AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE KINGSWOOD MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Kingswood Management
Company, a Maryland corporation (the "Management Company"), and the
stockholders set forth on Schedule 2.2 attached hereto (collectively the
"Stockholders"). BRI, the Management Company and the Stockholders are
referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI
in exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions of
this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company
file the certificate of merger or other appropriate documents prepared and
executed in accordance with the relevant provisions of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of
the State of Delaware and the Maryland General Corporation Law with the
Department of Assessments and Taxation of the State of Maryland. The Merger
shall have the effects set forth in Section 259 of the Delaware General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date
("Closing Date") mutually agreed to in writing by the Parties, but not later
than October 31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and
documents referred to in Section 8.10, (b) BRI shall deliver to the Company
the various certificates, instruments and documents referred to in Section
9.9, (c) the Management
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Company and BRI shall file with the Secretary of State of the State of Delaware
the Certificate of Merger, (d) the Management Company and BRI shall file with
the Department of Assessments and Taxation of the State of Maryland the Articles
of Merger, (e) BRI shall deliver certificates for the BRI Shares (as defined
below) to the Stockholders, and (f) the Stockholders shall deliver certificates
for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the Effective
Time, take any action, including executing and delivering any document, in the
name and on behalf of the Management Company, in order to consummate the
transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of any Party, each share of common stock, no
par value per share, of the Management Company ("Company Shares") issued and
outstanding immediately prior to the Effective Time shall be converted into
and represent the right to receive such number of shares of common stock, $.01
par value per share, of BRI ("BRI Common Stock") as is equal to one share of
BRI Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio"
shall be determined by dividing (i) the number of shares of BRI Common Stock
equal in value (as such value is determined at the time and in the manner
provided herein below) to $65,755
(the "Consideration Amount"), by (ii) the number of Company Shares issued and
outstanding immediately prior to the Effective Time; provided, however, with
respect to each property set forth on Exhibit 1 attached hereto, as to which
the transactions described in the applicable Related Agreement (as defined in
Section 11.6) have not been closed on or prior to the Closing Date hereunder
(a "Non-Acquired Property"), there shall be a reduction in the Consideration
Amount equal to the Reduction Amount for such property. The Reduction Amount
for each such property shall be equal to (A) .6 multiplied by the amount of
the Management Fees for such property as set forth on Exhibit 1 multiplied by
(B) five (5). The shares of BRI Common Stock to be issued to the holders of
the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this Agreement,
the value of each share of BRI Common Stock ("BRI Share 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 11.5 hereof, provided that in any event the BRI Share 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 Share Value
(including the Fixed Floor and Fixed Ceiling) will be
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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.
(c) The Management Company and the Stockholders acknowledge
and agree that after the execution hereof, the price of the BRI Common Stock
may increase or decrease in value as the result of market fluctuations prior
and subsequent to the Public Offering. Notwithstanding these fluctuations,
once the value and number of BRI Shares have been established as provided in
this Section 1.5, BRI will not be required to increase or be permitted to
decrease the number of BRI Shares to be issued to the Stockholders in the
event of a decrease or increase in the market value of the BRI Common Stock
subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the
nearest whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the
Certificate of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after
the Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state
of Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to
do business and is in good standing in all other jurisdictions in which the
failure to be so qualified and in good standing would have a material adverse
effect on the Management Company's business (a "Material Adverse Effect").
