein contemplated will be duly authorized, validly issued,
fully paid and non-assessable, free and clear of any liens, pledges and
encumbrances of any kind whatsoever. All issued and outstanding shares of common
stock of BRI were issued in compliance with or in transactions exempt from the
registration provisions of applicable federal and state securities laws.
6.11 Receipt of Documents. The BRI Partnership acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Transferor Partnership otherwise in writing) and represents
that there are no other documents known to the BRI Partnership which are
required to be delivered hereunder which have not been so delivered.
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6.12 Litigation, etc. Except as described in the SEC Filings there is no
material action, suit or, to the BRI Partnership's knowledge, proceeding or
investigation pending or, to the BRI Partnership's knowledge, any threat
thereof, against the BRI Partners, the BRI Partnership or its properties or any
part thereof which questions the validity of this Agreement and the transactions
contemplated hereby or the right of the BRI Partnership to enter into it, or
which would likely have, either individually or in the aggregate, a material
adverse effect on the business of the BRI Partnership as such is presently
conducted.
6.13 Title to Properties and Assets. The BRI Partnership or its
subsidiaries or affiliates is the owner as described in the SEC Filings with
good title to its properties as described in the SEC Filings, subject to such
financings, easements, restrictions and other matters which do not have a
material adverse effect on the operation of such properties in accordance with
the BRI Partnership's past practices. Except as disclosed in the SEC Filings,
the BRI Partnership does not own, or otherwise hold any interest in, any other
material properties.
6.14 Liabilities. Except as disclosed in the SEC Filings, the BRI
Partnership has no material liabilities and the BRI Partnership has not,
directly or indirectly, created, incurred, assumed or guaranteed or otherwise
become directly or indirectly liable for the payment of any material amount of
borrowed money.
6.15 Environmental Compliance. Except as disclosed in the SEC Filings, no
action has been commenced by any enforcement agency under any Environmental Laws
which, if adversely determined, would have a material adverse effect on the BRI
Partnership and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on the BRI
Partnership.
6.16 Permits and Compliance with Laws. Except as disclosed in the SEC
Filings, the BRI Partnership has not received written notice that (i) any
material approvals, consents, permits, licenses or certificates of occupancy
(whether governmental or otherwise) required for the current use and operation
of any of its properties have not been granted, effected, renewed or performed
and completed (as the case may be) or have been or are about to be revoked; (ii)
any fees and charges therefor have not been fully paid; (iii) any of its
properties, including the current use and occupancy thereof are in violation in
any material respect of any laws or (iv) any governmental authority has a
current plan that would adversely affect the continued use and operation of any
of its properties as currently used and operated except, in the case of clauses
(i), (ii), (iii) and (iv), as would not have a Material Adverse Effect.
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SECTION 7
INSURANCE AND CASUALTY
7.01 Maintenance of Insurance. Until the Closing Date, the Transferor
Partnership shall cause the Transferor Partnership to maintain its present
insurance on the Property which insurance in respect of fire and casualty shall
be covered by a standard All-Risk Policy in the amounts as currently insured. A
certificate or certificates of such insurance shall be provided to the BRI
Partnership upon written request by the BRI Partnership. Subject to the
provisions of Section 7.02, the risk of loss in and to the Property shall remain
vested in the Transferor Partners until the Time of Closing.
7.02 Casualty or Condemnation. If prior to the Time of Closing, the
Improvements or any material portion thereof (having a replacement cost equal to
or in excess of $750,000.00) are damaged or destroyed by fire or casualty, or if
any material part of the Property is subject to any eminent domain notice or
proceeding by any governmental entity (which shall mean for purposes of this
Section 7.02 a proceeding which affects any units, parking spaces or material
amenities), then the BRI Partnership shall have the option, exercisable by
written notice given to the Transferor Partners at or prior to the Time of
Closing, either to (a) terminate this Agreement, whereupon all obligations of
all parties hereto shall cease, and this Agreement shall be void and without
recourse to the parties hereto except for provisions which are expressly stated
to survive such termination; or (b) proceed with the contribution and transfer
of the Transferor Partnership Interests, and in such case, unless the Transferor
Partners shall have previously restored the Property to its condition prior to
the occurrence of any such damage or destruction, the Transferor Partners shall
pay over or assign to the BRI Partnership, on behalf of the Transferor
Partnership, all amounts received or due (plus an amount equal to any deductible
under any insurance policy covering the Property) from, and all claims against,
any insurance company or governmental entity as a result of such destruction or
taking and there shall be no adjustment to the Consideration hereunder. If prior
to the Time of Closing, any such damage or destruction shall occur having a
replacement cost of less than $750,000.00 or if any eminent domain notice or
proceeding is commenced which does not affect any material portion of the
Property, the BRI Partnership shall proceed to accept the contribution and
transfer of the Transferor Partnership Interests in accordance with the
provisions of clause (b) above.
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SECTION 8
VIOLATIONS OF LAW
8.01 Responsibility for Violations. All notices of material violations of
laws, ordinances, regulations or insurance requirements ("Violations of Law"),
which are issued or sent prior to the Closing Date by any governmental
department, agency or bureau having jurisdiction as to conditions affecting the
Property shall, to the extent reasonably practical be removed or complied with
by the Transferor Partnership, at the expense of the Transferor Partnership, but
in any event not to exceed $25,000.00, prior to the Closing Date; provided,
however, that if Transferor Partnership is unable or unwilling, if the cost
exceeds $25,000.00, to remove such Violations of Law or comply with such notices
by the Closing Date, the BRI Partnership shall have the option to (i) terminate
this Agreement, whereupon all obligations of all parties hereto shall cease and
this Agreement shall be void and without recourse to the parties hereto, except
for provisions which are expressly stated to survive such termination, or (ii)
proceed with the transaction contemplated hereby in which event there shall be a
reduction in the Consideration Amount in an amount necessary to enable the BRI
Partnership to remove such Violations of Law, provided such reduction shall not
in any event exceed $25,000.00, and the obligations of the Transferor
Partnership with respect to such violations shall cease.
SECTION 9
OBLIGATIONS PRIOR TO CLOSING
The Transferor Partnership covenants that between the date of this
Agreement and the Closing Date:
9.01 No Lease Amendments. Other than ordinary course transactions
consistent with past practice, the Transferor Partnership shall not, without the
BRI Partnership's prior written consent (a) enter into any new lease for an
apartment unit with a first-time tenant unless the lease is for a period of no
more than one year and the rent shall be not less than the amount of the market
rent noted on the Rent Roll for the respective apartment; or (b) amend any Lease
for an apartment unit with an existing tenant, or (c) renew or extend any Lease
for an apartment unit with an existing tenant unless the lease is for a period
of not more than one year and that the rent for the amended, renewal or
extension term shall not be less than the amount of rent noted on the Rent Roll,
for the respective apartment; or (d) terminate any Lease except in the ordinary
course of business or by reason of a default by the tenant thereunder or by
reason of the provisions contained in the Lease or as required by applicable
law.
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9.02 Condition of Units. Up to the Time of Closing, all apartment units on
the Property which become vacant shall be maintained in accordance with the
Transferor Partnership's usual and customary practice without regard to the
Closing contemplated by this Agreement. Except as otherwise specifically
provided herein, the BRI Partnership acknowledges and agrees that all properties
with units will be delivered in "as is" condition.
9.03 Continuation of Service Contracts. The Transferor Partnership shall
not modify or amend any Service Contract or enter into any new service contract
for the Property, without the prior written consent of the BRI Partnership which
consent shall not be unreasonably withheld or delayed, provided no consent shall
be required with respect to any of the foregoing so long as such service
contract is terminable without penalty by the then owner of the Property upon
not more than thirty (30) days' notice.
9.04 Replacement of Personal Property. No personal property included as
part of the Property shall be removed from the Property unless the same is
replaced with similar items of at least equal quality prior to the Closing Date.
9.05 Tax Procedure. Except as to the proceedings, if any, noted on Schedule
9.05 attached hereto, the Transferor Partnership shall not withdraw, settle or
otherwise compromise any protest or reduction proceeding affecting real estate
taxes assessed against the Property for any fiscal period in which the Closing
Date is to occur or any subsequent fiscal period without the prior written
consent of BRI Partnership. Real estate tax refunds and credits received after
the Closing Date which are attributable to (i) the fiscal tax year during which
the Closing occurs shall be apportioned between Transferor Partners and the BRI
Partnership, based upon the relative time periods before and after the Closing,
or (ii) any fiscal year prior to the fiscal year in which the Closing occurs
shall be paid to the Transferor Partners, in either case after deducting the
expenses of collection thereof, which obligation shall survive the Closing.
9.06 Loan Compliance. The Transferor Partnership shall (a) make all
payments of interest and principal and, if applicable, tax escrow, insurance
escrow and other amounts required under the Note and other Loan Documents coming
due thereunder prior to the Closing, in accordance with the terms thereof, (b)
otherwise comply with all of the material terms and provisions of the Loan
Documents up to the Closing, (c) not alter or amend the Loan Documents, or seek
or accept any waivers or extensions of time for payment or performance
thereunder except as permitted and set forth on Schedule 9.06 attached hereto
and (d) not make any prepayment of principal under the Note.
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9.07 Property Maintenance. The Transferor Partnership, in accordance with
its normal practices and procedures, shall continue to maintain and to make all
repairs and replacements to the Property so as to keep the Property in
substantially its present condition, subject to the provisions of Section 7
hereof, and the Transferor Partnership shall operate and manage the Property in
the same manner as it has operated the Property prior to the date hereof.