Such jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2
attached hereto, including the number of Company Shares outstanding. Such
Company Shares are held of record and beneficially owned by the Stockholders
as set forth on Schedule 2.2 attached hereto. All of such Company Shares have
been duly and validly issued, are fully paid and nonassessable and free of all
preemptive rights and were issued in compliance with applicable federal and
state securities laws. There are no outstanding or authorized options,
warrants, rights, agreements or commitments to which the Management Company is
a party or which are binding upon the Management Company providing for the
issuance, disposition or acquisition of any of its capital stock. There are
no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to the Management Company. There are no agreements,
voting trusts, proxies, or understandings with respect to the voting, or
registration under the Securities Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this Agreement
and the agreements provided for herein by the Management Company, and the
consummation by the Management Company of all transactions contemplated hereby
and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management
Company, enforceable against the Management Company 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. The execution, delivery and performance by the
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Management Company of this Agreement and the agreements provided for herein,
and the consummation by the Management Company of the transactions
contemplated hereby and thereby, will not, with or without the giving of
notice or the passage of time or both, (a) violate the provisions of any law,
rule or regulation applicable to the Management Company; (b) violate the
provisions of the Certificate of Incorporation or By-laws of the Management
Company; (c) violate any judgment, decree, order or award of any court, governme
ntal body or arbitrator which would have a Material Adverse Effect; or (d)
conflict with or result in the breach or termination of any term or provision
of, or constitute a default under, or cause any acceleration under, or cause
the creation of any lien, charge or encumbrance upon the properties or assets
of the Management Company pursuant to, any indenture, mortgage, deed of trust
or other instrument or agreement to which the Management Company is a party or
by which the Management Company or any of its properties is or may be bound
which would have a Material Adverse Effect. Schedule 2.3 attached hereto sets
forth a true, correct and complete list of all material consents and approvals
of third parties that are required in connection with the consummation by the
Management Company of the transactions contemplated by this Agreement and the
agreements provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the
Closing) other than (i) the Contracts and (ii) the assets set forth on
Schedule 2.4 hereto. The Management Company shall distribute the Excluded
Assets prior to Closing to the Shareholders. Upon the Closing, the Management
Company will own all tangible assets set forth on Schedule 2.4 attached
hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements")
and on or before August 31, 1997 the Management Company shall provide
unaudited financial statements (the "Current Financial Statements") for the
six-month period ending June 30, 1997 (the "Balance Sheet Date"). The
December 31 Financial Statements, the Current Financial Statements and the
Closing Financial Statement to be delivered pursuant to Section 6.8 are
collectively referred to as the "Financial Statements". The Financial
Statements fairly present the financial condition of the Management Company 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). The
Financial Statements shall be certified by the Management Company&WP1-9;s
chief financial officer.
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2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course
of business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of
the date of Closing, the Management Company shall have no liabilities or
obligations (absolute or contingent) for borrowed money and shall have no
other liabilities or obligations (absolute or contingent) of any kind, other
than (a) liabilities and obligations incurred in the ordinary course of the
Management Company's business which are either (i) in the aggregate, not
material, 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 Contracts. For purposes of this Subsection 2.6, "material"
means any amount in excess of $50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the
Management Company or the Stockholders, proceeding or investigation pending or
threat thereof, against the Management Company or the Stockholders which
questions the validity of this Agreement or the right of the Management
Company or the Stockholders to enter into it, or which might result in or
have, either individually or in the aggregate, a Material Adverse Effect on
the Management Company. The Management Company is not in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule
of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority except for
such violations or defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims
thereunder. The Management Company has done nothing to reduce or impair the
insurance afforded by the Insurance Policies. To the Management Company'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.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development
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which would have a Material Adverse Effect on the business, properties, assets,
condition or prospects of the Management Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns and
information statements required to be filed by or on behalf of the Management
Company, or for which the Management Company 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 deficiency or refund litigation
or matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due
with respect to completed and settled examinations or concluded litigation
have been paid.
(b) The Management Company 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) Neither the Management Company, nor the Stockholders,
know of (A) any audit or investigation of the Management Company with respect
to any liability for taxes relating to the Management Company, or (B) any
threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and complete
copy of the Federal Income Tax Return for 1996 for the Management Company, as
filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of account
of the Management Company, all federal, state and local income, franchise,
property and other tax returns filed by the Management Company, and all other
books and records of the Management Company are in all material respects complet
e and correct and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true, complete
and correct list of the following contracts and agreements, whether written or
oral (collectively, the "Contracts"):
(i) all management contracts to which the Management
Company is a party;
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(ii) all loan agreements, indentures, mortgages and
guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title retention
agreements, security agreements, personal property leases and lease purchase
agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other understandings
or arrangements between the Management Company and any stockholder or
affiliate of the Management Company except those described in the Financial
Statements or in writing to BRI; and
(v) any other material agreement or contract entered
into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached hereto:
(i) each Contract is a valid and binding agreement of
the Management Company, enforceable against the Management Company in
accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company and
the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
(iii) To the knowledge of the Management Company and
the Stockholders, the Management Company is not in breach of or default under
any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto except for such defaults, losses, liens,
changes or encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management Company
and the Stockholders, there is no existing breach or default by any other
party to any
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Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto except, in each case, as would not have a
Material Adverse Effect.