9.08 Preservation of Partnership Business. On and after the date hereof,
except with the prior written consent of the BRI Partnership or as otherwise
provided in this Agreement, the Transferor Partnership shall not cause,
acquiesce in, or agree to:
(a) any material amendment of the Transferor Partnership Agreement;
(b) any willful action by the Transferor Partnership which would render any
of the representations and warranties contained in Section 5 hereof untrue in
any respect at and as of the Closing Date with the same effect as though such
representations and warranties had been made at and as of the Closing Date;
(c) Merge or consolidate with any other entity or permit any other entity
to merge into it; acquire any stock or partnership interests; effect any
reorganization or recapitalization; or acquire any material assets of any other
person, partnership, corporation, or business organization;
(d) Except in the ordinary course of business and consistent with past
practices, (i) incur any absolute or contingent liabilities; make or incur
obligations for any capital expenditures except as contemplated by the
Transferor Partnership's fiscal 1997 operating budget; (ii) waive or release any
right or cancel or compromise any debt or claim except in the ordinary course of
business; or (iii) otherwise enter into any contract, transaction or agreement
which shall survive the Closing (except as permitted by Section 9.03);
(e) Except as permitted as set forth on Schedule 9.06 hereof, incur any
liabilities for the repayment of borrowed money, whether directly or by way of
guaranty, including any obligation for borrowed money or evidenced by any note,
bond, debenture or similar instrument;
(f) Enter into any agreement, transaction or arrangement with any affiliate
that will survive the Closing;
(g) Mortgage or subject the Property or any part thereof to a lien or other
encumbrance, allow any mechanic's or materialmen's lien to attach against the
Property, cause or permit to be placed or recorded any document affecting title
to any
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portion of the Property, or subject any portion of the Property to any option
contract or sales contract;
(h) Sell, transfer, or otherwise dispose of or remove or permit the removal
from the Property of any fixtures, mechanical equipment or any other assets of
the Transferor Partnership unless the same is replaced with similar items of at
least equal quality or make or permit to be made any material alterations to or
upon the Improvements on the Property, other than customary maintenance repairs.
(i) Except as permitted as set forth on Schedule 9.06 hereof, enter into
any agreement cancelling, terminating or modifying the Loan.
9.09 Conduct of Business. Except with the prior written consent of BRI
Partnership, on and after the date hereof the Transferor Partnership shall
conduct its business only in the ordinary course as heretofore conducted and do
the following:
(a) Subject to the provisions of Section 8.01 hereof, comply with all
regulations and laws applicable to it in the conduct of its business;
(b) Keep in full force and effect insurance coverage with reputable
insurers, which in respect of amounts, types and risks insured is that which its
management reasonably believes to be adequate for the business conducted by it;
(c) Duly and timely file, or obtain appropriate extensions of the time for
filing, all material reports, and all tax returns and other material documents
required to be filed with federal, state, local and other authorities;
(d) Unless it is contesting the same in good faith and has established
reasonable reserves therefor, pay when required to be paid all taxes indicated
by its tax returns or otherwise lawfully levied or assessed upon it, or any of
its properties or assets, or which it is otherwise legally obligated to pay;
(e) Comply in all material respects with each and every undertaking,
covenant and obligation of landlord under the Leases and as obligor under the
Loan Documents, including up to the Closing Date; and
(f) Pay or cause to be paid all material debts, and other material
obligations incurred by the Transferor Partnership in connection with the use
and ownership of the Property up to the date of Closing; provided, however, that
the Transferor Partnership shall, in the case of the Loan, comply with the
provisions of Section 9.06 hereof.
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9.10 Access to Information. Upon reasonable notice and during regular
business hours, the Transferor Partnership will give the BRI Partnership and
their attorneys, accountants, and other representatives reasonable access to
Transferor Partnership's personnel and all properties, documents, contracts,
books, and records of the Transferor Partnership, relating to the consummation
of the transactions contemplated hereunder and will furnish the BRI Partnership
with copies of such documents (certified by the Transferor Partnership if so
requested) and with such information with respect to the affairs of the
Transferor Partnership as the BRI Partnership may from time to time reasonably
request.
9.11 Audited Financial Statements. In connection with the Public Offering
and the Private Placement (each as defined in Section 17.04 hereof) the
Transferor Partnership shall provide the BRI Partnership such additional
documentation and information as the SEC shall require.
SECTION 10
TRANSFEROR PARTNER'S CLOSING OBLIGATIONS AND
POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY
10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the
Transferor Partners shall deliver the following to the BRI Partnership (the
"Transferor Partners Closing Documents"):
(a) Assignment of Transferor Partnership Interests. An assignment of the
Transferor Partnership Interests from each of the respective Transferor Partners
to the BRI Partnership and a designee of the BRI Partnership in such a manner as
not to result in the dissolution of the Transferor Partnership in the form of
the Transferor Assignment attached hereto as Exhibit III, duly executed and
delivered by each of the Transferor Partners, which shall transfer the
Transferor Partnership Interests to the BRI Partnership and such designee free
and clear of any lien, pledge, restriction, encumbrance or other claim by any
third party.
(b) UCC Search - Transferor Partners. A Uniform Commercial Code lien search
for each of the Transferor Partners, indicating that the partnership interest of
each Transferor Partner in the Transferor Partnership is unencumbered by any
security interest therein and the cost of which shall be paid one-half by the
Transferor Partners.
(c) Amended Transferor Partnership Agreement and Certificate. The Amended
Transferor Partnership Agreement in the form of Exhibit IV and the Amended and
Restated Transferor Partnership Certificate in the form of Exhibit V
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hereto duly executed and delivered by the Transferor Partners, pursuant to which
the Transferor Partners shall withdraw as partners from the Transferor
Partnership.
(d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to
the effect that the Transferor Partnership has been duly formed in accordance
with Maryland law and is validly existing and in good standing under such laws,
that to the best of such counsel's knowledge the Transferor Partners are all of
the partners of the Transferor Partnership, that no state transfer taxes, sales
tax, excise tax or transfer stamps are required to consummate the transactions
contemplated by this Agreement and as to such other matters as are customarily
required in Baltimore, Maryland in connection with the transactions contemplated
under this Agreement. The opinion shall also provide that such counsel has no
knowledge that the Transferor Assignments have not been duly executed and
delivered by each of the Transferor Parties.
(e) BRI Partnership Amendment and BRI Questionnaire. The BRI Partnership
Amendment in the form of Exhibit 3 attached hereto, duly executed and delivered
by the Transferor Partners and a BRI Questionnaire, in the form of Exhibit 5
attached hereto, duly executed by each of the Transferor Partners.
(f) Occupancy Permit. Certificates of Occupancy (or other evidence
reasonably acceptable to the BRI Partnership) from the local authority having
jurisdiction over the construction and occupancy of the Improvements.
(g) Evidence of Tax Payments. Evidence, reasonably acceptable to the BRI
Partnership, that all real estate taxes and personal property taxes and special
assessments, if any, affecting the Property for calendar years 1996 and 1997,
which are due and payable at the Closing have been paid unless contested in good
faith and reasonable reserves are established therefor.
(h) Lease Records. Original copies of all Leases, together with photocopies
of all rent records (including an updated Rent Roll in the same format as the
Rent Roll attached as Schedule D dated as of the last day of the month preceding
the month in which the Closing occurs), and related documents in the possession
or under the control of the Transferor Partnership. Such records shall include a
schedule of all cash security deposits and credit to the BRI Partnership in the
amount of such security deposits, including interest thereon, if any, held by
the Transferor Partnership at the Closing Date under the Leases and a schedule
updating the Rent Roll and setting forth all arrears in rents and all
prepayments of rents.
(i) Plans, Specifications, Warranties and Guaranties. To the extent in the
possession of the Transferor Partnership, original copies (or photocopies if
original copies are unavailable to the Transferor Partnership) of all current
site plans, surveys,
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soil and substrata studies, architectural drawings, plans and specifications,
engineering plans and studies, floor plans, landscape plans and other plans or
studies of any kind that relate to all or any part of the Property. The
Transferor Partnership shall also deliver, to the extent in the possession of
the Transferor Partnership: original copies of all certificates, licenses,
permits, authorizations and approvals issued for or with respect to the Property
by governmental and quasi-governmental authorities having jurisdiction, except
that photocopies may be substituted if the originals are posted at the Property.
(j) Title Affidavits. Affidavits and indemnities from each Transferor
Partner executed by the Transferor Agent pursuant to the power of attorney
granted under Section 19.04 in the form of Exhibits VII and VIII, respectively,
as required by the Title Insurer in order to issue the non-imputation
endorsement and to omit from its title insurance policy all exceptions for (i)
judgments, bankruptcies or other returns against persons or entities whose names
are the same as or similar to the Transferor Partnership's name; (ii) parties in
possession other than under the rights to possession granted under the Leases;
and (iii) mechanics' liens.
(k) Notices of Transfer. Sufficient original letters, executed by the
Transferor Agent, advising the tenants under the Leases of the transfer of
ownership of the Transferor Partnership to the BRI Partnership and directing
that all rents and other payments thereafter becoming due under the Leases be
sent as the BRI Partnership may direct.
(l) Certificate as to Representations and Warranties. A certificate by the
Transferor Agent to the effect that, to its knowledge, all of the
representations and warranties of the Transferor Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(m) Evidence of Existence and Authority. A certificate issued by the
Department of Assessments and Taxation of the State of Maryland dated not
earlier than thirty (30) days prior to the Closing Date certifying the good
standing or valid existence of the Transferor Partnership.
(n) Non-Foreign Affidavit. The Transferor Partners shall execute and
deliver to the BRI Partnership and the BRI Partnership's counsel, at Closing
such evidence as may be reasonably required by the BRI Partnership to show
compliance by the Transferor Partners with the Foreign Investment and Real
Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended.
(o) Lender Estoppel Letter. An estoppel letter dated within thirty (30)
days of the Closing Date (the "Lender Estoppel Letter"); the form of the Lender
Estoppel
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Letter shall be mutually agreed upon by the parties during the Financing
Assumption Period (as defined in Section 17.03). However, the BRI Partnership
will require, at a minimum, that the Lender Estoppel Letter set forth (i) Lender
consent to the contribution of the Transferor Partnership Interests, as
contemplated herein, and to the transfer of the ownership of the Transferor
Partnership to the BRI Partnership and (ii) the following matters: (A) the Note
and other Loan Documents are in full force and effect; (B) to the Lender's
knowledge, no default exists; (C) the amount of the outstanding unpaid principal
balance of the Note, and the date to which interest and principal have been paid
on the Note; and (D) the amount of any real estate tax escrow, insurance escrow
and other escrows or reserves held by Lender.
(p) UCC Search - Property. A Uniform Commercial Code lien search showing no
Uniform Commercial Code filing (other than in respect of the Loan Documents) or
judgment or tax lien filings against the Transferor Partnership with respect to
the Property, which searches shall be dated not earlier than thirty (30) days
prior to the Closing and the cost of which shall be paid one-half by the
Transferor Partners and one-half by the BRI Partnership.
(q) Other Documents. Such other documents, instruments or agreements which
the Transferor Partners are required to deliver to the BRI Partnership pursuant
to any other provisions of this Agreement or which the BRI Partnership may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the BRI Partnership title to the Transferor Partnership Interests. The
provisions of this Section 10.01(q) shall survive the Closing indefinitely.
10.02 The Transferor Partners' Expenses. The Transferor Partners shall pay
one-half of all: (i) Title Insurance and Survey costs, (ii) escrow and recording
costs (iii) transfer taxes and documentary stamps, if any, and (iv) UCC Search
costs. The Transferor Partners also shall pay their pro rata share of the fees
and expenses attributable to the transactions contemplated by this Agreement in
accordance with the provisions of Section 19.03 and all of the fees and expenses
of their own separate legal, tax or other advisors.
10.03 Accuracy of Representations and Warranties. Each Transferor Partner
agrees that such Transferor Partner will notify the Transferor Partnership and
the BRI Partnership in writing on or prior to the Closing Date if any of the
representations and warranties of such Transferor Partner cease to be true and
correct on and as of the Closing Date. Each Transferor Partner further agrees
that, subject to Section 10.05(g), if no such notice is given to the Transferor
Partnership and the BRI Partnership, the representations and warranties of such
Transferor Partner shall be deemed to be true and correct on and as of the
Closing Date and that the BRI Partnership and the
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Transferor Partnership shall be entitled to rely on the agreements contained in
this Section 10.03.
10.04 Post-Closing Restrictions on the Transferor Partners. In order to
induce the BRI Partnership to enter into this Agreement, each Transferor
Partner, hereby agrees that until the tenth (10th) day following the first
anniversary of the Closing:
(a) each Transferor Partner shall continue to own and hold, and shall not
assign, transfer, distribute to its partners or otherwise dispose of any of the
BRI Partnership Units received by it pursuant to this Agreement except to the
extent permitted under Section 9 of the BRI Partnership Agreement;
(b) no Transferor Partner shall transfer or exchange the BRI Partnership
Units for shares of common stock of BRI;
(c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen
M. Gorn and John B. Colvin, or an entity controlled by them, given to the BRI
Partnership pursuant to the Pledge Agreement (described on Schedule K), no
Transferor Partner shall mortgage, pledge, create a security interest in or lien
on or otherwise hypothecate or encumber any of such BRI Partnership Units except
as permitted under the BRI Partnership Agreement;
(d) the provisions of this Section 10.03 shall survive the Closing
indefinitely.
10.05 Indemnification.
(a) The Transferor Partners' Indemnity. In the event the parties proceed to
Closing, each Transferor Partner agrees, severally and not jointly, to indemnify
and hold the BRI Partnership harmless against and with respect to (i) any loss
or damage (including reasonable attorney's fees) to the BRI Partnership
subsequent to the Closing Date, resulting from (A) any inaccuracy in or breach
of any representation or warranty of the Transferor Partnership set forth in
Section 5A or of such Transferor Partner set forth in Section 5B or (B)
resulting from any breach or default by the Transferor Partnership or such
Transferor Partner of any obligation of the Transferor Partnership or such
Transferor Partner under this Agreement or (ii) from liabilities for borrowed
money (other than the payments under the Loan due after the Closing) incurred by
the Transferor Partnership or the Property prior to the Closing; provided that
no Transferor Partner shall be required to indemnify the BRI Partnership for any
amounts in excess of 50% of the fair market value of the BRI Partnership Units
received by such Transferor Partner as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each
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of the Transferor Partners in Section 5.34, which shall be limited to 100% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner)
(collectively, the "Cap"); and provided further that to the extent any of the
Transferor Partners have any indemnification obligation to the BRI Partnership,
the Transferor Partners may elect to satisfy such indemnification obligation by
directing the BRI Partnership to cancel such amount of BRI Partnership Units
acquired by such Transferor Partner pursuant to this Agreement having a fair
market value (measured at the time such BRI Partnership Units are returned or
cancelled) equal to the indemnification obligation of such Transferor Partner.
(b) The BRI Partnership's Indemnity. In the event the parties proceed to
Closing, the BRI Partnership agrees to indemnify and hold the Transferor
Partners harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Transferor Partners, subsequent to the
Closing Date, resulting from (A) any inaccuracy in or breach of any
representation or warranty of the BRI Partnership or (B) resulting from any
breach or default by the BRI Partnership of any obligation of the BRI
Partnership under this Agreement or (ii) from liabilities of the Transferor
Partnership or the Property after the Closing (except for such liabilities
resulting from a breach or default by the Transferor Partners or the Transferor
Partnership for which the BRI Partnership is indemnified under Section 10.05(a)
above); provided that the BRI Partnership shall not be required to indemnify any
Transferor Partner under Section 10.05(b)(i) for any amounts in excess of 50% of
the fair market value as of the date such indemnification obligation is
satisfied of the BRI Partnership Units received by such Transferor Partner
(except for indemnification obligations with respect to Sections 6.10 and 11.03
which shall be limited to 100% of the fair market value as of the date such
indemnification obligation is satisfied of the BRI Partnership Units received by
such Transferor Partner).
(c) The indemnification obligations of the Transfer Partners and the BRI
Partnership, respectively, with respect to any representation or warranty, shall
be limited to claims made prior to the last date of survival thereof set forth
in Section 16. No such claim for indemnification shall be deemed due and payable
unless such claim has been agreed to by the parties or has been finally
determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability under this Agreement
shall be determined taking into account any applicable insurance proceeds
actually received by, and other savings that actually reduce the impact of
losses upon, the indemnified party.
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(e) Neither the BRI Partnership nor any of the Transferor Partners shall
have any liability for claims made under Section 10.05(a) or 10.05(b) unless and
until the aggregate amount of all losses incurred exceeds $50,000 (in which case
the indemnifying party shall be liable for the portion of losses exceeding
$50,000).
(f) The indemnification provided in this Section 10 shall be the sole and
exclusive remedy after the Closing Date for damages available to the BRI
Partnership or the Transferor Partners for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to the BRI Partnership, the Transferor Partnership or the Property.
(g) Each of the Transferor Partners, the Transferor Partnership and the BRI
Partnership acknowledge and agree that, unless otherwise agreed to in writing by
all the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
10.06 Post-Closing Tax Matters. As a result of the Closing, the Transferor
Partnership shall terminate for federal income tax purposes pursuant to Section
708(b)(1)(B) of the Code and its tax year shall close on the Closing Date. The
Transferor Agent shall prepare and timely file any federal, state, local and
foreign tax or information returns due after Closing that are required to be
filed by or on behalf of the Transferor Partnership with respect to all tax
years or periods ending on or prior to the Closing Date. The Transferor Agent
shall prepare and timely file the terminating tax returns for the Transferor
Partnership resulting from the consummation of the transactions contemplated
under this Agreement, provided, however, that such tax returns shall be prepared
in accordance with the terms and provisions of this Agreement and provided
further, that prior to the filing thereof the Transferor Agent shall submit the
terminating tax returns to the BRI Partnership for its review and approval,
which shall not be unreasonably withheld or delayed. The BRI Partnership shall
assist the Transferor Agent in obtaining such data and information regarding the
Transferor Agent to permit the Transferor Partnership to prepare such returns or
to respond to any audits or assessments for the periods covered by such returns.
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SECTION 11
BRI PARTNERSHIP'S CLOSING OBLIGATIONS
AND POST-CLOSING AGREEMENTS
11.01 Closing Deliveries and Agreements. At the Closing, the BRI
Partnership shall:
(a) Transfer of Consideration; Execution and Delivery of BRI Partnership
Amendment, Confirmation and Registration Rights Agreement. Deliver to the
Transferor Partners (i) the Consideration, as the same shall be adjusted for
apportionments under Section 12 and any adjustments thereto required pursuant to
the express provisions this Agreement, (ii) the BRI Partnership Confirmations in
the form attached hereto as Exhibit 2, (iii) the BRI Partnership Amendment, in
the form attached hereto as Exhibit 3 duly executed by BRI Apartments and (iv)
the Registration Rights Agreement in the form attached hereto as Exhibit 4 duly
executed by BRI.