(c) Except as set forth on Schedule 2.12, the continuation,
validity and effectiveness of each Contract will not be affected by the Merger
(d) True, correct and complete copies of all Contracts have
previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management Company
has all requisite licenses, permits and certificates, including environmental,
health and safety permits, from federal, state and local authorities necessary
to conduct its business and own and operate its assets (collectively, the
"Permits") except as would not have a Material Adverse Effect. The
Management Company is not in violation of any law, regulation or ordinance
(including, without limitation, laws, regulations or ordinances relating to
building, zoning, environmental, disposal of hazardous substances, land use or
similar matters) relating to its properties, the violation of which would have
a Material Adverse Effect on the Management Company or its properties. The
business of the Management Company does not violate, in any material respect,
any federal, state, local or foreign laws, regulations or orders (including,
but not limited to, any of the foregoing relating to employment
discrimination, occupational safety, environmental protection, hazardous waste
(as defined in the Resource Conservation and Recovery Act, as amended, and the
regulations adopted pursuant thereto), conservation, or corrupt practices, the
enforcement of which would have a Material Adverse Effect on the Management
Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have
a Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached
hereto, since the Balance Sheet Date, the Management Company has not entered
into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the
Management Company has not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge or
other encumbrance any assets of the Management Company;
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(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or
regulation which must be obtained or satisfied by the Management Company and
which are necessary for the execution and delivery by the Management Company
of this Agreement and the documents to be executed and delivered by the
Management Company in connection herewith are set forth on Schedule 2.16
attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of the
Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate list of
all Employee Benefit Plans (as defined below) maintained, or contributed to,
by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee
pension benefit plan" (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written
plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits,
disability benefits, deferred compensation, bonuses, stock options, stock
purchase, phantom stock, stock appreciation or other forms of incentive
compensation or post-retirement compensation. For purposes of this Agreement,
"ERISA Affiliate" means any entity which is a member of (i) a controlled group
of corporations (as defined in Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (iii) an affiliated service group (as defined under Section 414(m)
of the Code or the
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regulations under Section 414(o) of the Code), any of which includes the
Management Company. Complete and accurate copies of (i) all Employee Benefits
Plans, (ii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iii) all annual reports filed on IRS Form 5500, 5500C or
5500R for the last three plan years for each Employee Benefit Plan, have been
delivered to the BRI. Each Employee Benefit Plan has been administered in all
material respects in accordance with its terms and each of the Management
Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Management Company and all Employee Benefit Plans are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder.
(c) There are no investigations by an governmental entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with
respect to qualified domestic relations orders), suits or proceedings against
or involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit
Plans are qualified and the plans and the trusts related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively, of
the Code, no such determination letter has been revoked and revocation has not
been threatened, no such Employee Benefit Plan has been amended since the date
of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would likely result in a
revocation of such determination.
(e) Neither the Management Company nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(f) At no time has the Management Company or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred
compensation, but excluding continuation of health coverage required to be
continued under Section 4980B of the Code and insurance conversion privileges
under state law.
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3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and authority
to enter into and deliver this Agreement and the other agreements provided for
herein and to consummate the transactions contemplated hereby and thereby.
This Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby constitute
the valid and legally binding obligations of such Stockholder, enforceable
against such Stockholder 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. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or
arbitrator; or (c) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
Company Shares of such Stockholder pursuant to, any indenture, mortgage, deed
of trust or other instrument or agreement to which such Stockholder is a party
or by which such Stockholder is or may be bound. Schedule 3.1 attached hereto
sets forth a true, correct and complete list of all consents and approvals of
third parties that are required in connection with the consummation by such
Stockholder of the transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares 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 Shares except in compliance with the
registration requirements or exemption provisions of any applicable securities
laws and in accordance with the terms of the Registration Rights Agreement (as
defined below).