(b) Execution and Delivery of Transferor Assignments, Amended Transferor
Partnership Agreement and Amended Transferor Partnership Certificate. Deliver to
the Transferor Partners (i) the Transferor Assignments duly executed by the BRI
Partnership and (ii) the Amended Transferor Partnership Agreement and Amended
Transferor Partnership Certificate duly executed by the BRI Partnership, or its
designees, pursuant to which the BRI Partnership, or its designees, shall be
admitted as partners of the Transferor Partnership.
(c) Record Amended Transferor Partnership Certificate. Cause the Amended
Transferor Partnership Certificate to be filed with all appropriate state and,
if applicable, local filing offices.
(d) Opinion. An opinion of counsel satisfactory to the Transferor Partners
to the effect that the BRI Partnership has been duly formed in accordance with
Delaware law and is validly existing and in good standing under such laws, that
the BRI Partnership Amendment has been duly executed and delivered, that no
state transfer taxes, sales tax, excise tax or transfer stamps are required in
connection with the issuance of the BRI Partnership Units to the Transferor
Partners as contemplated by this Agreement and as to such other matters as are
customarily required in Baltimore, Maryland in connection with the transactions
contemplated under this Agreement. The opinion shall also provide that, based
solely on a certification of BRI, commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualifications as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
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qualification and taxation as a "real estate investment trust" under the
Internal Revenue Code of 1986, as amended.
(e) Certificate as to Representations and Warranties. Deliver to the
Transferor Partners a certificate by the BRI Partnership to the effect that all
of the representations and warranties of the BRI Partnership set forth in this
Agreement remain true and correct as of the Closing Date.
(f) Evidence of Existence and Authority. A certificate issued by the
Secretary of State of the State of Delaware dated no earlier than 30 days prior
to the Closing Date certifying as to the good standing and valid existence of
the BRI Partnership.
(g) BRI Partnership Agreement. Deliver to the Transferor Partners a true
and correct copy of the BRI Partnership Agreement, as amended and in effect on
the Closing Date, certified as such by an officer of the general partner of the
BRI Partnership.
(h) Other Documents. Such other documents, instruments or agreements which
the BRI Partnership is required to deliver to the Transferor Partners pursuant
to any other provisions of this Agreement or which the Transferor Partners may,
either at or subsequent to the Closing, deem reasonably necessary in order to
consummate the transactions contemplated by this Agreement or to better vest in
the Transferor Partners title to the BRI Partnership Units. The provisions of
this Section 11.01(h) shall survive the Closing indefinitely.
11.02 Partnership's Expenses. The BRI Partnership shall pay its own counsel
fees, and all loan assumption fees (not to exceed 1% of the outstanding loan
balance) and one-half of all (i) Title Insurance and Survey costs, (ii) escrow
and recording costs and (iii) transfer taxes and documentary stamps, if any, and
(iv) UCC search costs.
11.03 Post-Closing Agreements of the BRI Partnership.
(a) The BRI Partnership hereby grants the Transferor Partners, in their
capacity as a limited partner of the BRI Partnership and so long as the
Transferor Partnership has not dissolved, terminated or liquidated, the right to
receive the Transferor Partnership Interests as a distribution in kind in
satisfaction of the Transferor Partners' distribution rights under Section 8.2
of the BRI Partnership Agreement. If the Transferor Partnership Interests are
contributed by the BRI Partnership to a Subsidiary Entity (as defined in the BRI
Partnership Agreement), the BRI Partnership shall cause such Subsidiary Entity,
to take such actions as may be necessary to effectuate the foregoing right
granted by the BRI Partnership to the Transferor Partners.
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(b) Until the expiration of the period (the "No Transfer Period") ending on
the earlier of (I) such time as all of the Transferor Partners have redeemed all
of the BRI Partnership Units received by the Transferor Partners hereunder for
cash or for shares of BRI common stock or (II) seven (7) years from the Closing
Date, neither the BRI Partnership nor BRI shall allow the sale or transfer of
either the Transferor Partnership Interests or the Property, except for (i)
transfers that are fully tax-free to partnerships in which the BRI Partnership
has an interest, (ii) exchanges that are fully tax-free pursuant to Section 1031
of the Code and (iii) involuntary transfers which shall include, without
limitation, a foreclosure, a deed-in-lieu of foreclosure, a condemnation or a
liquidation of the BRI Partnership or BRI, provided that in the event of a
condemnation, the BRI Partnership shall use reasonable efforts to reinvest the
net condemnation proceeds in accordance with Section 1033 of the Code and hold
the same until the expiration of the No Transfer Period.
(c) Until the expiration of the No Transfer Period, neither the BRI
Partnership nor BRI shall allow the Transferor Partnership to refinance the Loan
for an amount less than the outstanding principal balance of the Loan as of
Closing or to make any payment of principal under the Loan, except as part of
regularly scheduled amortization payments or as otherwise required by the holder
of the Loan under the Loan Documents, or change the terms in a manner that would
change the Loan from nonrecourse to recourse within the meaning of Section 752
of the Code and the regulations promulgated thereunder.
(d) Section 704(c) Method. The BRI Partnership shall elect the "traditional
method" as described in Treasury Regulation Section 1.704-3(b) with respect to
allocations required by Code Section 704(c) relating to the interests in the
Transferor Partnership contributed by the Transferor Partners and the assets of
the Transferor Partnership.
(e) Allocation of Excess Nonrecourse Liabilities. For purposes of
allocating the "excess nonrecourse liabilities" (within the meaning of Treasury
Regulations Section 1.752-3(a)(3)) of the BRI Partnership among the partners
(including the Transferor Partners), the BRI Partnership will allocate one-half
of such excess nonrecourse liabilities among its partners based upon each
partner's relative number of BRI Partnership Units (taking into account
Restricted Distribution BRI Partnership Units) and the remainder of such excess
nonrecourse liabilities will be allocated among the partners based on each
partner's relative share of the BRI Partnership's Section 704(c) "minimum gain."
The foregoing method shall not be modified by the BRI Partnership until the
expiration of the No Transfer Period without the consent of the Transferor Agent
(which consent may only be granted if none of the Transferor Partners is
materially adversely affected unless the consent of such materially adversely
affected
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Transferor Partners is obtained), provided however that in the event of a change
in the Code, the Treasury Regulations, or published Internal Revenue Service
("IRS") rulings, notices or other administrative guidance, or in any private
letter ruling issued to a taxpayer other than the BRI Partnership (any such
change, a "Change in Law") such that, in the reasonable opinion of tax counsel
to the BRI Partnership, based on such Change in Law, either (i) the foregoing
method is no longer legally permissible, (ii) or an alternative method, not
previously permitted, which results in more favorable tax consequences to each
of the limited partners, including the Transferor Partners, of the BRI
Partnership is currently permitted, the BRI Partnership, shall be entitled,
without the consent of the Transferor Agent, to adopt an alternative method,
provided further that, in the case of clause (i), the BRI Partnership shall
choose the alternative method that minimizes to the extent reasonably possible,
the adverse tax consequences to the Transferor Partners.
(f) The provisions of this Section 11.03 shall survive the Closing
indefinitely.
SECTION 12
APPORTIONMENTS AND ADJUSTMENTS TO CONSIDERATION
12.01 Apportionments. The following apportionments shall be made between
the parties on the Closing Date as of the close of the business day prior to the
Closing Date and the net amount of such prorations and apportionments shall be
settled in accordance with Section 12.04:
(a) prepaid and collected rent;
(b) real estate and personal property taxes, water charges, sewer rents and
vault charges, if any, on the basis of the fiscal period for which assessed,
except that if there is a water meter on the Property, apportionment on the
Closing Date shall be based on the last available reading, subject to adjustment
after the Closing on a per diem basis, when the next reading is available;
(c) principal and interest paid or payable under the Note; except to the
extent such amounts are distributed as cash prior to Closing in accordance with
the last paragraph of Section 12.01, the Transferor Partners shall receive a
credit for any real estate tax, insurance and other escrows and reserves, if
any, held by Lender as set forth in the Lender Estoppel Letter;
(d) charges or prepayments under transferable Service Contracts; and
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(e) all other income and expenses relating to the Property, including
without limitation, income from cable television services as are customarily
adjusted in real estate transactions of this size and type in Baltimore,
Maryland.
If as of the Closing Date, any items of income or expense attributable to
the Property are not known or available, the parties agree to equitably
apportion such items, so long as the same are identified within 90 days after
the Closing. If the Closing Date shall occur before the applicable real estate
or personal property tax rate is fixed, the apportionment of taxes on the
Closing Date shall be upon the basis of the tax rate for the preceding period
applied to the latest assessed valuation. Promptly after the new tax rate is
fixed, the apportionment of taxes shall be recomputed. Any discrepancy resulting
from such recomputation and any material errors or omissions in computing any
apportionments on the Closing Date shall be promptly corrected, which obligation
shall survive the Closing Date for a period of ninety (90) days after Closing.
At least five (5) days prior to the Closing Date, the Transferor Agent and
the BRI Partnership shall prepare and exchange preliminary calculations of all
adjustments and prorations to be made pursuant to this Section 12. Transferor
Agent and the BRI Partnership shall cooperate in the furnishing of all
information and documentation necessary to prepare such calculations. Prior to
Closing, the Transferor Agent shall deliver to the BRI Partnership the final
Transfer Allocation Schedule (the "Transfer Allocation Schedule"), which shall
be based upon the Preliminary Transfer Allocation Schedule, shall incorporate
all adjustments and prorations to be made pursuant to Section 12 and shall set
forth (i) the name of each Transferor Partner, (ii) the number of Unrestricted
Distribution BRI Partnership Units to be received by each Transferor Partner,
and (iii) the number of the Restricted Distribution BRI Partnership Units to be
received by each Transferor Partner. The BRI Partnership shall have no
obligation or liability with respect to the preparation or accuracy of the
Preliminary Transferor Allocation Schedule or the Transfer Allocation Schedule
or the distribution of the BRI Partnership Units or the BRI Additional Payment,
if applicable, to the Transferor Partners and the Transferor Partners hereby
release the BRI Partnership from any such obligation or liability.
All cash (including the escrow deposits set forth on Schedule C) shall be
used by the Transferor Partnership to pay amounts payable by the Transferor
Partnership and/or distributed to the Transferor Partners prior to Closing, and
if any of such cash applicable to pre-closing periods is not removed from the
Transferor Partnership prior to Closing, the BRI Partnership shall hold such
cash as agent for the Transferor Partners, and refund such cash to the
Transferor Partners subsequent to Closing.
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12.02 Application of Rent Payments. If any tenant is in arrears in the
payment of rent on the Closing Date, the Transferor Partnership shall distribute
the right to receive such rent to the Transferor Partners immediately prior to
Closing. The BRI Partnership shall act as agent for the Transferor Partners in
collecting such rent. Rents received from such tenant after the Closing shall be
applied in the following order of priority: (a) first to the month in which the
Closing occurred; (b) then to any month or months following the month in which
the Closing occurred until all unpaid rents have been paid in full; and (c) then
to the period prior to the month in which the Closing occurred. After Closing,
the BRI Partnership shall cause the Transferor Partnership to use reasonable
efforts to collect delinquent rents attributable to the period prior to the
month in which Closing occurred, provided such efforts shall not require the
commencement of litigation against any such tenant. If rents or any portion
thereof received by the Transferor Partners or the BRI Partnership after the
Closing are payable to the other party by reason of this allocation or
otherwise, the appropriate sum shall be paid to the other party within thirty
(30) days from the receipt thereof, which obligation shall survive the Closing.
12.03 Security Deposits. The Transferor Partnership shall assign and
deliver to the BRI Partnership all of the tenant security deposits, including
interest accrued thereon at the rate of 4% as required by applicable state law
or at such higher rate, if any, as required by the terms of the leases, for each
tenant as shown on the Rent Roll and the BRI Partnership, or its designee, shall
assume all liability with respect to the tenant security deposits under
applicable state law and/or the terms of the Leases.
12.04 Election of Form of Payment. If as a result of the prorations and
apportionments set forth in Section 12.01, the Transferor Partners owe an amount
to the BRI Partnership, the Transferor Partnership shall have the right to elect
on behalf of the Transferor Partners to adjust for such amounts owing by the
Transferor Partners to the BRI Partnership in the form of BRI Partnership Units
rather than cash. In addition, if as a result of the prorations and
apportionments set forth in Section 12.01, the BRI Partnership owes an amount to
the Transferor Partners, such amount shall be paid in the form of BRI
Partnership Units rather than cash. The Transferor Agent shall have the right to
elect to adjust for amounts owing to the Transferor Partners or the BRI
Partnership, as the case may be, in the form of cash and/or BRI Partnership
Units. The Transferor Agent shall notify the BRI Partnership at least seven (7)
business days prior to the Closing Date of the manner in which the Transferor
Partnership shall have elected to settle adjustments under Section 12.
12.05 Surplus Cash. No surplus cash shall be distributed from the
Transferor Partnership after the date of this Agreement unless the amount of
such surplus cash has been established in accordance with the Regulatory
Agreement. If (a) there shall be no outstanding unresolved HUD audit
investigation relating to the Property and (b) such
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distribution of surplus cash relates only to the period prior to the Closing
Date, all such surplus cash shall be distributed to the Transferor Partners
prior to Closing; provided however, if as a result of the 1997 annual HUD audit
(it being agreed that the BRI Partnership shall consult with the Transferor
Agent during the HUD audit procedure), HUD (after final adjudication by
regulatory and judicial authorities) determines that all or any portion of such
distribution of surplus cash to the Transferor Partners was improper, the
Transferor Partners, severally, agree to reimburse the Transferor Partnership
immediately upon demand for all amounts so designated by HUD as improper and to
indemnify, defend and hold the Transferor Partnership and the BRI Partnership
harmless from and against all loss, cost, damage or expense (including
reasonable legal fees) suffered or incurred as a result of such improper
distribution of surplus cash. In all other cases, there shall be no adjustment
at Closing regarding surplus cash, but at such time as HUD approves the
distribution of surplus cash for fiscal 1997, the BRI Partnership shall receive
all such surplus cash and thereafter the BRI Partnership shall promptly pay to
the Transferor Agent, as distribution agent for the Transferor Partners, the
Transferor Partners pro-rata share of such surplus cash allocable to the period
prior to the Closing Date.
SECTION 13
FAILURE TO PERFORM
13.01 Defective Title or Condition. If the Transferor Partners are unable
to give title or to contribute and transfer the Transferor Partnership
Interests, or to deliver possession of the Property, or to satisfy all of the
terms and conditions precedent to closing as set forth in this Agreement, all as
herein stipulated, or if on the scheduled closing the Transferor Partnership
Interests or the Property does not conform with the provisions hereof, the BRI
Partnership may elect by written notice given to the Transferor Agent on or
before the Closing Date either (a) to take title as provided in Section 13.02,
or (b) to terminate this Agreement as provided in Section 13.03.
13.02 BRI Partnership Election. The BRI Partnership shall have the right to
elect, in its sole discretion, on the Closing Date, to accept such title as the
Transferor Partners can deliver to the Transferor Partnership Interests and the
Property in its then condition and to deliver in exchange therefor the
Consideration subject to reduction of the Consideration Amount by the amounts
required to remove all Monetary Liens.
13.03 Transferor Partners' Default. If on the Closing Date, the Transferor
Partners have failed to perform all of the material obligations of the
Transferor Partners under this Agreement, the Transferor Partners shall be in
default under this Agreement and the BRI Partnership shall be entitled to
terminate this Agreement by written notice
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given to the Transferor Agent within seven (7) days after the Closing Date and
thereafter this Agreement shall be void and without recourse to any party
hereunder except for provisions which are expressly stated to survive
termination of this Agreement. In addition to the foregoing, if the BRI
Partnership desires to accept the contribution and transfer of the Transferor
Partnership Interests in accordance with the terms of this Agreement and the
Transferor Partners willfully refuse to perform the Transferor Partners'
obligations hereunder, the BRI Partnership, at its option, shall have the right
to compel specific performance by the Transferor Partners hereunder, in which
event the BRI Partnership shall have the right to recover from the Transferor
Partners the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the BRI Partnership in connection with the
exercise of its right of specific performance. The remedies provided in this
Section 13.03 shall be the sole and exclusive remedies at law or in equity of
the BRI Partnership in the event of a default by the Transferor Partners in lieu
of all other rights and remedies which the BRI Partnership may have against the
Transferor Partners at law or in equity.
13.04 BRI Partnership's Default. If on the Closing Date, the BRI
Partnership has failed to perform all of the material obligations of the BRI
Partnership under this Agreement, the BRI Partnership shall be in default under
this Agreement and the Transferor Agent shall be entitled to terminate this
Agreement by written notice given to the BRI Partnership within seven (7) days
after the Closing Date and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if all
of the Transferor Partners desire to accept the transfer of the BRI Partnership
Units in accordance with the terms of this Agreement and the BRI Partnership
willfully refuses to perform the BRI Partnership's obligations hereunder, the
Transferor Partners, jointly, but not severally, at their option, shall have the
right to compel specific performance by the BRI Partnership hereunder, in which
event the Transferor Partners shall have the right to recover from the BRI
Partnership the amount of all reasonable legal fees, court costs and other
litigation expenses incurred by the Transferor Partners in connection with the
exercise of their right of specific performance. The remedies provided in this
Section 13.04 shall be the sole and exclusive remedies at law or in equity of
the Transferor Partners in the event of a default by the BRI Partnership in lieu
of all other rights and remedies which the Transferor Partners may have against
the BRI Partnership at law or in equity.
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SECTION 14
BROKERAGE AND LOAN ASSUMPTION FEES
14.01 Brokerage Fees. The Transferor Partnership and the BRI Partnership
mutually represent and warrant that neither of them has retained a broker,
finder or similar agent who might have a claim or right to claim a commission or
fee in connection with this transaction. The Transferor Partnership understands
that American Property Consultants ("APC") had entered into a fee arrangement
with Questar Properties, Inc. ("QPI"), which might not apply to this transaction
in any event. Nevertheless, to the extent that it is determined that a
commission or fee is owed to APC, it shall be the obligation of the Transferor
Partners and QPI in accordance with the provisions of Section 19 hereof. In no
event shall any commission be due unless and until Closing has occurred and the
transactions contemplated hereby have been consummated and in no event shall the
BRI Partnership or the Transferor Partnership have any obligation to pay any
commission to APC.