(b) Such Stockholder understands that the BRI Shares to be
issued to Stockholder 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 reliance on
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such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that, for the
reasons set forth in paragraphs (a) and (b) above, the BRI Shares may not be
offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder 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 Shares may be made without registration under the Act,
together with either registration or an exemption under applicable Blue Sky
Laws, or (iii) upon BRI receiving an opinion of counsel knowledgeable in
securities law matters (and which opinion and counsel shall be reasonably
acceptable to 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 Stockholder must bear the economic risk of an
investment in the BRI Shares for an indefinite period of time. Such
Stockholder acknowledges, represents and agrees that (i) his or her economic
circumstances are such that he or she is able to bear all risks of the
investment in BRI and the BRI Shares for an indefinite period of time,
including the risk of a complete loss of his or her investment in the BRI
Shares, (ii) he or she has knowledge and experience in financial and business
matters sufficient to evaluate the risks of investment in BRI, and (iii) he or
she has consulted with his or her own separate counsel and tax advisor, to the
extent necessary, as to all legal and taxation matters covered by this
Agreement and has not relied upon BRI, its affiliates or its 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 his or her acquisition of
the BRI Shares. Such Stockholder further acknowledges and represents that he
or she has made his or her own independent investigation of BRI and the
business conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor" within the
meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment in BRI
involves substantial risks; such Stockholder acknowledges that he or she has
(i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and
information relevant to its decision to enter into this Agreement and to
invest in BRI, including, without limitation, BRI's SEC Filings (as defined
below) and the Private Placement Memorandum of BRI, dated as of August 25,
1997 (the "PPM") and (iii) had the opportunity to ask questions of BRI and its
management concerning his or her investment in BRI and the transactions
contemplated hereby, which questions were answered to his or her satisfaction.
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(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her 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) Until such time as the following legend is no longer required,
the BRI Shares 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 "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) BRI reserves the right to place a stop order against the
transfer of the BRI Shares and to refuse to effect any transfers thereof, in
the absence of satisfying the conditions contained in the foregoing legend.
(g) The address of each Stockholder set forth on Schedule
2.2 attached hereto is the address of such Stockholder's principal residence
or principal place of business, and such Stockholder 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 3.2 shall survive the
Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
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4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation 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; (b) BRI has the right,
power and authority to issue the BRI Shares 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; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, 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 (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other
documents and instruments contemplated hereby and the performance by BRI of
its obligations hereunder and thereunder do not and will not constitute a
default under, or conflict with or violate, any provision of the Certificate
of Incorporation or By-Laws of BRI or any other material agreement to which
BRI is a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders 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 BRI 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 BRI with the Securities
and Exchange Commission since December 31, 1996 (the "SEC Filings"). The
financial statements of BRI 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 BRI 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 ended
adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or 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
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of BRI in connection with the valid execution and delivery of this Agreement by
BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI consists
of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares were
issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly
authorized, validly issued, fully paid, nonassessable and free and clear of
all preemptive rights and of any lien, claim, change, pledge, encumbrance,
limitation, agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other similar proceedings are pending or, to BRI's
knowledge, threatened against BRI, nor are any of such proceedings anticipated
or contemplated by BRI.
4.6 PPM. The PPM, as of the date 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.
4.7 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 will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has received
all of the documents described herein as delivered thereto (unless it has
notified the Management Company or the Stockholders otherwise in writing) and
represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax returns and
information statements required to be filed by or on behalf of BRI or for
which BRI 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 deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
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(b) BRI 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) BRI does not know of (A) any audit or investigation of
BRI with respect to any liability for taxes relating to BRI, or (B) any
threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue after
Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI
or its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to
enter into it, or which would likely have, either individually or in the
aggregate, a material adverse effect on the business of BRI as such is
presently conducted.
4.12 Title to Properties and Assets. BRI 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 BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 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 BRI and BRI is not in material violation of any
Environmental Laws to such an extent that it would have a material adverse
effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals,
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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.