14.02 Loan Assumption Fees. The BRI Partnership will pay any assumption or
transfer fee and other related costs and expenses (not to exceed in the
aggregate 1% of the outstanding principal balance of the Loan) required by
Lender (the "Loan Assumption Fees") in connection with obtaining the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership and the transfer of the ownership of the Transferor Partnership to
the BRI Partnership subject to the Notes and other Loan Documents as
contemplated hereby.
SECTION 15
NOTICES
15.01 Effective Notices. All notices under this Agreement shall be in
writing and shall be delivered personally, sent by telecopier with original by
first class mail, sent by Federal Express or other reputable overnight delivery
service, or sent by prepaid registered or certified mail, return receipt
requested, addressed as follows (or
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to such address as the Transferor Agent or the BRI Partnership shall otherwise
have given notice as herein provided):
If to the BRI Partnership: c/o Berkshire Realty Company, Inc.
470 Atlantic Avenue
Boston, MA 02210
Attn: Mr. David J. Olney
Telecopier No. 617-423-8903
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Joel H. Sirkin, Esq.
Telecopier No. 617-526-5000
If to the Transferor Partners Questar Investment Corporation
c/o the Transferor Agent: 124 Slade Avenue, Suite 200
Baltimore, MD 21208
Attn: Mr. Stephen M. Gorn
Telecopier No. 410-486-7692
With a copy to: James C. Oliver, Esq.
Lenrow, Kohn, Howard & Oliver
Seven St. Paul Street, 9th Floor
Baltimore, MD 21202-1626
Telecopier No. 410-962-0558
With a copy to: Ronald Hopkinson, Esq.
Latham & Watkins
885 Third Avenue, Suite 1000
New York, NY 10022
Telecopier No. 212-751-4864
Notices shall be deemed effective, if delivered by hand, when so delivered;
if sent by telecopier with original by first class mail, when so delivered by
telecopier; if sent by overnight delivery service, one business day after
deposited with such delivery service; or, if mailed, one business day after the
date deposited with the U.S. Postal Service.
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SECTION 16
LIMITATIONS ON SURVIVAL
16.01 Survival. The representations, warranties, covenants and other
obligations set forth in Sections 1.05, 5.02, 5.34, 5.35, 10.01(q), 10.04, 10.05
(subject to the provisions of Section 10.05(c)), 19.06 and the representations,
warranties, covenants and agreements of the BRI Partnership contained in
Sections 6.02, 6.05, 6.10, 10.05 (subject to the provisions of Section 10.05(c))
and 11.03 shall survive the Closing indefinitely and an action based thereon may
be brought at any time after the Closing Date. Representations and warranties in
Sections 5.12, 6.06 and 6.09 shall survive until 30 days after the expiration of
the applicable statute of limitations. The representations, warranties,
covenants and other obligations of the Transferor Partners set forth in Sections
4, 5.01 through and including 5.36 (except for 5.02, 5.12, 5.34 and 5.35), 9, 10
(except for 10.01(q), 10.04 and 10.05), 12 and 14 and the representations and
warranties, covenants and other obligations of the BRI Partnership contained in
Sections 1.04(d), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10 (except
10.05), 11 (except 11.03), 12 and 14 shall survive until twelve (12) months
after the Closing Date and thereafter during the pendency of any claim based
upon a breach thereof, and no action based thereon shall be commenced more than
twelve (12) months after the Closing Date. Except as otherwise specifically
provided in this Agreement, no other representations, warranties, covenants or
other obligations of the Transferor Partners or the BRI Partnership set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
16.02 Merger. The delivery of the Transferor Assignments and Amended
Transferor Partnership Agreement by the Transferor Partners (subject to the
provisions of Section 12 hereof), and the acceptance and filing thereof by the
BRI Partnership and the delivery of the BRI Confirmations and the acceptance
thereof by the Transferor Partners, shall be deemed the full performance and
discharge of every obligation to be performed by the parties hereunder and the
satisfaction of all conditions to Closing set forth herein, except as provided
in Section 16.01 and except for such other obligations which are expressly
provided herein to survive the Closing.
SECTION 17
CONDITIONS TO CLOSING
17.01 BRI Conditions. Without limiting any other conditions to Closing of
the BRI Partnership contained herein, the obligation of the BRI Partnership to
proceed with the Closing of the transactions contemplated by this Agreement is
expressly
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conditioned upon the fulfillment of each of the conditions listed below as of
the Closing Date, any or all of which may be waived, only in writing, by the BRI
Partnership, as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the Transferor Partners and the Transferor Partnership shall have performed
or complied with, in all material respects, all of their respective covenants,
agreements and obligations under this Agreement, (ii) the Transferor Partners
shall have delivered the Transferor Partners Closing Documents and (iii) all of
the representations and warranties of the Transferor Partnership and the
Transferor Partners set forth in this Agreement shall be true and correct, in
all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the Transferor Partnership;
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing including the Lender Estoppel Letter and the
consent of the Transferor Limited Partners shall have been obtained.
(d) Partnership Title. The Transferor Partnership Interests shall, as of
the Closing Date, be transferred and assigned to the BRI Partnership, or its
designees, respectively, and shall be free and clear of any liens, pledges and
encumbrances of any kind whatsoever.
(e) Property Title. The Transferor Partnership shall, as of the Closing
Date, have good record, marketable and insurable title to the Property, subject
only to the title exceptions permitted under Section 1.02.
(f) Title Insurance. The Transferor Partnership shall have received from
the Title Insurer the Title Policy for the Property, in accordance with Section
1.02.
(g) HUD Audit. The Transferor Partnership shall have obtained written
confirmation from HUD that the HUD Audit has been closed as to all findings such
that as of Closing, the HUD Audit shall be closed and the Transferor Partnership
shall have no liability whatsoever under the HUD Audit.
In the event that any condition set forth in Section 17.01(a) through
Section 17.01(g) hereinabove is neither satisfied nor waived by the BRI
Partnership in writing, on or before the Closing Date, the BRI Partnership shall
be entitled to terminate this Agreement by written notice given to the
Transferor Agent within seven (7) days
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after such date, and, thereafter this Agreement shall be void and without
recourse to all parties hereunder except for provisions which are expressly
stated to survive termination of this Agreement.
17.02 Transferor Conditions. Without limiting any other conditions to
Closing of the Transferor Partners contained herein, the obligation of the
Transferor Partners to proceed with the Closing of the transactions contemplated
by this Agreement is expressly conditioned upon the fulfillment of each of the
conditions listed below as of the Closing Date, any or all of which may be
waived, only in writing, by the Transferor Agent as follows:
(a) Performance and Representations and Warranties. As of the Closing Date,
(i) the BRI Partnership shall have performed or complied with, in all material
respects, all of the BRI Partnership covenants, agreements and obligations under
this Agreement, (ii) the BRI Partnership shall have delivered the BRI
Partnership Closing Documents and (iii) all of the BRI Partnership
representations and warranties set forth in this Agreement shall be true and
correct, in all material respects, as of the Closing Date.
(b) No Adverse Changes. Since the date of this Agreement, there shall not
have occurred any material adverse change in the financial condition, business,
properties, assets or liabilities of the BRI Partnership or BRI.
(c) Consents. Any and all consents, authorizations and approvals necessary
to be obtained before Closing shall have been obtained.
(d) BRI Partnership Units. The BRI Partnership Units shall, as of the
Closing Date, be transferred and assigned to the Transferor Partners and shall
be free and clear of any liens, pledges and encumbrances of any kind whatsoever.
In the event that any condition set forth in Section 17.02(a) through
Section 17.02(d) hereinabove is neither satisfied nor waived by the Transferor
Agent in writing, on or before the Closing Date, the Transferor Partners shall
be entitled to terminate this Agreement by written notice given to the BRI
Partnership within seven (7) days after such date, and, thereafter this
Agreement shall be void and without recourse to all parties hereunder except for
provisions which are expressly stated to survive termination of this Agreement.
17.03 Financing Assumption Condition. The BRI Partnership and the
Transferor Partnership shall use reasonable efforts to obtain the consent of
Lender to the contribution of the Transferor Partnership Interests to the BRI
Partnership by the Transferor Partners, to the transfer of ownership of the
Transferor Partnership to the
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BRI Partnership and to obtain the Lender Estoppel Letter. The Transferor
Partnership, with the BRI Partnership's cooperation, shall immediately commence
to obtain the consent of Lender necessary to permit the contribution of the
Transferor Partnership Interests to the BRI Partnership and the transfer of
ownership of the Transferor Partnership to the BRI Partnership. The BRI
Partnership shall supply any and all documentation and additional information
required by Lender in order to promptly complete the request for the consent of
Lender to the transactions contemplated hereunder. The Transferor Partnership
shall request that Lender state in writing any terms and requirements, including
the amount of any Loan Assumption Fees, to be imposed by Lender in connection
with its consent to the transactions contemplated hereby. It shall be a
condition of Closing that prior to October 15, 1997, Lender shall have granted
its consent to the transactions contemplated hereunder on terms and requirements
reasonably satisfactory to the BRI Partnership, shall have issued the Lender
Estoppel Letter and shall have agreed to release the Transferor Partners from
all liability under the Loan Documents. In the event that any of the terms or
requirements required by Lender for its consent are not approved by the BRI
Partnership, the BRI Partnership may terminate this Agreement by written notice
given to the Transferor Partners within fifteen (15) business days after the BRI
Partnership have received in writing the terms and requirements of Lender for
its consent. In the event either (a) the consent of Lender is not obtained prior
to the Closing or (b) the BRI Partnership does not approve the terms and
conditions of Lender, including the amount of any Loan Assumption Fees in excess
of 1% of the unpaid principal balance, and the BRI Partnership gives timely
notice of termination hereunder to the Transferor Agent, this Agreement shall
terminate without further action by any party, and, thereafter this Agreement
shall be void and without recourse to all parties, except for provisions which
are expressly stated to survive termination of this Agreement. In the event the
Lender shall not have agreed to release the Transferor Partners from all
liability under the Loan Documents or the Lender shall have placed terms and
conditions on the Transferor Partners that are unacceptable to them, the
Transferor Agent may terminate this Agreement by written notice given to the BRI
Partnership within fifteen (15) business days after the Transferor Agent has
received in writing notice that the Lender has refused to release the Transferor
Partners from liability under the Loan Documents or has imposed such
unacceptable terms and conditions. If the Transferor Agent gives timely notice
of termination to the BRI Partnership, this Agreement shall terminate without
further action by any party, and, thereafter this Agreement shall be void and
without recourse to all parties, except for provisions which are expressly
stated to survive termination of this Agreement.