5. Access to Information
5.1 Access to Management, Properties and Records; Due Diligence.
From the date of this Agreement until the Closing Date, BRI may examine the
accounting books and other business and financial records, plans, reports and
documents of the Management Company and its business, including all corporate
records, tax returns, contracts, licenses, business plans and projections,
audits and audit work papers, employee benefit plans, employee records,
management plans and records, and any and all other information reasonably
requested by BRI, and the Management Company and the Stockholders shall
cooperate fully with BRI's representatives and make themselves available, so
that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or
copies of, all such books and records. The Management Company shall furnish
to BRI such financial and operating data and other information as to the
assets and the business of the Management Company as BRI shall reasonably
request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable to the
conduct of the business of the Management Company;
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(b) 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;
(c) Unless the Management Company is contesting the same in
good faith and has established reasonable reserves therefor, pay when required
to be paid all taxes indicated by the Management Company's 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; and
(d) Comply in all material respects with each and every
undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may
be applicable:
(a) Take any action to materially amend the Management
Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other corporate
securities of the Management Company or grant any option or issue any warrant
to purchase or subscribe to any of such securities or issue any securities
convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of the
Management Company other than the Excluded Assets;
(e) 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;
(f) Make any election or give any consent under the Code or
the tax statutes of any state or other jurisdiction or make any termination,
revocation or cancellation of any such election or any consent or compromise
or settle any claim for past or present tax due;
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(g) Waive any rights of material value relating to the
business of the Management Company;
(h) Modify, amend, alter or terminate any of its management
contracts or other material contracts;
(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control of its
assets and business, (ii) keep in faithful service its present officers and
key employees, (iii) preserve the goodwill of its customers and others having
business relations with it, and (iv) keep and preserve its business existing
on the date hereof until the Closing Date provided that the Management Company
and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its books,
accounts and records in the customary manner and in the ordinary or regular
course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent pursuant to
the management contracts, enter into any leases, contracts, agreements or
understandings other than those entered into in the ordinary course of
business calling for payments which in the aggregate do not exceed $50,000 for
each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis, file
all tax returns for and pay any and all taxes which shall become due or shall
have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
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6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and
3 hereof being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior to
the Closing, the Management Company and the Stockholders will deliver or cause
to be delivered to BRI supplemental information concerning events subsequent
to the date hereof which would render any statement, representation or
warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations
and statements of cash flows with respect to the Management Company for the
one month period that ended immediately preceding the month in which the
Closing occurs, certified by the Management Company&WP1-9;s chief financial
officer (the "Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth
on Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate
the transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance Policies
in full force and effect following the Closing in accordance with the terms
thereof, or to maintain other insurance policies having terms that are no less
favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations
and warranties set forth in Sections 2 and 3 shall be true on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, except for any changes permitted by the terms hereof or
consented to in writing by BRI. The Management Company and the Stockholders
shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or
carry out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by the Management Company and
the Stockholders of the transactions contemplated by this Agreement shall have
consented to, authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the
Stockholder to consummate the transactions contemplated by this Agreement,
including, without limitation, those consents and approvals set forth on
Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Venable, Baetjer & Howard, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly
authorized the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4 attached
hereto.
7.10. Closing Deliveries. BRI shall have received at or prior to
the Closing each of the following documents:
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(a) such contracts, files and other data and documents
pertaining to the business of the Management Company as BRI may reasonably
request;
(b) copies of the general ledgers and books of account of
the Management Company, and all federal, state and local income, franchise,
property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and the
Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management Company
attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by
the Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates as
BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties
of BRI in this Agreement shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except
for any changes consented to in writing by the Management Company. BRI shall
have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by BRI of the transactions
contemplated by this Agreement shall have consented to, authorized, permitted
or approved such transactions.
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8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or
approval is required in order for BRI to consummate the transactions
contemplated by this Agreement, including, without limitation, those set forth
on Schedule 8.4 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened
by any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Brown, counsel to BRI, dated as of the
Closing Date, substantially in the form of Exhibit 5 attached hereto and as to
such matters as may be reasonably requested by the Management Company or its
counsel.
8.7 Employment and Consulting Agreements. Stephen M. Gorn and
John B. Colvin shall have executed and delivered employment agreements with
BRI, and Morton Gorn shall have executed and delivered a Consulting Agreement
with BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 124 Slade Avenue,
Baltimore County, Maryland, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the State of
Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting to the
incumbency of BRI's officers, the authenticity of the resolutions authorizing
the transactions contemplated by this Agreement, and the authenticity and
continuing validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form attached
hereto as Exhibit 6 duly executed by BRI; and
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(e) such other documents, instruments or certificates as
the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the parties
proceed to Closing, each Stockholder agrees, severally and not jointly, to
indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting
from any breach or default by the Management Company or such Stockholder of
any obligation of the Management Company or such Stockholder under this
Agreement or (ii) from liabilities for borrowed money incurred by the
Management Company prior to the Closing; provided that no Stockholder shall be
required to indemnify BRI for any amounts in excess of 50% of the fair market
value of the BRI shares received by such Stockholder as of the date such
indemnification obligation is satisfied (except for indemnification
obligations with respect to representations of each of the Stockholders in
Section 3.2, which shall be limited to 100% of the fair market value as of the
date such indemnification obligation is satisfied of the BRI Shares received
by such Stockholder (collectively, the "Cap"); and provided further that to
the extent any of the Stockholders have any indemnification obligation to BRI,
the Stockholder may elect to satisfy such indemnification obligation by
directing BRI to cancel such amount of BRI shares acquired by such Stockholder
pursuant to this Agreement having a fair market value (measured at the time
such BRI shares are returned or cancelled) equal to the indemnification
obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing
Date, resulting from (A) any inaccuracy in or breach of any representation or
warranty of BRI or (B) resulting from any breach or default by BRI of any
obligation of BRI under this Agreement or (ii) from liabilities of the
Management Company accruing after the Closing (including liabilities accruing
after the Closing in connection with employee benefit plans) (except for such
liabilities resulting from a breach or default by the Stockholder or the
Management Company for which BRI is indemnified under Section 9(a) above);
provided that BRI shall not be required to indemnify any Stockholder under
Section 9(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 shares
received by such Stockholder (except for indemnification obligations with
respect to Section 4.10 which shall be limited to 100% of the fair market
value as of the date such indemnification obligation is satisfied of the BRI sha
res received by such Stockholder; and
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(c) The indemnification obligations of the Stockholders
and BRI, 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 14. 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.
(e) Neither BRI nor any of the Stockholders shall have any
liability for claims made under Section 9(a) or 9(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 9 shall be
the sole and exclusive remedy after the Closing Date for damages available to
BRI or the Stockholders 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
BRI or the Management Company.
(g) Each of the Stockholders, the Management Company and
BRI 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.
(h) Promptly after receipt by any party hereto of notice of
the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action.
In case any such action is brought, the Stockholders shall be entitled, but
shall not be required, to participate in the defense thereof, or the
Stockholders may elect to take charge of and control the defense of such
action, provided that the stockholders shall agree to pursue the defense of
such action or claim in good faith by appropriate actions or proceedings
promptly taken or instituted and diligently pursued.
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10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate
at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may
be terminated by the mutual written agreement of the Parties. In the event of
such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further
obligation or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of the
Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven 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 BRI desires to consummate the Merger in accordance with the
terms of this Agreement and the Management Company or the Stockholders
willfully refuse to perform their respective obligations hereunder, BRI, at
its option, shall have the right to compel specific performance by the
Management Company and the Stockholders to close the transaction hereunder, in
which event BRI shall have the right to recover from the Management Company
and the Stockholders the amount of all reasonable legal fees, court costs and
other litigation expenses incurred by BRI in connection with the exercise of
its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed to
perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven 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 Management Company desires to consummate the Merger in
accordance with the terms of this Agreement and BRI
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willfully refuses to perform its obligations hereunder, the Management Company,
at its option, shall have the right to compel specific performance by BRI to
close the transaction, in which event the Management Company (and the
Stockholders) shall have the right to recover from BRI the amount of all
reasonable legal fees, court costs and other litigation expenses incurred in
connection with the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the Management
Company and the Shareholders that in connection with the consummation of the
various Related Transactions (as defined in Section 11.6 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 placement
of common stock or other equity securities of BRI (the "Private Placement").