17.04 Public Offering Condition. BRI has informed the Transferor Partners
that in connection with the consummation of the various Related Transactions (as
defined in Section 17.05 hereof), BRI intends to undertake either or both of (i)
a public offering of common stock or other equity securities of BRI (the "Public
Offering"), or (ii) a private
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placement of common stock or other equity securities of BRI (the "Private
Placement"). The Transferor Partners shall supply any documentation and
additional information required by BRI in order to complete the offering
materials in connection with the Public Offering or the Private Placement. The
obligation of the BRI Partnership to proceed with the Closing of the
transactions contemplated by this Agreement is expressly conditioned upon the
successful completion of the Public Offering and the Private Placement raising a
minimum of $75,000,000.00. If the Public Placement and the Private Placement do
not in the aggregate complete offerings which raise a minimum of $75,000,000 as
aforesaid prior to the Closing Date hereunder, the BRI Partnership shall have
the right to terminate this Agreement effective as of the Closing Date, and,
thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
17.05 Related Agreements. Simultaneously herewith, the BRI Partnership has
entered into with various parties various agreements, including this Agreement,
for the conveyance of partnership interests or property interests or other
assets and for the making of certain secured loans, which agreements are more
particularly described on Schedule K attached hereto (collectively the "Related
Agreements"). (The transactions described in the Related Agreements, including
this Agreement, are collectively the "Related Transactions"). Except to the
extent the parties expressly agree otherwise in writing or in that certain
Kickout Agreement of even date between the BRI Partnership and the Transferor
Agent attached hereto as Exhibit 6 (the "Kickout Agreement"), in the event that
any of the Related Agreements is terminated pursuant to any termination
provision of any other Related Agreement or does not become effective due to the
failure of all of the other parties to the Related Agreement to execute the
Related Agreement on or before September 22, 1997, this Agreement shall
terminate automatically simultaneously with the termination of any such Related
Agreement or upon the failure of all of the other parties to the Related
Agreement to execute the Related Agreement on or before September 22, 1997,
whereupon this Agreement shall be void and without recourse to all parties,
except for provisions which are expressly stated to survive the termination of
this Agreement. The Closing under this Agreement shall be simultaneous with the
closings under the Related Agreements. Except as provided in the Kickout
Agreement, in the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be cancelled or
postponed.
17.06 TPA Approval. This Agreement is subject to the following HUD Required
Language: This Agreement is expressly conditioned upon preliminary approval by
HUD of the transactions as set forth in form HUD 92266, Application for Transfer
of Physical Assets, and supporting documents submitted to HUD. None of the terms
and conditions of this Agreement shall be effective prior to such HUD approval.
The BRI
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Partnership will not take possession of the Transferor Partnership or the
Property nor assume the burdens and benefits of project ownership prior to such
approval by HUD.
The Transferor Partnership shall file with the appropriate Area Office of
HUD an Application (the "Application") for Transfer of Physical Assets ("TPA
Approval"). The BRI Partnership and the Transferor Partnership shall use
reasonable efforts to obtain the TPA Approval from HUD. The BRI Partnership
shall supply any and all documentation and additional information required by
HUD in order to properly complete the Application. In the event that the Lender
must join in and execute the Application, the Transferor Partnership shall be
responsible to obtain the execution of the Application by Lender.
In the event that any special conditions are set forth in the preliminary
HUD TPA Approval or required by the Lender relating to the transfer of ownership
of the Transferor Partnership to the BRI Partnership and satisfaction of the
same is reasonably and verifiably estimated by the BRI Partnership to involve an
aggregate cost to the Transferor Partners of not more than $5,000.00, the
Transferor Partners shall be obligated to proceed with the Closing and the BRI
Partnership shall receive a credit equal to the estimated aggregate cost to
comply with said special conditions up to a maximum of $5,000.00. If the cost,
as estimated by the BRI Partnership, to comply with the special conditions
exceeds $5,000.00, the BRI Partnership shall have the option either to terminate
this Agreement or to proceed with the Closing under this Agreement and to fund
all amounts necessary to comply said special conditions in excess of $5,000.00
(in which event the BRI Partnership shall receive a credit against the BRI
Additional Payment in the sum of $5,000.00 from the Transferor Partners).
One half (1/2) of any fees payable to HUD arising out of the Application
shall be paid by the Transferor Partners and one half (1/2) of any such fees
shall be paid by the BRI Partnership. In addition to the foregoing, the legal
fees of counsel retained by the Transferor Partnership to assist in obtaining
the TPA Approval shall be paid by the Transferor Partners (collectively "HUD TPA
Application Costs").
It shall be a condition of Closing that prior to Closing, HUD shall have
granted the TPA Approval to the transactions contemplated hereunder on terms and
requirements reasonably satisfactory to the BRI Partnership. In the event that
any of the terms or requirements required by HUD for the issuance of the TPA
Approval are not approved by the BRI Partnership, the BRI Partnership may
terminate this Agreement by written notice given to the Transferor Partners
within fifteen (15) business days after the BRI Partnership has received in
writing the terms and requirements of HUD for the issuance of the TPA Approval.
In the event either (a) the consent of HUD to issue the TPA Approval is not
obtained prior to the Closing or (b) the BRI Partnership does not approve the
terms and conditions of HUD and gives
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timely notice of termination hereunder to the Transferor Partners, this
Agreement shall terminate without further action by any party, and, thereafter
this Agreement shall be void and without recourse to all parties, except for
provisions which are expressly stated to survive termination of this Agreement.
SECTION 18
MISCELLANEOUS PROVISIONS
18.01 Assignment. Neither the BRI Partnership nor the Transferor Partners
shall assign all or any portion of its interest under this Agreement without the
prior written consent of the other party hereto; provided that the BRI
Partnership shall be permitted to designate any one or more subsidiary entities,
which are wholly owned by the BRI Partnership or BRI, to receive title to all or
any portion of the Transferor Partnership Interests as its designee, provided
further that notwithstanding any such designation, the BRI Partnership shall
continue to remain liable for the performance of all of its obligations under
this Agreement.
18.02 Integration. This Agreement and the Schedules and Exhibits hereto
embody and constitute the entire understanding between the parties with respect
to the transactions contemplated herein, and all prior agreements,
understandings, representations and statements, oral or written, are merged into
this Agreement. Neither this Agreement nor any provision hereof may be waived,
modified, amended, discharged or terminated except by an instrument signed by
the party against whom the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
18.03 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Maryland. The Transferor Partners,
Transferor Agent and the BRI Partnership consent to the personal jurisdiction of
the federal and state courts of the State of Maryland and agree that service of
process may be made upon each of them by certified mail, return receipt
requested or in any other manner permitted by law.
18.04 Captions. The captions in this Agreement are inserted for convenience
of reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
18.05 Successors and Assigns. Subject to the provisions of this Agreement,
the terms, covenants, agreements, conditions, representations and warranties
contained in this Agreement shall inure to the benefit of and shall be
enforceable by the parties
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hereto and their respective successors and permitted assigns. In no event shall
the Transferor Partners have the right to assign or transfer its right to
receive BRI Partnership Units.
18.06 Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by all of the Transferor Partners and the BRI
Partnership. The delivery by the BRI Partnership to the Transferor Partners of
an executed counterpart of this Agreement shall constitute an offer which may be
accepted by the delivery to the BRI Partnership of a duly executed counterpart
of this Agreement and the satisfaction of all conditions under which such offer
is made, but such offer may be revoked by the BRI Partnership by written notice
given at any time prior to such acceptance and satisfaction.
18.07 Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
18.08 Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
18.09 Publicity. In no event shall either the Transferor Partners or the
BRI Partnership issue any press release or otherwise communicate to any third
party any information regarding this Agreement or the transactions contemplated
hereby unless the other party has consented thereto and to the form and
substance of any such statement, announcement or release; provided, however,
that nothing herein shall be deemed to limit or impair in any way any party's
ability to disclose the details of the transactions contemplated hereby to the
accountants, attorneys or other authorized agents of such party or as such party
deems necessary or desirable pursuant to any court or governmental order or
applicable securities regulations or financial reporting requirements, nor shall
the BRI Partnership or BRI be precluded from describing this Agreement and the
transactions herein contemplated in any filings made pursuant to any securities
laws or in connection with the Public Offering or Private Placement, or from
filing this Agreement, the Exhibits hereto and the Schedules as exhibits to any
filings by the BRI Partnership or BRI required by any securities laws.
Notwithstanding
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the foregoing, no party hereunder shall have any liability by reason of the
details of the transactions contemplated hereby becoming known by means beyond
the reasonable control of such party. The provisions of this Section 18.09 shall
survive the Closing.
18.10 Counterparts. This Agreement may be executed and delivered in any
number of counterparts and such counterparts taken together shall constitute one
and the same agreement.
18.11 Extension. Notwithstanding anything to the contrary set forth herein,
the dates referred to in Sections 1.02, 1.03, 1.04(b), 3.01, 5.07, 17.03 and
17.05 may be extended only by the mutual written agreement of the Transferor
Agent and the BRI Partnership, in each case, to a date no later than November
30, 1997.
SECTION 19
ADDITIONAL PROVISIONS RELATING TO
THE TRANSFEROR PARTNERS
19.01 Transferor Allocation Schedule. Each Transferor Partner acknowledges
and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I
is true, correct and complete in all respects as it related to such Transferor
Partner.
19.02 Appointment of Agent. Each Transferor Partner hereby appoints the
Transferor Agent as its agent for the purpose of performing the administrative
activities to be performed under this Agreement, including, without limitation,
delivering and receiving notices on behalf of the Transferor Partners and the
Transferor Partnership, preparing the Transferor Allocation Schedule, waiving
conditions to closing (provided that delivery of the consideration as provided
herein to the Transferor Partners may not be waived by the Transferor Agent)
and/or effecting or refraining to effect a termination of this Agreement
pursuant to the terms hereof and the Kickout Agreement, agreeing to extend any
of the dates by which certain events must occur in accordance with Section
18.11, calculation of apportionment amounts under Section 12, electing on behalf
of the Transferor Partners which pro-rations will be adjusted with cash and/or
BRI Partnership Units and acting as distribution agent with respect to the
apportionments and adjustments under Section 12 hereof and such other
administrative activities as are described in this Agreement.
19.03 Allocation of Transaction Costs. Each Transferor Partner hereby
acknowledge and agrees that a portion of the amount due to such Transferor
Partner will be used to pay the fees and expenses attributable to the
transaction contemplated by this Agreement, which fees and expenses are the
several obligations of the
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Transferor Partners pursuant to the terms of this Agreement. Each Transferor
Partner and the Transferor Partnership hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Transferor Partnership due to
said fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot
be so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the proposes of this Section 19.03, each of the Transferor
Partners hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM, by the other Transferor Partnerships and related entities (collectively,
the "Related Entities"), which shall be Indirect Costs; (ii) to the extent it is
determined that APC is due any fee as described in Section 14.01 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by the Transferor Agent until such time as the amount of such fee, if
any, is determined) shall be included as Indirect Costs, with any such fee in
excess of $1,000,000 to APC being the sole responsibility of QPI; and (iii) all
legal and accounting fees of counsel and advisors to the Transferor Agent and
the Related Entities shall also be Indirect Costs. Each of the Transferor
Partners acknowledges and agrees that (i) any and all Direct Costs shall be
allocated based on the pro rata number of BRI Partnership Units allocated to
each of them with respect to their interest in the Transferor Partnership and
(ii) any and all Indirect Costs shall be allocated among the Transferor Partners
and the Related Entities at Closing based on the pro rata number of BRI
Partnership Units allocated at Closing to each of them. Each of the Transferor
Partners further acknowledges and agrees that the Transferor Agent shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 19.03.
19.04 Power of Attorney. In consideration of the foregoing matters and
intending to be legally bound hereby, each of the undersigned Transferor
Partners hereby irrevocably constitutes and appoints the Transferor Agent with
unrestricted power of substitution and resubstitution, as the attorney-in-fact
for the undersigned, coupled with an interest, with power and authority to act
in its name and on its behalf to execute, acknowledge, deliver, swear to, file,
or record in the appropriate public offices such documents and instruments as
may be necessary or appropriate in the sole judgment of the Transferor Agent to
carry out the provisions of this Agreement and the transactions contemplated
hereby including, without limitation, execution of such title affidavits,
non-imputation affidavits and gap indemnities as are required by the terms of
this Agreement.
19.05 Time of Effectiveness. The Transferor Partners acknowledge and agree
that this Agreement and the agreements attached as Exhibits hereto will not be
binding and effective unless and until all of the parties hereto and thereto
have executed
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counterparts to such agreements and, to the extent that any agreements or
documents relating to this Agreement (such as partnership assignments or other
similar closing documents) are executed prior to the Closing, the Transferor
Agent is authorized on behalf of each Transferor Partner to hold all such
agreements in escrow pending the Closing, at which time the Transferor Agent
shall be authorized to deliver such documents on behalf of the Transferor
Partners to the BRI Partnership.
19.06 Release and Indemnification by and between each Transferor Partner,
the Transferor Agent and certain Affiliates thereof. By executing this
Agreement, each of the Transferor Partners (i) consents to the transactions
contemplated by this Agreement, including the transfer of the Transferor
Partnership interest of each of the other Transferor Partners, and waives any
provisions contained in the Partnership Agreement for the Transferor Partnership
inconsistent with anything contained in this Agreement, (ii) waives all
conditions precedent to the transactions contemplated by this Agreement set
forth in the organizational documents of Transferor Partnership, (iii) except as
set forth in Schedule 19.06 and except as specifically provided herein or in any
of the Closing documents implementing the transactions contemplated hereby,
releases the Transferor Agent and the Morton Gorn, Stephen Gorn and John Colvin
and their affiliated entities and spouses (collectively, the "GGC Parties") from
any and all liability arising out of the transactions contemplated hereby and
the operation of Transferor Partnership prior to the Closing, including, but not
limited to, all matters relating to the management of the property owned by the
Transferor Partnership by the management company for the Transferor Partnership
and any affiliated persons or entities thereto, and (iv) agrees, severally and
not jointly, subject to the provisions of Section 10.05, to indemnify and hold
harmless the Transferor Agent and the GGC Parties from and against any and all
costs, damages, fees, and expenses, including reasonable attorney's fees, that
the Transferor Agent and/or the GGC Parties may incur in carrying out its, his,
or their responsibilities in good faith and in accordance with the terms of this
Agreement; provided that the indemnity granted under this Section 19.06 shall
not extend to any act of gross negligence or willful malfeasance on the part of
the Transferor Agent and/or the GGC Parties. By executing this Agreement, Morton
Gorn, Stephen Gorn and John Colvin, individually, and on behalf of all of the
GGC Parties, jointly and severally, hereby release each of the Transferor
Partners from any and all liability arising out of the transactions contemplated
hereby and the operation of the Transferor Partnership prior to the Closing,
except as specifically provided to the contrary herein or in any of the Closing
documents implementing the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
TRANSFEROR PARTNERS:
WITNESS: TRANSFEROR GENERAL PARTNER
CALIBER ASSOCIATES LIMITED
PARTNERSHIP
By:
- ------------------------------- --------------------------------
Name:
Its:
WITNESS: EACH TRANSFEROR LIMITED PARTNER
HELEN B. KLEIMAN TRUST
By:
- ------------------------------- --------------------------------
Name:
As Trustee of Helen B.
Kleiman Trust
BERNARD S. KLEIMAN TRUST
By:
- ------------------------------- --------------------------------
Name:
As Trustee of Bernard S.
Kleiman Trust
TRANSFEROR AGENT:
WITNESS: QUESTAR INVESTMENT CORPORATION,
a Maryland corporation
By:
- ------------------------------- --------------------------------
Name:
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Title:
BRI PARTNERSHIP:
WITNESS: BRI OP LIMITED PARTNERSHIP
By: Berkshire Apartments, Inc.,
Its General Partner
By:
- ------------------------------- --------------------------------
Name:
Title:
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List of Schedules
Schedule A - Description of Land
Schedule B - Personal Property
Schedule C - Escrow Deposits
Schedule D - Rent Roll
Schedule E - Service Contracts
Schedule F - Financial Statements
Schedule G - Insurance
Schedule H - Loan Documents (including amount of any tax escrow, insurance
escrow or other reserves)
Schedule I - Transferor Partnership 1996 Federal Tax Return
Schedule J - Environmental Reports
Schedule K - Related Agreements
Schedule 5.04 - Capital Contribution Defaults
Schedule 5.05 - Litigation
Schedule 5.10 - Indebtedness
Schedule 5.18 - Litigation Pending Against Transferor Partnership by Tenants
Schedule 5.28 - Shared Facilities/Utilities
Schedule 5.31 - HUD Audit Letter
Schedule 5.33 - Required Consents
Schedule 5.34 - Liens on Partnership Interests
Schedule 9.05 - Pending Tax Abatement Proceedings
Schedule 9.06 - Permitted Loan Extension, Modification or Refinance Terms
List of Exhibits
BRI Exhibits
Exhibit 1 - BRI Partnership Agreement (including all amendments)
Exhibit 2 - BRI Partnership Confirmation
Exhibit 3 - BRI Partnership Amendments
Exhibit 4 - BRI Registration Rights Agreement
Exhibit 5 - BRI Questionnaire
Exhibit 6 - KickoutAgreement
Transferor Exhibits
Exhibit I - List of Transferor General and Transferor Limited Partners (with
address and partnership interest of each partner)
Exhibit II - Transferor Partnership Agreement
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Exhibit III - Assignment of Transferor Partnership Interests
Exhibit IV - Amended and Restated Agreement of Transferor Partnership
Exhibit V - Amended and Restated Certificate of Transferor Partnership
Exhibit VI - Gap Indemnity
Exhibit VII - Non-Imputation/Fairway Affidavit
Exhibit VIII - Title Affidavit
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