The Management Company and the Shareholders 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 BRI 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, BRI 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.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have 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 Exhibit 4 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 [as such term is
defined in the Related Agreements] (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, unless such date is
extended by the written consent of all of the parties hereto, 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, unless such date is extended by the written consent of all of the
parties hereto, whereupon this Agreement shall be void and without recourse to
all parties, except for provisions which are expressly
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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.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none 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 Management Company 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 Stockholders and QPI in
accordance with the provisions of Section 12.3 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 BRI or the
Management Company have any obligation to pay any commission to APC.
12.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
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 Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company 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
Management Company 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 purposes of
this Section 12.2, each of the Stockholders 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 certain 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 12.1 hereof, up to $1,000,000 of such fee
(which may be paid at Closing or held back in an escrow account by Questar
Investment Corporation 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 Questar Investment Corporation
shall also be Indirect Costs. Each of the Stockholders acknowledges and
agrees that (i) any and all Direct Costs shall be allocated to each of them
with respect to their interest in the Management Company and (ii) any and all
Indirect Costs shall be allocated among
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the Stockholders and Related Entities at Closing based on the pro rata number of
BRI shares allocated at Closing to each of them. Each of the Stockholders
further acknowledges and agrees that Questar Investment Corporation shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 12.2.
12.3 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 cash:
(a) prepaid and collected fees received under any of the
Contracts;
(b) wages and pension benefits of all persons employed by
the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable to
the Management Company 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.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation
necessary to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any
of such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
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13. 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 to such address as the Management Company, the Stockholders or
BRI shall otherwise have given notice as herein provided):
If to BRI: 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 c/o Questar Properties, Inc.
Management 124 Slade Avenue, Suite 200
Company or the Baltimore, MD 21208
Stockholders: 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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14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions
of 9(c)) 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 2.10, 4.7 and 4.9 shall survive until thirty (30) days
after the expiration of the applicable statute of limitations. Except as set
forth in the immediately preceding sentence or otherwise as specified in this
Agreement, the representations, warranties, covenants and other obligations of
the Management Company and the Stockholders set forth in Sections 2 (other
than Section 2.10) and 3 (other than Section 3.2) and the representations and
warranties, covenants and other obligations of BRI contained in Section 4
(other than Sections 4.7, 4.9 and 4.10) shall survive until 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 12
months after the Closing Date. Except as otherwise specifically provided in
this Agreement, no other representations, warranties, covenants or other
obligations of the Management Company, the Stockholders or BRI set forth in
this Agreement shall survive the Closing, and no action based thereon shall be
commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes 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.
17. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Delaware.
18. 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.
19. 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 hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to
assign or transfer their right to receive BRI Shares.
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20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to
BRI 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 BRI by written notice given at any time prior to such acceptance and
satisfaction.
21. 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.
22. 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.
23. Publicity. In no event shall any Party issue any press release
or otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties
have 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 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 from filing this Agreement, the Exhibits hereto and the Schedules
as exhibits to any filings by BRI required by any securities laws.
Notwithstanding 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 24 shall survive the Closing.
24. 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE KINGSWOOD MANAGEMENT COMPANY
/s/ By: /s/
- ---------------------------- -------------------------------------
Name:
Title: President
WITNESS: STOCKHOLDERS:
/s/ By: /s/ Morton Gorn
- ---------------------------- -------------------------------------
Morton Gorn
/s/ By: /s/ Stephen M. Gorn
- ---------------------------- -------------------------------------
Stephen M. Gorn
/s/ By: /s/ John B. Colvin
- ---------------------------- -------------------------------------
John B. Colvin
/s/ By: /s/ Karen Colvin
- ---------------------------- -------------------------------------
Karen Colvin
WITNESS: BERKSHIRE REALTY COMPANY, INC.
/s/ By: /s/ David J. Olney
- ---------------------------- -------------------------------------
Name: David J. Olney
Title: Senior Vice President
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List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 4 Slade Avenue Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement