-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sr/CcSpZ3BCvSADvzH1v3Yc0m05Pj3aKLc/8QlvRfVQBetk3GxZA3rSEtuTsLLPt Lqx+dVc1P4p//VWg+O2XOg== 0001029869-97-001277.txt : 19971106 0001029869-97-001277.hdr.sgml : 19971106 ACCESSION NUMBER: 0001029869-97-001277 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19971014 ITEM INFORMATION: FILED AS OF DATE: 19971105 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE REALTY CO INC /DE CENTRAL INDEX KEY: 0000869446 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 043086485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-10660 FILM NUMBER: 97708123 BUSINESS ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6174232233 MAIL ADDRESS: STREET 1: 470 ATLANTIC AVE CITY: BOSTON STATE: MA ZIP: 02210 8-K/A 1 BERKSHIRE REALTY COMPANY, INC. FORM 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A Amendment No. 1 to Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 14, 1997 Berkshire Realty Company, Inc. Delaware 1-10660 04-3086485 -------- ------- ---------- (State or other jurisdiction (Commission (IRS Employer of incorporation File Number) Identification No.) or organization) 470 Atlantic Avenue, Boston, MA 02210 ----------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 423-2233 ---------------- Item 7. Financial Statements and Exhibits. --------------------------------- (c) Exhibits. The following exhibits are filed herewith: 3(ii) Bylaws as amended of Berkshire Realty Company, Inc. 4.1 Certificate of Designation designating 2,737,000 shares of Preferred Stock or 2,737,000 shares of Series 1997-A Convertible Preferred Stock (par value $0.01 per share) dated September 30, 1997. 10.25 Form of Development Acquisition Agreement among Questar Properties, Inc. Stephen M. Gorn, John B. Colvin and BRI OP Limited Partnership 10.26 Development Contribution Agreement (Avalon, 1,3,4) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.27 Development Contribution Agreement (Liriope) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.28 Development Contribution Agreement (Granite Run) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.29 Development Contribution Agreement (Avalon 2) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C. dated as of August 25, 1997 10.32 Stock Purchase Agreement among Berkshire Realty Company, Inc., Westbrook Real Estate Fund II, L.P. and Westbrook Berkshire Holdings, L.L.C. dated as of September 19, 1997 10.33 Exchange and Amendment Agreement among Berkshire Realty Company, Inc., Westbrook Berkshire Holdings, L.L.C. and Morgan Stanley Asset Management, Inc., as attorney in fact for certain clients, dated as of September 30, 1997 10.34 Registration Rights Agreement between Berkshire Realty Company, Inc. and Westbrook Berkshire Holdings, L.L.C. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BERKSHIRE REALTY COMPANY INC. /s/ Marianne Pritchard ----------------------------- Marianne Pritchard Senior Vice President and Chief Financial Officer Date: November 5, 1997 EXHIBIT INDEX Exhibit No. Exhibit Item - ----------- ----------------------------------------------------------------- 3(ii) Bylaws as amended of Berkshire Realty Company, Inc. 4.1 Certificate of Designation designating 2,737,000 shares of Preferred Stock or 2,737,000 shares of Series 1997-A Convertible Preferred Stock (par value $0.01 per share) dated September 30, 1997. 10.25 Form of Development Acquisition Agreement among Questar Properties, Inc. Stephen M. Gorn, John B. Colvin and BRI OP Limited Partnership 10.26 Development Contribution Agreement (Avalon, 1,3,4) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.27 Development Contribution Agreement (Liriope) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.28 Development Contribution Agreement (Granite Run) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.29 Development Contribution Agreement (Avalon 2) among Stephen Gorn, John B. Colvin and BRI OP Limited Partnership dated as of August 25, 1997 10.31 Loan Agreement between BRI OP Limited Partnership and GGC, L.L.C. dated as of August 25, 1997 10.32 Stock Purchase Agreement among Berkshire Realty Company, Inc., Westbrook Real Estate Fund II, L.P. and Westbrook Berkshire Holdings, L.L.C. dated as of September 19, 1997 10.33 Exchange and Amendment Agreement among Berkshire Realty Company, Inc., Westbrook Berkshire Holdings, L.L.C. and Morgan Stanley Asset Management, Inc., as attorney in fact for certain clients, dated as of September 30, 1997 10.34 Registration Rights Agreement between Berkshire Realty Company, Inc. and Westbrook Berkshire Holdings, L.L.C. EX-3.(II) 2 BY-LAWS BY-LAWS of BERKSHIRE REALTY COMPANY, INC. (as amended through October 9, 1997) ARTICLE I SHAREHOLDERS SECTION 1. Annual Meeting. The annual meeting of shareholders shall be held on the first Tuesday of May in each year after 1990 (or if that be a legal holiday in the place where the meeting is to be held, on the next succeeding full business day) at the principal office of the Corporation in Massachusetts at ten o'clock a.m., unless a different hour, date or place within or without the United States is fixed by the Board of Directors, the Chairman of the Board, if one is elected, or the President. If no annual meeting has been held on the date fixed as above provided, a special meeting in lieu thereof may be held, and such special meeting shall have, for the purposes of these By-laws or otherwise, all the force and effect of an annual meeting. SECTION 2. Matters to be Considered at Annual Meeting. At an annual meeting of shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before the annual meeting (a) by, or at the direction of, a majority of the Board of Directors (unless at the time of such action there is an Interested Shareholder, in which case the affirmative vote of a majority of the Continuing Directors then in office shall also be required) or (b) by any shareholder of the Corporation who complies with the notice procedures set forth in this Section 2. For a proposal to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than 50 days nor more than 150 days prior to the scheduled annual meeting, regardless of any postponements, deferrals or adjournments of that meeting to a later date; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the shareholder to be timely must be so delivered or received not later than the close of business on the 15th day following the day on which such notice of the date of the scheduled annual meeting was mailed. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's stock transfer books, of the shareholder proposing such business and of the beneficial owners (if any) of the stock registered in such shareholder's name and the name and address of other shareholders known by such shareholder to be supporting such proposal, (c) the class and number of shares of the Corporation's capital stock which are beneficially owned by the shareholder and beneficial owners (if any) on the date of such shareholder's notice and by any other shareholders known by such shareholder to be supporting such proposal on the date of such shareholder's notice, and (d) any financial interest of the shareholder in such proposal. If the Board of Directors determines that any shareholder proposal was not timely made in accordance with the terms of this Section 2, the Board of Directors may determine that such shareholder proposal will not be acted upon at the annual meeting. If the Board of Directors, or a designated committee thereof, determines that the information provided in a shareholder's notice does not satisfy the informational requirements of this section in any material respect, the Secretary of the Corporation shall promptly notify such shareholder of the deficiency in the notice. The shareholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed 5 days from the date such deficiency notice is given to the shareholder, as the Board of Directors or such committee shall reasonably determine. If the deficiency is not cured within such period, or if the Board of Directors or such committee determines that the additional information provided by the shareholder, together with the information previously provided, does not satisfy the requirements of this Section 2 in any material respect, then the Board of Directors may determine that such shareholder proposal will not be acted upon at the annual meeting. If there is an Interested Shareholder, any determination to be made by the Board of Directors or a designated committee thereof pursuant to the provisions of this Section 2 shall also require the concurrence of a majority of the Continuing Directors then in office. The Secretary of the Corporation shall notify a shareholder in writing whether his proposal has been made in accordance with the time and informational requirements of this Section. Notwithstanding the procedure set forth in the preceding paragraph, if neither the Board of Directors nor such committee makes a determination as to the validity of any shareholder proposal, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether the shareholder proposal was made in accordance with the terms of this Section 2. If the presiding officer determines that a shareholder proposal was made in accordance with the terms of this Section 2, he shall so declare at the annual meeting and ballots shall be provided for use at the meeting with respect to any such proposal. If the presiding officer determines that a shareholder proposal was not made in accordance with the terms of this Section 2, he shall so declare at the annual meeting and any such proposal shall not be acted upon at the annual meeting. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, Directors and committees of the Board of Directors, but in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided. SECTION 3. Special Meetings. Special meetings of the shareholders of the Corporation may be called only in the manner provided in the Restated Certificate of Incorporation. SECTION 4. Matters to be Considered at Special Meetings. Only those matters set forth in the call of the special meeting may be considered or acted upon at such special meeting, unless otherwise provided by law. -2- SECTION 5. Notice of Meetings; Adjournments. A written notice of all annual meetings of shareholders stating the hour, date and place of such annual meetings shall be given by the Secretary or an Assistant Secretary (or other person authorized by these By-laws or by law) not less than 10 days nor more than 60 days before the meeting, to each shareholder entitled to vote thereat or to each shareholder who, under the Restated Certificate of Incorporation or under these By-laws, is entitled to such notice, by delivering such notice to him or by mailing it, postage prepaid, addressed to such shareholder at the address of such shareholder as it appears on the Corporation's stock transfer books. Such notice shall be deemed to be delivered when hand delivered to such address or deposited in the mail so addressed, with postage prepaid. Notice of all special meetings of shareholders shall be given in the same manner as provided for annual meetings of the shareholders, except that the written notice of all special meetings shall state the purpose or purposes for which the meeting has been called. Notice of an annual or special meeting of shareholders need not be given to a shareholder if a written waiver of notice is executed before or after such meeting by such shareholder or such shareholder's authorized attorney, if communication with such shareholder is unlawful, or if such shareholder attends such meetings unless such attendance was for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of shareholders need be specified in any written waiver of notice. When any annual or special meeting of shareholders is adjourned to another hour, date or place, notice need not be given of the adjourned meeting other than an announcement at the meeting at which the adjournment is taken of the hour, date and place to which the meeting is adjourned; provided, however, that if the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given as in the case of the original meeting to each shareholder of record entitled to vote thereat. SECTION 6. Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at any annual or special meeting of shareholders; but if less than a quorum is present at a meeting, a majority in interest of the shareholders present or the presiding officer may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 5 of this Article I. At such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 7. Voting and Proxies. Shareholders shall have one vote for each share of stock entitled to vote owned by them of record according to the books of the Corporation, unless otherwise provided by law or by the Restated Certificate of Incorporation. Shareholders may vote either in person or by written proxy, but no proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Proxies shall be filed with the Secretary of the meeting before being voted. Except as otherwise limited therein, proxies shall entitle the persons -3- authorized thereby to vote at any adjournment of such meeting, but they shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to the exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a shareholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. SECTION 8. Rights of the Series 1997-A Convertible Preferred Shareholders - (a) Voting - The holders of shares of Series 1997-A Convertible Preferred Stock have the right to vote on all matters in which the holders of Common Stock are entitled to vote, including but not limited to the ability to notice special meetings and to determine the subject matter thereof, on an "as converted" basis with holders of shares of Common Stock, as though part of the same class as holders of Common Stock, with such number of shares of Common Stock deemed held of record by holders of shares of Series 1997-A Convertible Preferred Stock on any Record Date as would be the number of shares of Common Stock into which the shares of Series 1997-A Convertible Preferred Stock held by such holder would be entitled to be converted on such Record Date. Notwithstanding the foregoing, as set forth in the Certificate of Designation with respect to the Series 1997-A Convertible Preferred Stock, with respect to votes as to directors, merger or consolidation, the issuance of any shares of Series 1997-A Convertible Preferred Stock, the exchange or conversion of any shares of Series 1997-A Convertible Preferred Stock or the amendment, alteration or repeal of any provision of the Corporation Charter, the Certificate of Designation providing for the preferences and rights of the holders of shares of Series 1997-A Convertible Preferred Stock, the Agreement of Limited Partnership of the Operating Partnership, or any organizational document of any Subsidiary, in such a manner as would affect adversely the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series 1997-A Convertible Preferred Stock, the holders of Series 1997-A Convertible Preferred Stock must approve such action as a class by an affirmative vote of not less than a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock. (b) Notices - The holders of shares of Series 1997-A Convertible Preferred Stock will receive all notice of meetings of the holders of shares of Common Stock, and all other notices and correspondence to the holders of shares of Common Stock provided by the Corporation, and will be entitled to take such actions, and have such rights, as are set forth in the Certificate of Designation or are otherwise available to the holders of shares of Common Stock in the Charter and in the Bylaws of the Corporation as are in effect on the execution date, in each case with the same effect as would be taken by holders of Series 1997-A Convertible Preferred Stock if deemed to be holders of such number of shares of Common Stock as determined as aforesaid. (c) Resolutions - The Resolutions of the Board of Directors relating to the issuance of the 2,737,000 shares of Series 1997-A Convertible Preferred Stock are hereby adopted in the form attached. -4- SECTION 9. Action at Meeting. When a quorum is present, any matter before any annual or special meeting of shareholders shall be decided by vote of the holders of a majority of the shares of stock voting on such matter, except where a larger vote is required by law, by the Restated Certificate of Incorporation or by these By-laws. Any election by shareholders shall be determined by a plurality of the votes cast, except where a larger vote is required by law, by the Restated Certificate of Incorporation or by these By-laws. The Corporation shall not directly or indirectly vote any shares of its own stock except as to shares which it holds in a fiduciary capacity or except as otherwise permitted by law. An abstention shall not be deemed a vote cast. SECTION 10. No Action by Consent. Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly constituted annual or special meeting of such holders and may not be effected by any consent in writing by such shareholders. SECTION 11. Stockholder Lists. The Secretary or an Assistant Secretary (or the Corporation's transfer agent or other person authorized by these By-laws or by law) shall prepare and make, at least 10 days before every annual or special meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the hour, date and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. SECTION 12. Presiding Officer. The presiding officer at all annual or special meetings of shareholders shall have the power, among other things, to adjourn such meeting at any time and from time to time, subject to Sections 5 and 6 of this Article I. The order of business and all other matters of procedure at any meeting of the shareholders shall be determined by the presiding officer. ARTICLE II DIRECTORS SECTION 1. Powers. All the power of the Corporation shall be exercised by or under the direction of the Board of Directors except as otherwise provided by the Restated Certificate of Incorporation or required by law. SECTION 2. Number, Terms and Independent Directors. (a) Except as otherwise fixed pursuant to the provisions of the Restated Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation to elect additional Directors, the number of Directors of the Corporation shall be fixed by resolution duly adopted from time to time by the Board of Directors; provided, however, that if at the time of such action there is an Interested -5- Shareholder, such action shall also require a majority vote of the Continuing Directors then in office. The Directors, other than those who may be elected by the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible as determined by the Board of Directors, with one class to be elected annually. (b) The initial Directors of the Corporation shall hold office as follows: the first class of Directors shall hold office initially for a term expiring at the annual meeting of shareholders to be held in 1991, the second class of Directors shall hold office initially for a term expiring at the annual meeting of shareholders to be held in 1992, and the third class of Directors shall hold office initially for a term expiring at the annual meeting of shareholders to be held in 1993, with the members of each class to hold office until their respective successors are elected and qualified. Directors elected at each annual meeting of the shareholders of the Corporation shall hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election and until their respective successors are elected and qualified. The holders of shares of Series 1997-A Convertible Preferred Stock, voting as a separate class, shall be entitled at all times to elect one director (as defined in the Certificate of Designation, the "Series 1997-A Preferred Director") to the Board of Directors (the "Board") of the Company. In the event that the Series 1997-A Preferred Director is unable to attend any meeting of the Board for any reason, then such Series 1997-A Preferred Director may designate, in writing, one person (the "Observer") who shall have the right to attend, but not vote at, such meeting. The Observer shall not be deemed to be a member of the Board and shall have none of the rights, duties, privileges or powers of a member of the Board including, without limitation, the right to notice of or to vote at meetings of the Board, and shall not be counted as a member of the Board for the purpose of determining whether a quorum is present at any meeting of the Board. (c) At least a majority of the entire Board and a majority of the Audit Committee of the Board shall be Independent Directors. Independent Directors are those Directors of the Corporation who are not Affiliates or employees of the Corporation or the Corporation's Advisor, and: (i) have no material business relationship with the Corporation or its Advisor, (ii) perform no other services for the Corporation, other than as Directors, and (iii) do not directly or indirectly (including through a member of his immediate family) own any interest in the Corporation's Advisor. In addition, an Independent Director may not serve as a director for more than two other investment programs sponsored by The Krupp Corporation or its Affiliates. For purposes of this Section 2(c), a material business relationship shall mean a business relationship which results in remuneration to an Independent Director in excess of $50,000. An "Affiliate" shall mean any person directly or indirectly controlling, controlled by or under common control with another person. The "Advisor" shall mean the person(s) or entity responsible for directing or performing the day-to-day business affairs of the Corporation, including a person or entity to which the Adviser subcontracts substantially all such functions. The Independent Directors shall supervise the relationship of the Corporation to the Advisor. -6- SECTION 3. Director Nominations. Nomination of candidates for election as Directors of the Corporation at any annual meeting of shareholders may be made (a) by, or at the direction of, a majority of the Board of Directors (unless at the time of such action there is an Interested Shareholder, in which case the affirmative vote of a majority of the Continuing Directors shall also be required) provided that, a person meeting the requirements of an Independent Director, as that term is defined in Section 2(c) of this Article II, shall be nominated by, or at the direction of, the Board of Directors as necessary in order to maintain a majority of Independent Directors on the Board of Directors, or (b) by any shareholder entitled to vote at such annual meeting. Only persons nominated in accordance with the procedures set forth in this Section 3 shall be eligible for election as Directors at an annual meeting of shareholders. Nominations, other than those made by, or at the direction of, the Board of Directors (and by the Continuing Directors, if required), shall be made pursuant to timely notice in writing to the Secretary of the Corporation as set forth in this Section 3. To be timely, a shareholder's notice shall be delivered to, or mailed and received at, the principal executive office of the Corporation not less than 60 days nor more than 150 days prior to the date of the scheduled annual meeting, regardless of postponements, deferrals, or adjournments of that meeting to a later date; provided, however, that if less than 70 days' notice or prior public disclosure of the date of the scheduled annual meeting is given or made, notice by the shareholder to be timely must be so delivered or received not later than the close of business on the 10th day following the earlier of (a) the day on which such notice of the date of the scheduled annual meeting was mailed or (b) the day on which such public disclosure was made. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a Director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation's capital stock which are beneficially owned by such person on the date of such shareholder notice, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies with respect to nominees for election as directors, pursuant to Regulation 14A promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (or any subsequent provisions replacing such Act or the rules and regulations promulgated thereunder); and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the Corporation's stock transfer books, of such shareholder and of the beneficial owners (if any) of the stock registered in such shareholder's name and the name and address of other shareholders known by such shareholder to be supporting such nominees, and (ii) the class and number of shares of the Corporation's capital stock which are beneficially owned by such shareholder and beneficial owners (if any) on the date of such shareholder notice and by any other shareholders known by such shareholder to be supporting such nominees on the date of such shareholder notice. At the request of the Board of Directors, any person nominated by, or at the direction of, the Board of Directors for election as a Director at an annual meeting shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. No person shall be elected by the shareholders as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3. Election of Directors at the annual meeting need not be by written ballot, unless otherwise provided by the Board of Directors or presiding officer at such annual meeting. If written ballots are to be used, ballots bearing the -7- names of all the persons who have been nominated for election as Directors at the annual meeting in accordance with the procedures set forth in this Section 3 shall be provided for use at the annual meeting. The Board of Directors may reject any nomination by a shareholder not timely made in accordance with the requirements of this Section 3. If the Board of Directors, or a designated committee thereof, determines that the information provided in a shareholder's notice does not satisfy the informational requirements of this Section 3 in any material respect, the Secretary of the Corporation shall promptly notify such shareholder of the deficiency in the notice. The shareholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed 5 days from the date such deficiency notice is given to the shareholder, as the Board of Directors or such committee shall reasonably determine. If the deficiency is not cured within such period, or if the Board of Directors or such committee reasonably determines that the additional information provided by the shareholder, together with the information previously provided does not satisfy the requirements of this Section 3 in any material respect, then the Board of Directors may reject such shareholder's nomination. The Secretary of the Corporation shall notify a shareholder in writing whether his nomination has been made in accordance with the time and informational requirements of this Section 3. Notwithstanding the procedure set forth in the preceding paragraph, if neither the Board of Directors nor such committee makes a determination as to the validity of any nominations by a shareholder, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether a nomination was made in accordance with the terms of this Section 3. If the presiding officer determines that a nomination was made in accordance with the terms of this Section 3, he shall so declare at the annual meeting and ballots shall be provided for use at the meeting with respect to such nominee. If the presiding officer determines that a nomination was not made in accordance with the terms of this Section 3, he shall so declare at the annual meeting and such nomination shall be disregarded. If there is an Interested Shareholder, any determinations to be made by the Board of Directors or a designated committee thereof pursuant to the provisions of this Section 3 shall also require the concurrence of a majority of the Continuing Directors then in office. SECTION 4. Qualification. No Director need be a shareholder of the Corporation. Unless waived by a vote of the Board of Directors, no individual may serve as a Director of the Corporation if he has reached the age of 72 years at the time of election. SECTION 5. Vacancies. Any vacancy occurring on the Board of Directors, including any vacancy created by reason of an increase in the number of Directors, may be filled in the manner provided in the Restated Certificate of Incorporation. SECTION 6. Removal. Any Director may be removed from office in the manner provided in the Restated Certificate of Incorporation. SECTION 7. Resignation. A Director may resign at any time by giving written notice to the Chairman of the Board, if one is elected, the President or the Secretary. A resignation shall be effective upon receipt, unless the resignation otherwise provides. -8- SECTION 8. Regular Meetings. The regular annual meeting of the Board of Directors shall be held, without other notice than this By-law, on the same date and at the same place as the annual meeting of shareholders following the close of such meeting of shareholders. Other regular meetings of the Board of Directors may be held at such hour, date and place as the Board of Directors may by resolution from time to time determine without other notice than such resolution. SECTION 9. Special Meetings. Special meetings of the Board of Directors may be called, orally or in writing, by or at the request of a majority of the Directors, the Chairman of the Board, if one is elected, or the President. The person calling any such special meeting of the Board of Directors may fix the hour, date and place thereof. SECTION 10. Notice of Meetings. Notice of the hour, date and place of all special meetings of the Board of Directors shall be given to each Director by the Secretary or an Assistant Secretary, or in case of the death, absence, incapacity or refusal of such persons, by the Chairman of the Board, if one is elected, or the President or such other officer designated by the Chairman of the Board, if one is elected, or the President. Notice of any special meeting of the Board of Directors shall be given to each Director in person or by telephone or by telegram sent to his business or home address at least 24 hours in advance of the meeting, or by written notice mailed to his business or home address at least 48 hours in advance of the meeting. Such notice shall be deemed to be delivered when hand delivered to such address, read to such Director by telephone, deposited in the mail so addressed, with postage thereon prepaid if mailed, or when delivered to the telegraph company if sent by telegram. When any Board of Directors meeting, either regular or special, is adjourned for more than 30 days, notice of the adjourned meeting shall be given as in the case of an original meeting. It shall not be necessary to give any notice of the hour, date or place of any meeting adjourned for 30 days or less or of the business to be transacted at such meeting, other than an announcement at the meeting at which such adjournment is taken of the hour, date and place to which the meeting is adjourned. A written waiver of notice executed before or after a meeting by a Director and filed with the records of the meeting shall be deemed to be equivalent to notice of the meeting. The attendance of a Director at a meeting shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because such meeting is not lawfully called or convened. Except as otherwise required by law, by the Certificate of Incorporation or by these By-laws, neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 11. Quorum. At any meeting of the Board of Directors, a majority of the Directors then in office shall constitute a quorum for the transaction of business, but if less than a quorum is present at a meeting, a majority of the Directors present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice, except as provided in Section 10 of this Article II. Any business which might have been transacted at the meeting as originally noticed may be transacted at such adjourned meeting at which a quorum is present. -9- SECTION 12. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, a majority of the Directors present may take any action on behalf of the Board of Directors, unless otherwise required by law, by the Restated Certificate of Incorporation or by these By-laws. SECTION 13. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing. Such written consent shall be filed with the records of the meetings of the Board of Directors and shall be treated for all purposes as a vote at a meeting of the Board of Directors. SECTION 14. Manner of Participation. Members of the Board of Directors or of committees elected by the Board pursuant to Section 15 of this Article II may participate in meetings of the Board or of such committees by means of conference telephone or similar communications equipment by means of which all Directors participating in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for purposes of these By-laws. SECTION 15. Committees. The Board of Directors, by the affirmative vote of a majority of the Directors then in office, may elect from its number Directors to serve on one or more committees, including an Audit Committee, and may delegate thereto some or all of its powers except those which by law, by the Restated Certificate of Incorporation or by these By-laws, may not be delegated. Except as the Board of Directors may otherwise determine, any such committee may make rules for conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the same manner as is provided by these By-laws for the Board of Directors. All members of such committees shall hold such offices at the pleasure of the Board of Directors, except that members of the Audit Committee shall be Independent Directors and shall serve on such Audit Committee as long as they are Directors of the Corporation. The Board of Directors may abolish any such committee, other than the Audit Committee, at any time. Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the Board of Directors. The Board of Directors shall have power to rescind any action of any committee, other than the Audit Committee, but no such rescission shall have retroactive effect. With approval of the Board of Directors, the Chief Executive Officer may appoint such other committees consisting of such Directors as the Chief Executive Officer shall select. Any recommendations of such committees appointed by the Chief Executive Officer shall be submitted to the Board of Directors. The Series 1997-A Preferred Director shall sit as he may request on each committee of the Board or on any other group so acting, whether or not formally constituted as a committee of the Board; provided, however, that the Series 1997-A Preferred Director shall not have the right to request to sit on the Executive Committee. The Executive Committee shall report to the full Board on any matters exceeding $50,000,000. -10- SECTION 16. Compensation of Directors. Directors shall receive such compensation for their services as shall be determined by a majority of the Board of Directors, provided that Directors who are serving the Corporation as officers or employees and who receive compensation for their services as such shall not receive any salary or other compensation for their services as Directors of the Corporation. ARTICLE III OFFICERS SECTION 1. Enumeration. The officers of the Corporation shall consist of a President, a Chief Executive Officer, a Treasurer, a Secretary and such other officers, including without limitation a Chairman of the Board, one or more Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board of Directors may determine, SECTION 2. Election and Appointment. At the regular annual meeting of the Board following the annual meeting of shareholders, the Board of Directors shall elect the President, the Chief Executive Officer, the Treasurer and the Secretary. Other officers may be appointed by the Board of Directors at such regular annual meeting of the Board of Directors or at any other regular or special meeting or appointed by the Chief Executive Officer. SECTION 3. Qualification. No officer need be a shareholder or a Director; provided, however, that the Chief Executive Officer shall be a Director. Any person may occupy more than one office of the Corporation at any time. Any officer may be required by the Board of Directors to give bond, at the Corporation's expense, for the faithful performance of his duties in such amount and with such sureties as the Board of Directors may determine. SECTION 4. Tenure. Except as otherwise provided by the Restated Certificate of Incorporation or by these By-laws, each of the officers of the Corporation shall hold office until the regular annual meeting of the Board of Directors following the next annual meeting of shareholders and until his successor is elected and qualified or until his earlier resignation or removal. Election or appointment of an officer, employee or agent shall not of itself create contract rights. The Board of Directors may, however, authorize the Corporation to enter into an employment contract with any officer in accordance with law, but no such contract right shall impair the right of the Board of Directors to remove any officer at any time in accordance with Section 6 of this Article III. SECTION 5. Resignation. Any officer may resign by delivering his written resignation to the Corporation addressed to the President or the Secretary, and such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. SECTION 6. Removal. Except as otherwise provided by law, the Board of Directors may remove any officer with or without cause by the affirmative vote of a majority of the Directors then in office; provided, however, that if at the time of such removal there is an Interested Shareholder, -11- the affirmative vote of a majority of the Continuing Directors then in office shall also be required, and, provided further that, if an officer is to be removed for cause, he may only be removed after reasonable notice and an opportunity to be heard by the Board of Directors. SECTION 7. Absence or Disability. In the event of the absence or disability of any officer, the Board of Directors may designate another officer to act temporarily in place of such absent or disabled officer. SECTION 8. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors. SECTION 9. Chief Executive Officer. The President shall be the Chief Executive Officer, unless the Board of Directors shall designate another officer to be the Chief Executive Officer, The Chief Executive Officer shall, subject to the direction of the Board of Directors, have general supervision and control of the Corporation's business and shall preside, when present, at all meetings of the shareholders. SECTION 10. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors. If a Chairman of the Board is absent, the President shall preside at meetings of the Board of Directors. If the Chairman of the Board is not the Chief Executive Officer and in the absence of a Chief Executive Officer, the Chairman of the Board shall preside, when present, at all meetings of the shareholders. The Chairman of the Board shall have such other powers and shall perform such other duties as the Board of Directors may from time to time designate. If the Chairman of the Board is not the Chief Executive Officer, he shall also have such powers and perform such duties as the Chief Executive Officer may from time to time designate. SECTION 11. President. In the absence of the Chairman of the Board, the President shall preside, when present, at all meetings of the Board of Directors. If the President is not the Chief Executive Officer or Chairman of the Board and in the absence of such persons, the President shall preside, when present, at all meetings of the shareholders. If the President is not the Chief Executive Officer, he shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President or Senior Vice President) and Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. SECTION 13. Chief Financial Officer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors and except as the Board of Directors or the Chief Executive officer may otherwise provide, have general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. He shall have custody of all funds, securities, and valuable documents of the Corporation. He shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. The office of the Chief Financial Officer shall be deemed to be the office of the Treasurer of the Corporation -12- whenever the signature of the Treasurer is required on any document or instrument, by the laws of the United States or any state, or elsewhere in the By-laws, and the Chief Financial Officer shall have authority to affix his signature in such capacity. The office of the Vice President of Finance and Accounting shall be deemed an Assistant Treasurer of the Corporation whenever the signature of an Assistant Treasurer is required on any document or instrument, by the laws of the United States or any state, or elsewhere in these Bylaws, and the Vice President of Finance and Accounting shall have authority to affix his signature in such capacity. Any Assistant Treasurer shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. SECTION 14. Secretary and Assistant Secretaries. The Secretary shall record all the proceedings of the meetings of the shareholders and the Board of Directors (including committees of the Board) in books kept for that purpose. In his absence from any such meeting, a temporary secretary chosen at the meeting shall record the proceedings thereof. The Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation). He shall have custody of the seal of the Corporation, and he, or an Assistant Secretary, shall have authority to affix it to any instrument requiring it, and, when so affixed, the seal may be attested by his signature or that of an Assistant Secretary. He shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive Officer. In the absence of the Secretary, any Assistant Secretary may perform his duties and responsibilities. Any Assistant Secretary shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate. SECTION 15. Other Powers and Duties. Subject to these By-laws and to such limitations as the Board of Directors may from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the Chief Executive Officer. ARTICLE IV CAPITAL STOCK SECTION 1. Certificates of Stock. Unless otherwise provided by the Board of Directors, each shareholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall bear the seal of the Corporation, if one has been adopted, and shall be signed by the Chairman of the Board of Directors, President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary. The seal of the Corporation, if one has been adopted, and any and all signatures on the certificate may be a facsimile, including those of any transfer agent or registrar. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer, transfer agent or registrar -13- before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the time of its issue. Every certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. SECTION 2. Transfers. Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock may be transferred only on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer agent may reasonably require. SECTION 3. Record Holders. Except as may otherwise be required by law, by the Restated Certificate of Incorporation or by these By-laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws. It shall be the duty of each shareholder to notify the Corporation of his post office address and any changes thereto. SECTION 4. Record Date. In order that the Corporation may determine the shareholders entitled to receive notice of or to vote at any meeting of shareholders or any adjournments thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. In such case, only shareholders of record on such record date shall be so entitled, notwithstanding any transfer of stock on the stock transfer books of the Corporation after the record date. If no record date is fixed: (a) the record date for determining shareholders entitled to receive notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (b) the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. SECTION 5. Replacement of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof upon such terms as the Corporation or its transfer agent may prescribe. -14- ARTICLE V INDEMNIFICATION SECTION 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (hereinafter a "Proceeding"), by reason of the fact that he or she is or was (a) a Director of the Corporation, (b) an officer of the Corporation elected or appointed by the shareholders or the Board of Directors, or (c) serving, at the request of the Corporation as evidenced by a vote of the Board of Directors prior to the occurrence of the event to which the indemnification relates, as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (such persons described in (a), (b) and (c) are sometimes hereinafter referred to as an "Indemnitee"), whether the basis of such Proceeding is alleged action in an official capacity as such a Director or officer of the Corporation or as such other director, officer, employee or agent or in any other capacity while serving as such a Director or officer of the Corporation or as such other director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including, but not limited to, attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be such a director, officer, employee or agent and shall inure to the benefit of the Indemnitee's heirs, executors and administrators; provided, however, that, except as provided in Section 3 of this Article V with respect to Proceedings to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized or ratified by the Board of Directors of the Corporation. The right to indemnification conferred in this Article V shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any Proceeding in advance of its final disposition (hereinafter an "Advancement of Expenses"); provided, however, that, if the Delaware General Corporation Law requires, an Advancement of Expenses incurred by an Indemnitee in his or her capacity as a Director or officer of the Corporation (but not in any other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "Undertaking"), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "Final Adjudication") that such Indemnitee is not entitled to be indemnified for such expenses under this Article V or otherwise. SECTION 2. Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to an Advancement of Expenses, to any employee or agent of the Corporation to the fullest extent of the provisions of this Article V. -15- SECTION 3. Right of Indemnitee to Bring Suit. If a claim under this Article V is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit. In any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses), it shall be a defense that the Indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. In addition, in any suit by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Corporation shall be entitled to recover such expenses upon a Final Adjudication that the Indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or shareholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or shareholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an Advancement of Expenses hereunder, or by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such Advancement of Expenses, under this Article V or otherwise shall be on the Corporation. SECTION 4. Non Exclusivity of Rights. The rights to indemnification and to Advancement of Expenses conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under these By-laws, the Restated Certificate of Incorporation or any statute, agreement, vote of shareholders or disinterested directors or otherwise. SECTION 5. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the Corporation or any director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year. -16- SECTION 2. Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation. SECTION 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary course of its business without Director action may be executed on behalf of the Corporation by the Chairman of the Board, if one is elected, the President or the Treasurer or any other officer, employee or agent of the Corporation as the Board of Directors may authorize. SECTION 4. Voting of Securities. Unless the Board of Directors otherwise provides, the Chairman of the Board, if one is elected, the President or the Treasurer may waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or attorney in fact for this Corporation with or without discretionary power and/or power of substitutions at any meeting of shareholders or shareholders of any other corporation or organization, any of whose securities are held by this Corporation. SECTION 5. Registered Agent. The Board of Directors may appoint a registered agent upon whom legal process may be served in any action or proceeding against the Corporation. SECTION 6. Corporate Records. The original or attested copies of the Restated Certificate of Incorporation, By-laws and records of all meetings of the incorporators, shareholders and the Board of Directors and the stock transfer books, which shall contain the names of all shareholders, their record addresses and the amount of stock held by each, may be kept outside the State of Delaware and shall be kept at the principal office of the Corporation, at the office of its counsel or at an office of its transfer agent or at such other place or places as may be designated from time to time by the Board of Directors. SECTION 7. Definitions. As used in these By-laws, the terms "Interested Shareholder" and "Continuing Director" shall have the same respective meanings assigned to them in the Restated Certificate of Incorporation. The term "Independent Director" shall have the meaning given in Section 5 of Article VIII of the Restated Certificate of Incorporation. Any determination of beneficial ownership of securities under these By-laws shall be made in the manner specified in the Restated Certificate of Incorporation. For purposes herein, the term "Interested Shareholder" shall not include holders of shares of Series 1997-A Convertible Preferred Stock. SECTION 8. Restated Certificate of Incorporation. All references in these By-laws to the Restated Certificate of Incorporation shall be deemed to refer to the Restated Certificate of Incorporation of the Corporation, as amended and in effect from time to time. SECTION 9. Amendments. These By-laws may be altered, amended or repealed, or new By-laws may be adopted, by the Board of Directors or the shareholders in the manner provided in the Restated Certificate of Incorporation of the Corporation; provided, however, with respect to Article I, Section 8, Article II, Section 2(b) and Section 15, Article VI, Section 7 or Section 9, or any other provisions of these By-laws pertaining to the holders of shares of Series 1997-A Convertible Preferred Stock, the rights of the holders of shares of Series 1997-A Convertible Preferred Stock shall not be altered, amended or repealed, and new By-laws that alter, amend or repeal the rights of the holders of Series 1997-A Convertible Preferred Stock shall not be adopted without the affirmative vote of the holders of not less than a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock. -17- RESOLUTIONS (Attached Pursuant To Article I, Section 8(c)) RESOLVED: That the Exchange and Amendment Agreement, dated as of September 30, 1997 (the "Exchange Agreement"), by and among the Corporation and Westbrook Berkshire Holdings, L.L.C., (the "Buyer"), Westbrook Real Estate Fund II, L.P. and Morgan Stanley Asset Management, Inc., be, and it hereby is, approved. RESOLVED: That the Board of Directors hereby approves and adopts the Certificate of Designation, Preferences and Rights of the Series 1997-A Convertible Preferred Stock (the "Series 1997-A Preferred Stock") in the form submitted to this meeting (the "Certificate of Designation") and the resolution of the Board of Directors set forth herein, and authorizes the Chairman of the Board, the President and the Chief Executive Officer of the Corporation (the "Authorized Officers") to execute and cause such Certificate of Designation to be filed with and in the Office of the Secretary of State of the State of Delaware in accordance with the requirements of Section 151 of the Delaware General Corporation Law. RESOLVED: That the form of specimen stock certificate presented to this meeting representing shares of Series 1997-A Preferred Stock be, and hereby is. adopted and approved. RESOLVED: That following the filing of the Certificate of Designation, and as provided for in the Exchange Agreement, the Authorized Officers of the Corporation are authorized to issue 2,737,000 shares of Series 1997-A Preferred Stock in exchange (the "Exchange") for the 2,737,000 shares of Series A Convertible Preferred Stock authorized pursuant to the Certificate of Designation filed with and in the Office of the Secretary of State of the State of Delaware on September 25, 1997 and issued in accordance with the Stock Purchase Agreement dated as of September 19, 1997 among the Corporation and the Buyer, and the Authorized Officers are hereby authorized to take all such actions as are necessary to effect and carry out the Exchange. RESOLVED: That the Board of Directors hereby authorizes and approves the issuance, from time to time, of up to, and hereby irrevocably reserves for issuance, 5,643,420 shares (the "Conversion Shares") of the Corporation's common stock, par value $.01 per share ("Common Stock"), including the 506,497 shares of Common Stock currently held in the Corporation's treasury, upon conversion of shares of the Series 1997-A Preferred Stock, such number of Conversion Shares to be adjusted as appropriate from time to time to account for stock splits, stock dividends and other similar transactions and for changes in the conversion price per share of the Series 1997-A Preferred Stock. RESOLVED: That the officers of this Corporation be, and they hereby are, severally authorized and directed in the name and on behalf of the Corporation to take any and all actions and to execute such applications, instruments or other agreements or documents which they may deem necessary or desirable to amend or refile, as may be required by the New York Stock Exchange, Inc. ("NYSE"), the NYSE supplemental listing application for the shares of Common Stock to be issued upon conversion of the Series 1997-A Preferred Stock to reflect the Exchange, the taking of any such action or the execution of such applications, instruments or other agreements or documents to be conclusive evidence of the authorization and approval thereof by the Board of Directors of this Corporation. RESOLVED: That the Conversion Shares issued by the Corporation upon conversion of shares of Preferred Stock in accordance with the terms of the Series 1997-A Preferred Stock shall be fully paid and nonassessable upon delivery thereof to the respective holder of Series 1997- A Preferred Stock against receipt by the Corporation of the certificates representing the shares of Series 1997-A Preferred Stock being converted, and of the value of the consideration so received by the Corporation, an amount equal to $.01 per share shall, for accounting purposes, be allocated to the Common Stock account and the balance to the Additional Paid-In Capital account. -18- RESOLVED: That the Board of Directors hereby confirms that the Board of Directors has determined that the restrictions on business combinations provided for in Section 203 do not apply to the Exchange or the issuance of the shares of Series 1997-A Preferred Stock in connection therewith or the other transactions provided for in the Exchange Agreement. RESOLVED: That the Bylaws of the Corporation be and hereby are amended in the form submitted to this meeting and as attached to the Exchange Agreement as Exhibit C so as to reflect the rights of the holders of the Series 1997-A Preferred Stock set forth in the Stock Purchase Agreement; and that, upon completion of the Exchange, the amendments to the Bylaws of the Corporation relating to the Series A Preferred Stock adopted on September 24, 1997 be, and they hereby are, deleted. RESOLVED: That upon completion of the Exchange, the Series 1997-A Preferred Stock delivered to the Buyer in the Exchange shall be retired and canceled, and the resolutions set forth in the Certificate of Elimination in the form presented to this meeting be, and they hereby are, adopted and approved, and the Authorized Officers are authorized and directed to execute such certificate and cause it to be filed with and in the Office of the Secretary of State of the State of Delaware. RESOLVED: That the Corporation hereby elects to be governed by paragraph (2) of subsection (c) of Section 141 of the Delaware General Corporation Law with respect to the powers and authority of the Board of Directors that may be delegated to the committee of the Board of Directors. RESOLVED: That the Executive Committee is hereby authorized to approve and authorize on behalf of the Corporation any and all such actions as it determines to be necessary or desirable in connection with the transactions contemplated by the Exchange Agreement including, without limitation, approving changes to the terms of the Series 1997-A Preferred Stock as set forth in the Certificate of Designation. -19- Historical Notes re BRI By-Laws The By-laws were adopted by the Incorporator on April 25, 1990 within the context of the Certificate of Incorporation filed with the Delaware Secretary of State on April 26, 1990. They were ratified and approved by the Written Consent of the Directors dated April 30, 1990. Subsequently the By-laws were restated in their entirety on November 1, 1990. - -------------------- On February 4, 1993 the Directors amended Article I, Section 8 (now Article I, Section 9) by adding the last sentence thereto with respect to abstentions. On August 15, 1994 the Directors amended Article IV, Section 1 by restating the third full sentence of said section with respect to facsimile signatures. On February 28, 1996 the Directors amended Article III, Section 3 by changing the reference in the first sentence thereof from "President" to "Chief Executive Officer." On February 28, 1996 the Directors amended Article III, Section 13 by replacing the word "Treasurer" with the words "Chief Financial Officer" in the section heading and by adding the last sentence of the first paragraph of said section. On May 13, 1997 the Directors further amended Article III, Section 13 by adding the first sentence of the second paragraph of said section with respect to the office of Vice President of Finance and Accounting. -20- On September 18, 1997 the Directors authorized and approved certain amendments with respect to the establishment and issuance of a new class and series of stock. Those amendments were subsequently repealed in their entirety on October 9, 1997 in connection with the exchange of such class and series of stock for a new class and series of stock. On October 9, 1997 the Directors authorized and approved the following amendments reflecting the establishment and issuance of a new class and series of stock: (1) Article I was amended by the insertion of a new Section 8 with respect to the rights of Series A Convertible Preferred Shareholders. Former Sections 8 through 11 were renumbered 9 through 12. (2) Article II, Section 2(b) was amended by adding the second full paragraph thereto with respect to the rights of the Series A Convertible Preferred Shareholders as a class to elect one director. (3) Article II, Section 15 was amended by adding the second full paragraph there with respect to the Series A Preferred Director. (4) Article VI, Section 7 was amended by adding the last sentence thereof. (5) Article VI, Section 9 was amended by adding to the end thereof the clause "; provided, however . . . 51% of the outstanding shares of Series A Convertible Preferred Stock." -21- EX-4.1 3 CERTIFICATE OF DESIGNATION BERKSHIRE REALTY COMPANY, INC. CERTIFICATE OF DESIGNATION Designating 2,737,000 shares of Preferred Stock as 2,737,000 shares of Series 1997-A CONVERTIBLE PREFERRED STOCK (par value $0.01 per share) Pursuant to Section 151 of the General Corporation Law of the State of Delaware Berkshire Realty Company, Inc., a corporation organized and existing under the laws of Delaware (the "Corporation"), does hereby certify that: Pursuant to the authority contained in Article IV of the Restated Certificate of Incorporation of the Corporation, as amended (the "Charter"), and in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware (the "DGCL"), the Board of Directors of the Corporation duly adopted the following resolution creating a series of the Preferred Stock, par value $.01 (the "Preferred Stock"), designated as Series 1997-A Convertible Preferred Stock: RESOLVED, that a series of the class of authorized Preferred Stock, par value $.01, of the Company be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof are as follows: Section 1. Designation, Amount and Price. Of the 60,000,000 authorized shares of Preferred Stock, 2,737,000 shares are designated Series 1997-A Convertible Preferred Stock (the "Series 1997-A Convertible Preferred Stock"). Section 2. Dividends and Distributions. (a) Holders of shares of Series 1997-A Convertible Preferred Stock will be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the payment of dividends, cumulative quarterly cash dividends (rounded up to the nearest whole cent) equal to the greater of (i) 2.25% of $25.00 per share (such $25.00, the "Stated Value"), and (ii) the per share Common Stock Dividend Amount, payable in each case in arrears on February 15, May 15, August 15 and November 15 of each year, commencing on the first such day after the issuance of a share of Series 1997-A Convertible Preferred Stock (each a "Dividend Payment Date"). The "Common Stock Dividend Amount" applicable as of any Dividend Payment Date shall mean the amount which is the product of (i) the dollar amount of the dividend paid per share of Common Stock on the dividend payment date with respect to the shares of Common Stock (other than a distribution payable solely in shares of Common Stock) which occurs on such Dividend Payment Date or, if no such dividend payment date occurs on such Dividend Payment Date, the dividend payment date with respect to the shares of Common Stock next preceding such Dividend Payment Date and (ii) the number of shares of Common Stock into which each share of Series 1997-A Convertible Preferred Stock is entitled to be converted, at the Conversion Price then in effect and otherwise as set forth in this Certificate of Designation, as of the record date established for such Dividend Payment Date (determined, for purposes of this computation, to the fourth decimal place). Such dividends will accrue daily on the basis of a 360-day year of twelve 30-day months, and will, to the extent not paid in full on a Dividend Payment Date, compound quarterly at a rate of 2.25% per quarter, whether or not the Corporation has earnings or surplus. The dividend payable to a holder of a share of Series 1997-A Convertible Preferred Stock on the first Dividend Payment Date after the share is issued will be the accrued dividend calculated from the day the share is issued to such Dividend Payment Date. If any Dividend Payment Date is not a Business Day, the dividend due on that Dividend Payment Date will be paid on the Business Day immediately succeeding that Dividend Payment Date. Each Dividend Payment Date will be on a date which is the date fixed for payment of dividends with respect to the shares of Common Stock or is not more than five Business Days after the date fixed for payment of dividends with respect to the shares of Common Stock. As used with regard to the Series 1997-A Convertible Preferred Stock, the term "Business Day" means a day on which both state and federally chartered banks in New York, New York are required to be open for general banking business, and all accrued and compounded dividends together with all accrued but not yet due dividends (whether or not declared or authorized) are referred to as "Accrued Dividends." (b) Each dividend will be payable to holders of record of the Series 1997-A Convertible Preferred Stock on a date (a "Record Date") selected by the Board of Directors which is not less than 10 nor more than 45 days before the Dividend Payment Date on which the dividend is to be paid. No Record Date will precede the close of business on the date the Record Date is fixed. (c) Unless and until all Accrued Dividends on the Series 1997-A Convertible Preferred Stock under Section 2(a) through the last preceding Dividend Payment Date have been paid, the Corporation may not (i) declare or pay any dividend, make any distribution (other than a distribution payable solely in shares of Common Stock), or set aside any funds or assets for payment or distribution with regard to any Junior Shares (as herein defined), (ii) redeem or purchase (directly or through the Operating Partnership or Subsidiaries), or set aside any funds or other assets for the redemption or purchase of, any Junior Shares or (iii) authorize, take or cause or permit to be taken any action of the general partner of the Operating Partnership, that will result in (A) the declaration or payment by the Operating Partnership (defined below) of any distribution to its partners (other than distributions made concurrently with distributions payable to the Corporation in respect of its partnership interest that will be used by the Corporation to fund the payment of dividends on the Series 1997-A Convertible Preferred Stock (such distributions to the Corporation being referred to as "Authorized LP Distributions")), or set aside any funds or assets for payment of any distributions to its partners (other than those made concurrently with Authorized LP Distributions) or (B) the redemption or purchase (directly or through the Operating Partnership or Subsidiaries), or the setting aside of any funds or other assets for the redemption or purchase of, any partnership interests in the Operating Partnership, except for conversions of partnership interests in the Operating Partnership in the ordinary course into shares of Common Stock. As used with regard to the Series 1997-A Convertible Preferred Stock, the term "Junior Shares" means all shares of Common Stock and all shares of any other class or series of stock of the Corporation to which the shares of Series 1997-A Convertible Preferred Stock are prior in rank with regard to payment of dividends or payments upon the liquidation, dissolution or winding-up of the Corporation; the term "Operating Partnership" means BRI OP Limited Partnership, a Delaware limited partnership, or any successor thereto; and the term "Subsidiary" means any Person in which the Company directly or indirectly owns any equity interest. As used herein, "Person" shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government or other entity of whatever nature. (d) While any shares of Series 1997-A Convertible Preferred Stock are outstanding, the Corporation may not pay any dividend, or set aside any funds for the payment of a dividend, with regard to any shares of any class or series of stock of the Corporation which ranks on a parity with Series 1997-A Convertible Preferred Stock as to payment of dividends unless at least a proportionate payment is made with regard to all Accrued Dividends on the Series A Convertible Preferred Stock (except, as to any shares of the Series 1997-A Convertible Preferred Stock as to which a notice of conversion has been furnished by the holder thereof, at the effective time of conversion). A payment of dividends with regard to the Series 1997-A Convertible Preferred Stock will be proportionate to a payment of a dividend with regard to another class or series of stock if the dividend per share of Series 1997-A Convertible Preferred Stock is the same percentage of the Accrued Dividends (except as aforesaid) with regard to a share of Series 1997-A Convertible Preferred Stock that the dividend paid with regard to a share of stock of the other class or series is of the Accrued Dividends (except as aforesaid) with regard to a share of stock of that other class or series. (e) Any dividend paid with regard to shares of Series 1997-A Convertible Preferred Stock will be paid equally with regard to each outstanding share of Series 1997-A Convertible Preferred Stock, except to the extent that 2 shares of Series 1997-A Convertible Preferred Stock are outstanding for differing amounts of time during the relevant dividend period. Section 3. Voting Rights. The voting rights of the holders of shares of Series 1997-A Convertible Preferred Stock will be only the following: (a) The holders of shares of Series 1997-A Convertible Preferred Stock will have the right to vote on all matters, including without limitation, transfers, mergers or consolidations or recapitalizations of the nature described in sections 4(a)(i), $(a)(ii) and 4(a)(iii) of this Certificate of Designation on which the holders of Common Stock are entitled to vote on an "as converted" basis with holders of shares of the Common Stock, as though part of the same class as holders of Common Stock, with such number of shares of Common Stock deemed held of record by holders of shares of Series 1997-A Convertible Preferred Stock on any Record Date as would be the number of shares of Common Stock into which the shares of Series 1997-A Convertible Preferred Stock held by such holder would be entitled to be converted on such Record Date. The holders of shares of Series 1997-A Convertible Preferred Stock shall receive all notices of meetings of the holders of shares of Common Stock, and all other notices and correspondence to the holders of shares of Common Stock provided by the Corporation, and shall be entitled to take such actions, and shall have such rights, as are set forth in this Certificate of Designation or are otherwise available to the holders of shares of Common Stock in the Charter and in the By-laws of the Corporation as are in effect on the date hereof, in each case with the same effect as would be taken by holders of Series 1997-A Convertible Preferred Stock if deemed to be holders of such number of shares of Common Stock as determined as aforesaid. (b) While any shares of Series 1997-A Convertible Preferred Stock are outstanding, the Corporation will not, directly or indirectly, including through a merger or consolidation with any other corporation or otherwise, without approval of holders of at least a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock, voting separately as a class, (i) issue any shares of Series 1997-A Convertible Preferred Stock except pursuant to that certain Stock Purchase Agreement dated as of September 19, 1997, by and among the Corporation, Westbrook Berkshire Holdings, L.L.C., and Westbrook Real Estate Fund II, L.P., or increase the number of authorized shares of Series 1997-A Convertible Preferred Stock; (ii) combine, split or reclassify the outstanding shares of Series 1997-A Convertible Preferred Stock into a smaller or larger number of shares; (iii) exchange or convert any shares of Series 1997-A Convertible Preferred Stock for other securities or the right to receive cash, or propose or require an exchange or conversion other than as provided in this Certificate of Designation, or reclassify any shares of Series 1997-A Convertible Preferred Stock, or to authorize, create, classify, reclassify or issue any class or series of stock ranking prior to or on a parity with the Series 1997-A Convertible Preferred Stock either as to dividends or upon liquidation, dissolution or winding-up of the Corporation or as to the rights of the Series 1997-A Convertible Preferred Stock set forth in this Section 3; (iv) amend, alter or repeal, or permit to be amended, altered or repealed, the following provisions of the By-laws of the Corporation: Article I, Section 8, Article II, Section 2 and Article VI, Section 7 or 9 or (v) amend, alter or repeal, or permit to be amended, altered or repealed, any of the provisions of the Charter, this Certificate of Designation, the By-laws of the Corporation, the agreement of limited partnership of the Operating Partnership, or any organizational document of any Subsidiary, in such a manner as would affect adversely the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of (A) the Series 1997-A Convertible Preferred Stock (including, without limitation, taking any such action the result of which could be to alter the manner or rate of exchange of partnership interests in the Operating Partnership for securities of the Corporation as in effect on the date hereof) or, (B) in the case of a proposed amendment to the agreement of limited partnership of the Operating Partnership, or any organizational document of any Subsidiary, in such a manner as would affect adversely the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, and qualifications of the holders of shares of the Series 1997-A Convertible Preferred Stock or the Common Stock and the shares of Series 1997-A Convertible Preferred Stock, considered as a whole. (c) Until March 19, 1999, and for so long thereafter as there shall be outstanding a number of shares of Series 1997-A Convertible Preferred Stock not less than 29% of the shares of Series 1997-A Convertible Preferred Stock issued by the Corporation to Westbrook Berkshire Holdings, L.L.C., the Corporation will not, directly or indirectly, including through a merger or consolidation with any other corporation or otherwise, without the approval 3 of the holders of not less than a majority of the outstanding shares of the Series 1997-A Convertible Preferred Stock, voting separately as a class, propose, authorize, take, or cause to be taken or allow to occur any of the following actions: (i) the Transfer (as defined below) of the record or beneficial ownership of any interest in Berkshire Apartments, Inc., the Transfer by Berkshire Apartments, Inc. to a third party of the right to exercise all or a portion of its rights as the general partner of the Operating Partnership, or the Transfer in a single transaction or series of transactions of the assets of the Corporation, the Operating Partnership and the Subsidiaries, considered as a whole, including for such purpose any Person (except that, with respect to any such Person in which the Corporation or the Operating Partnership has a direct or indirect minority interest such that a sale, transfer or assignment is not within the Corporation's or Operating Partnership's control, and is not otherwise a part of the transaction or series of transactions otherwise occurring, this provision shall not apply) owned directly or indirectly by the Corporation to the extent of the Corporation's attributed interest in such other Person, having a fair market value (based on the value of the total consideration of each such transaction, including, without limitation, any debt assumed by any purchaser in connection therewith) in excess of 10% of the Corporation Market Capitalization within any 90-day period or 20% of the Corporation Market Capitalization within any 360-day period, (ii) the Corporation's termination of the election, or the taking of any action by the Corporation which would cause termination other than by election, of the Corporation as a real estate investment trust under the Internal Revenue Code of 1986, as amended, (iii) any alteration in the Corporation's or the Operating Partnership's business, or the business of the Corporation, the Operating Partnership and the Subsidiaries, considered as a whole, such that real estate assets owned directly or indirectly by the Corporation are, on a square foot basis, less than 90% invested in multifamily residential properties; or (iv) the Transfer on or before September 19, 1998, of more than 30% of the Common Stock or units of the Operating Partnership held directly or indirectly, of record or beneficially, by any of Douglas Krupp or David Marshall, as of the date hereof, by any of such Persons. There shall be excluded from the transactions requiring approval of not less than a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock, as set forth in clause (i) of this Section 3(c), the (a) public market trading of shares of Common Stock in unsolicited transactions, (b) sale of Common Stock or other securities of the Corporation in any underwritten, widely distributed offering and (c) a transaction which is of the nature described in and subject to Section 4(a)(i), 4(a)(ii) and 4(a)(iii) of this Certificate of Designation. There shall be excluded from the transactions requiring approval of not less than a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock, as set forth in clause (iv) of this Section 3(c), any Transfer, as to any said Person, which occurs solely and directly as a result of the death or proceedings in divorce of such Person. As used herein, "Corporation Market Capitalization" is the total market capitalization of the Corporation determined by reference to (determined based upon the Current Market Price, as defined in Section 5(e)(viii) of this Certificate of Designation) (i) outstanding (assuming for this purpose the exercise of all then outstanding warrants or other rights to acquire Common Stock, and the conversion of all other Common Stock equivalents not otherwise referenced below) shares of Common Stock, (ii) outstanding shares of Series 1997-A Convertible Preferred Stock (determined as the quotient of (x) the product of (A) the Current Market Price of a share of Common Stock and (B) the aggregate Stated Value and Accrued Dividends of all outstanding shares of Series 1997-A Convertible Preferred Stock, and (y) the Conversion Price then in effect), and (iii) all partnership and other interests in the Operating Partnership and the other Subsidiaries held by Persons (other than the Company and the Subsidiaries) (assuming for this purpose the exchange or conversion of all such third-Person partnership and other interests in the Operating Partnership or other Subsidiaries for shares of Common Stock), plus total consolidated and unconsolidated debt of the Corporation, the Operating Partnership and the other Subsidiaries, but excluding (i) all nonrecourse consolidated debt in excess of the Corporation's proportionate share of such debt and (ii) all nonrecourse unconsolidated debt of partnerships of which the Corporation is directly or indirectly a limited partner. As used herein, "Transfer" means any sale, transfer by operation of law or otherwise, assignment, disposition or arrangement, whether voluntary or involuntary, which has the effect, directly or indirectly, of altering the holding of or causing or permitting another Person to succeed to, any voting control or economic interest, whether beneficial or of record or both, including any arrangement for collateral purposes only, or which could, with the passage of time or the occurrence of any event, or both, have such effect. (d) The holders of shares of Series 1997-A Convertible Preferred Stock, voting as a separate class, shall be entitled at all times and at any time to elect one director (the "Series 1997-A Preferred Director") to the Board of Directors of the Corporation (the "Board"); provided, however, that the size of the Board shall not be increased above nine at any time unless Westbrook Real Estate Fund II, L.P. shall be entitled to elect or appoint that number of directors to such expanded Board that will permit ERISA counsel to Westbrook Real Estate Fund II, L.P. to 4 confirm that Westbrook Berkshire Holdings, L.L.C.'s investment in the Series 1997-A Convertible Preferred Stock will continue to qualify as a "venture capital investment" under the plan asset rules and regulations promulgated under and the provisions of the Employee Retirement Income Security Act of 1974, as amended, or any successor thereto. The Series 1997-A Preferred Director, who has been elected by the Board and agreed to serve until his successor is elected and qualified, is Paul D. Kazilionis, who shall be considered a "third class" director in accordance with Article II, Section 2(b) of the Bylaws of the Corporation (as amended to the date hereof), and who shall sit as he may request on each committee of the Board (other than the executive committee of the Board) or on any other group so acting, whether or not formally constituted as a committee of the Board. In the event that the Series 1997-A Preferred Director is unable to attend any meeting of the Board for any reason, then such Series 1997-A Preferred Director may designate, in writing, one person (the "Observer") who shall have the right to attend, but not vote at, such meeting. The Observer shall not be deemed to be a member of the Board of Directors and shall have none of the rights, duties, privileges or powers of a member of the Board of Directors, including, without limitation, the right to notice of or to vote at meetings of the Board of Directors, and shall not be counted as a member of the Board of Directors for the purpose of determining whether a quorum is present at any meeting of the Board of Directors. The Series 1997-A Preferred Director from time to time sitting as a member of the Board may be removed by the holders of record of not less than a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock and, if so removed, a successor individual to serve as the Series 1997-A Preferred Director may be appointed by the holders of record of not less than a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock. At any annual meeting of the holders of Common Stock at which "third class" directors are to be elected, the incumbent Series 1997-A Preferred Director shall be nominated and, upon the affirmative vote of not less than a majority of the holders of shares of Series 1997-A Convertible Preferred Stock, shall be elected to serve as the Series A Preferred Director. Upon the occurrence of a "Preferred Default" (defined below), (i) the number of members of the entire Board (as if there were no vacancies or unfilled newly-created directorships thereon) shall be automatically increased such that the holders of the Series 1997-A Convertible Preferred Stock shall be entitled to elect, when considered with the Series 1997-A Preferred Director, a number of directors of the Corporation equivalent to the smallest number representing a majority of the number of members of the entire Board as if there were no vacancies or unfilled newly created directorships on such Board, and (ii) the holders of shares of Series 1997-A Convertible Preferred Stock, voting as a separate class, shall be entitled, at each annual meeting of stockholders of the Corporation and at each special meeting of stockholders of the Corporation called for the election of directors by the holders of Series 1997-A Convertible Preferred Stock, to elect a number of directors of the Corporation equivalent to the smallest number representing a majority of the number of members of the entire Board as if there were no vacancies or unfilled newly created directorships on such Board. As used herein, "Preferred Default" shall mean a failure by the Corporation on any four consecutive Dividend Payment Dates to pay in full the dividends due and payable on such dates such that there are Accrued Dividends (whether or not declared) with respect to such four consecutive Dividend Payment Dates. Whenever the holders of shares of Series 1997-A Convertible Preferred Stock have the right under this Section 3(d) to elect a director or directors, but have not done so, the Secretary of the Corporation will, upon the written request of the holders of record of at least 25% of the outstanding shares of Series 1997-A Convertible Preferred Stock, call a special meeting of the holders of Series 1997-A Convertible Preferred Stock for the purpose of removing and/or electing a director or directors, as the case may be. The meeting will be held at the earliest practicable date upon the notice required for annual meetings of the shareholders of the Corporation (or such shorter notice as is stipulated in the written requests for such meeting or is otherwise agreed in writing by the holders of record of the outstanding shares of Series 1997-A Convertible Preferred Stock before or within 10 days after the meeting) at the place specified in the request for a meeting, or if there is none, at a place in New York, New York, designated by the Secretary of the Corporation. If the meeting has not been called within 2 days after delivery of the written request to the Secretary of the Corporation, or within 4 days after the request is mailed by registered mail, addressed to the Secretary of the Corporation at the Corporation's principal office, the holders of record of at least 25% of the outstanding shares of Series 1997-A Convertible Preferred Stock may designate in writing one holder to call and appoint an individual to chair (who need not be an officer or member of the Board) the meeting at the expense of the Corporation, and the meeting may be called by that person upon the notice required for annual meetings (or such shorter notice as aforesaid). Any holder of shares of Series 1997-A Convertible Preferred Stock or its representative will have access to the stock ledger of the Corporation relating to the Series 1997-A Convertible Preferred Stock for the purpose of causing a meeting of shareholders to be called in accordance with this Section 3(d). Except as otherwise provided above in this Section 3(d), a director elected in accordance with this Section 5 3(d) will serve until the next annual meeting of the shareholders of the Corporation and until his or her successor is elected and qualified by the holders of Series 1997-A Convertible Preferred Stock. Section 4. Change of Control; Liquidation. (a) Upon (i) the Transfer in a single transaction, or series of transactions, of all or substantially all of the assets of the Corporation, the Operating Partnership and the Subsidiaries, considered as a whole, including for such purpose the assets of any Subsidiary (except that with respect to any such Subsidiary in which the Corporation or the Operating Partnership has a direct or indirect minority interest such that a sale, transfer or assignment is not within the Corporation's or Operating Partnership's control, and is not a part of, or occurring in connection with, a transaction or series of transactions covered hereby, this provision shall not apply), (ii) the merger or consolidation of the Corporation or the Operating Partnership with any other Person (other than a merger of the Corporation with or into a wholly-owned Subsidiary of the Corporation in which the Corporation Market Capitalization is unchanged), (iii) any recapitalization of the Corporation, the Operating Partnership and the Subsidiaries, considered as a whole, in a single transaction or a series of transactions, in an amount or amounts which aggregate 50% or more of Corporation Market Capitalization or (iv) a Change of Control (as defined herein), the holders of the Series 1997-A Convertible Preferred Stock, may at their option receive, and, if so electing by written notice to the Corporation to such effect, will be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any distributions made to holders of any Junior Shares, an amount per share (the "Change of Control Preference") equal to the product of (A) 115% and (B) the sum of (1) Stated Value plus (2) the per share amount of Accrued Dividends with regard to the Series 1997-A Convertible Preferred Stock to the date of final distribution (whether or not declared). For the purposes of this Section 4(a), Corporation Market Capitalization shall be calculated on the date of the first of any transactions in a series for purposes of determining the percentage thereof represented by all transactions in such series. There shall be excluded from transactions as a result of which the holders of Series 1997-A Convertible Preferred Stock are entitled to elect and receive the Change of Control Preference (i) the public market trading of shares of Common Stock in unsolicited transactions, and (ii) the sale of Common Stock or other securities of the Corporation in underwritten, widely distributed offerings. The Corporation shall provide proper notice to each holder of record of shares of Series 1997-A Convertible Preferred Stock of any event of the nature set forth in clauses (i) to (iv) of this Section 4(a). (b) In the event of a voluntary or an involuntary liquidation, dissolution or winding-up of the Corporation (including, without limitation, the Plan of Liquidation (as defined in the Certificate of Amendment of the Corporation dated December 7, 1990, included in the Charter), the holders of the Series 1997-A Convertible Preferred Stock, may at their option receive, and, if so electing by written notice to the Corporation to such effect, shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, whether from capital, surplus or earnings, before any distributions made to holders of any Junior Shares, an amount per share as set forth in this Section 4(b) as a liquidation preference (the "Liquidation Preference") in the manner and as provided in Section 4(a), except that the Liquidation Preference shall be at an amount per share equal to the Liquidation Percentage (as defined and established below) multiplied by the sum of (i) Stated Value plus (ii) the per share amount of Accrued Dividends with respect to the Series 1997-A Convertible Preferred Stock to the date of final distribution (whether or not declared). As used herein, the "Liquidation Percentage" shall for the periods specified mean the percentage specified as set forth in the following table: 6
The effective date of the plan of liquidation, dissolution or winding-up, in terms of the anniversary of the date of the initial Liquidation issuance of shares of Series 1997-A Convertible Preferred Stock Percentage - ------------------------------------------------------------------ ----------- Before the 5th anniversary 115% After the 5th but before the 6th anniversary 110% After the 6th but before the 7th anniversary 105% After the 7th anniversary 100%
Notwithstanding the foregoing, upon the liquidation, dissolution or winding-up of the Corporation solely and directly as a result of the adoption and implementation of the Plan of Liquidation (as defined in the Certificate of Amendment of the Corporation dated December 7, 1990, included in the Charter), holders of shares of Series 1997-A Convertible Preferred Stock which vote in favor of the adoption of the Plan of Liquidation shall be entitled to receive the Liquidation Percentage measured as if such Plan of Liquidation was adopted after the seventh anniversary of the initial issuance of Series 1997-A Convertible Preferred Stock, regardless of the date on which such Plan of Liquidation was actually adopted. (c) Holders of Series 1997-A Convertible Preferred Stock may further elect, when delivering the written notice to the Corporation with respect to the election under Section 4(a) or Section 4(b), in lieu of receiving the Change of Control Preference or the Liquidation Preference, as the case may be, to receive Common Stock on conversion of Series 1997-A Convertible Preferred Stock, without regard to the time restriction on conversion established in the first sentence of Section 5(a) of this Certificate of Designation, in the manner and as provided in Section 5 of this Certificate of Designation. (d) If, upon any liquidation, dissolution or winding-up of the Corporation, the assets of the Corporation, or proceeds of those assets, available for distribution to the holders of Series 1997-A Convertible Preferred Stock and of shares of all other classes or series which are on a parity as to distributions on liquidation with the Series 1997-A Convertible Preferred Stock are not sufficient to pay in full the Change of Control Preference or the Liquidation Preference, as the case may be, to the holders of the Series 1997-A Convertible Preferred Stock who have not elected to convert such stock pursuant to Section 4(c) and any liquidation preference of all other classes or series which are on a parity as to distributions on liquidation with the Series 1997-A Convertible Preferred Stock, then the assets, or the proceeds of those assets, which are available for distribution to such holders of shares of Series 1997-A Convertible Preferred Stock and of the shares of all other classes or series which are on a parity as to distributions on liquidation with such Series 1997-A Convertible Preferred Stock will be distributed to the holders of the Series 1997-A Convertible Preferred Stock and of the shares of all other classes or series which are on a parity as to distributions on liquidation with the Series 1997-A Convertible Preferred Stock ratably in accordance with the respective amounts of the liquidation preferences of the shares held by each of them. After payment of the full amount of the Change of Control Preference or the Liquidation Preference, as the case may be, such holders of shares of Series 1997-A Convertible Preferred Stock will not be entitled to any further distribution of assets of the Corporation. As used herein, a "Change of Control" of the Corporation or the Operating Partnership shall be deemed to have occurred if any of the following occur (or, in the case of any proposal, if any of the following could occur as a result thereof): (i) the Corporation takes or fails to take any action such that it ceases to be required to file reports under Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any successor to that Section; (ii) any "person" (as defined in Sections 13(d) and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of either (A) 20% or more of the outstanding shares of Common Stock, or (B) 20% (by right to vote or grant or withhold any approval) of the outstanding securities of any other class or classes which individually or together have the power to elect a majority of the members of the Board; (iii) the Board determines to recommend, or fails to determine to recommend, the acceptance of any proposal set forth in a tender offer statement or proxy statement filed by any person with the Securities and Exchange Commission which indicates the intention on the part of that person to 7 acquire, or acceptance of which would otherwise have the effect of that person acquiring, either (A) 20% or more of the outstanding shares of the Common Stock, or (B) 20% (by right to vote or grant or withhold any approval) of the outstanding securities of any other class or classes which individually or together have the power to elect a majority of the members of the Board; (iv) other than as a result of the death or disability of one or more of the directors within a three-month period, and other than by reason of the holders of Series 1997-A Convertible Preferred Stock exercising voting rights as set forth in Section 3(d) of the Certificate of Designation, a majority of the members of the Board for any period of three consecutive months are not persons who (A) had been directors of the Corporation for at least the preceding 24 consecutive months or (B) when they initially were elected to the Board, (x) were nominated (if they were elected by the stockholders) or elected (if they were elected by the directors) with the affirmative concurrence of 66-2/3% of the directors who were Continuing Directors at the time of the nomination or election by the Board and (y) were not elected as a result of an actual or threatened solicitation of proxies or consents by a person other than the Board or an agreement intended to avoid or settle such a proxy solicitation (the directors described in clauses (A) and (B) of this subsection (iv) being "Continuing Directors"); (v) the Corporation or a Subsidiary of the Corporation ceases to be the sole General Partner of the Operating Partnership or grants or sells to any person, or consents to any amendment to the agreement of limited partnership of the Operating Partnership, or the organizational documents of the other Subsidiaries, which has the effect of transferring, the power to control or direct the actions of the Operating Partnership or such other Subsidiaries as if such person (A) is a general partner of the Operating Partnership or (B) is a limited partner of the Operating Partnership with consent or approval rights greater than the consent or approval rights held by the limited partners of the Operating Partnership on the date hereof; or (vi) the Operating Partnership is a party to any entity conversion or any merger or consolidation in which the Operating Partnership is not surviving entity in such merger or consolidation or in which the effect is of the nature set forth in the next preceding clause (v). Section 5. Conversion Into Common Stock. (a) Optional Conversion. (i) On and after September 19, 1998, or earlier than September 19, 1998 as provided in Section 4(c), each holder of shares of Series 1997-A Convertible Preferred Stock will have the right, at the holder's option, exercised by notice to such effect (the "Notice of Election to Convert"), to convert all or any of the shares of Series 1997-A Convertible Preferred Stock held of record by the holder into shares of Common Stock, such that each share of Series 1997-A Convertible Preferred Stock will be entitled to be converted into (A) a number of fully paid and non-assessable shares of Common Stock (calculated as to each conversion to the nearest 1/100th of a share) equal to Stated Value plus the amount, if any, of the per share amount of Accrued Dividends as of the effective time of the conversion, divided by the Conversion Price, as defined below, then in effect, or (B) such other securities or assets as the holder is entitled to receive in accordance with Section 5(e). (ii) The holder of each share of Series 1997-A Convertible Preferred Stock to be converted must surrender the certificate representing that share to the conversion agent for the Series 1997-A Convertible Preferred Stock appointed by the Corporation (which may be the Corporation itself), with the Notice of Election to Convert on the back of that certificate duly completed and signed, at the principal office of the conversion agent. If the shares issuable on conversion are to be issued in a name other than the name in which the Series A Convertible Preferred Stock is registered, each share surrendered for conversion must be accompanied by an instrument of transfer, in form reasonably satisfactory to the Corporation, duly executed by the holder or the holder's duly authorized attorney and by funds in an amount sufficient to pay any transfer or similar tax which is required to be paid in connection with the transfer or evidence that such tax has been paid or is not payable. (b) Mandatory Conversion. Subject to Section 7 of this Certificate of Designation, if, after the fifth anniversary of the date of the first issuance of shares of Series 1997-A Convertible Preferred Stock, the closing price of the Common Stock on each of at least 20 Trading Days (as defined herein) (including the Trading Day immediately before both the Notice of Mandatory Conversion and the Mandatory Conversion Date referred to below) of the preceding period of 30 consecutive Trading Days immediately prior to the Notice of Mandatory Conversion and the Mandatory Conversion Date shall be greater than the Conversion Price in effect on each of such 20 Trading Days, the Corporation shall have the right, subject to the rights of the holders under Section 3(d), 4 and 7 of this Certificate of Designation, to convert at any time and from time to time not less than 500,000 of the outstanding shares of Series 1997-A Convertible Preferred Stock into a number of shares of Common Stock (calculated 8 as to each conversion to the nearest 1/100th of a share) equal to the product of (i) the number of shares of Series 1997-A Convertible Preferred Stock to be converted multiplied by (ii) the Stated Value plus the amount, if any, of the per share amount of Accrued Dividends, with regard to the Series 1997-A Convertible Preferred Stock to the date of conversion (whether or not declared), divided by the Conversion Price then in effect, such that each share of Series 1997-A Convertible Preferred Stock is valued as set forth in clause (ii) in consideration for Common Stock issued in conversion priced at the Conversion Price calculated in accordance with Section 5(e) of this Certificate of Designation. In order to elect to effect the mandatory conversion of Series 1997-A Convertible Preferred Stock, subject to the requirement as to closing price preceding the Mandatory Conversion Date, set forth above, the Corporation shall issue a notice as to the date of the intended conversion and number of shares of Series 1997-A Convertible Preferred Stock which are to be converted into shares of Common Stock (the "Notice of Mandatory Conversion") to all holders of outstanding shares of Series A Convertible Preferred Stock on a date (the "Mandatory Conversion Notice Date") at least 90 but not more than 120 days prior to the conversion date specified in the Notice of Mandatory Conversion (the "Mandatory Conversion Date"), which Notice of Mandatory Conversion specifies a record date (the "Mandatory Conversion Record Date") selected by the Board of Directors which is not less than 20 more than 45 days before the Mandatory Conversion Date on which the conversion is to occur. If the number of shares of Series 1997-A Convertible Preferred Stock to be converted into shares of Common Stock on a Mandatory Conversion Date is less than all of the outstanding shares of Series 1997-A Convertible Preferred Stock, then the number of shares of each holder of Series A Convertible Preferred Stock, as held of record by each such holder on the Mandatory Conversion Record Date, which will be converted into shares of Common Stock will be that number of shares of Series 1997-A Convertible Preferred Stock rounded to the nearest ten shares, which is equal to the proportion of all outstanding shares of Series 1997-A Convertible Preferred Stock on such Mandatory Conversion Record Date held of record by such holder of Series 1997-A Convertible Preferred Stock to the total number of such shares outstanding. Such number of shares of each holder of Series 1997-A Convertible Preferred Stock which are to be converted, if less than all outstanding shares of Series 1997-A Convertible Preferred Stock are included in the Notice of Mandatory Conversion, will be set forth (with the computation used in making such determination as to each holder of Series 1997-A Convertible Preferred Stock) in the Notice of Mandatory Conversion. If the Corporation gives a Notice of Mandatory Conversion, then, provided that the computation set forth in the Notice of Mandatory Conversion is not clearly erroneous, the number of the outstanding shares of Series 1997-A Convertible Preferred Stock which are the subject of such Notice of Mandatory Conversion will be automatically converted into shares of Common Stock at the close of business on the Mandatory Conversion Date regardless of whether the holders of such shares of Series 1997-A Convertible Preferred Stock actually surrender the certificates representing their shares of Series 1997-A Convertible Preferred Stock for conversion. At the close of business on the Mandatory Conversion Date, (i) the certificates representing the shares of Series 1997-A Convertible Preferred Stock will cease to represent anything other than the shares of Common Stock into which the shares of the Series 1997-A Convertible Preferred Stock were automatically converted and the shares of Series 1997-A Convertible Preferred Stock which were not automatically converted and (ii) the Corporation shall, at its option (the exercise of which will be described in the Notice of Mandatory Conversion), either (A) deliver certificates representing the shares of Common Stock to which the holders of the Series 1997-A Convertible Preferred Stock are entitled without requiring the surrender of the certificates which formerly represented shares of Series 1997-A Convertible Preferred Stock, or (B) deliver certificates representing (1) the shares of Common Stock to which the holders of Series 1997-A Convertible Preferred Stock are entitled and (2) the shares of Series 1997-A Convertible Preferred Stock continued to be held by the holders of Series 1997-A after giving effect to such conversion, when the holder surrenders the certificates representing Series 1997-A Convertible Preferred Stock issued before the Mandatory Conversion Date and complies with the other requirements of subparagraph 5(a)(ii) (excluding the completion of the Notice of Election to Convert). (c) Conversion Procedures. (i) The effective time of the conversion under Section 5(a) shall be immediately prior to the close of business on the day when all the conditions in Section 5(a)(ii) have been satisfied. The effective time of the conversion under Section 5(b) shall, subject to the rights of holders under Sections 3(d), 4 and 7, be the close of business on the Mandatory Conversion Date. (ii) If shares are surrendered between the close of business on a dividend payment Record Date and the opening of business on the corresponding Dividend Payment Date ("Ex Record Date Shares"), the dividend with respect to those shares will be payable on the Dividend Payment Date to the holder of record of the Ex Record Date Shares on the dividend payment Record Date notwithstanding the surrender of the Ex Record 9 Date Shares for conversion after the dividend payment Record Date and prior to the Dividend Payment Date. The Corporation will make no payment or adjustment for Accrued Dividends on Ex Record Date Shares, whether or not in arrears, or for dividends on the shares of Common Stock issued upon conversion of the Ex Record Date Shares, other than to make payment to the holder of record thereof on the Record Date. The provisions of this Section 5(c)(ii) shall not limit the obligation of the Corporation to issue shares of Common Stock in conversion of shares of Series 1997-A Convertible Preferred Stock, including Ex Record Date Shares, at Stated Value plus Accrued Dividends (whether or not declared), as elsewhere provided in this Certificate of Designation. (iii) Except as otherwise permitted in clause (ii)(B) of the last sentence of Section 5(b), as promptly as practicable after the effective time for conversion of shares of Series 1997-A Convertible Preferred Stock, the Corporation will issue and will deliver to the holder at the office of the holder set forth in the Notice of Election to Convert, or on the holder's written order, a certificate or certificates representing the number of full shares of Common Stock issued upon the conversion of the shares of Series 1997-A Convertible Preferred Stock. Any fractional interest in respect of a share of Common Stock arising upon a conversion will be settled as provided in Section 5(d). (iv) Each conversion will be deemed to have been effected at the effective time provided in Section 5(c)(i), and the person in whose name a certificate for shares of Common Stock is (or, in the case of a conversion of less than all shares of Series 1997-A Convertible Preferred Stock pursuant to Section 5(b), in whose name certificates for shares of Common Stock and Series 1997-A Convertible Preferred Stock are) to be issued upon a conversion will be deemed to have become the holder of record of the shares of Common Stock represented by that certificate at such effective time. All shares of Common Stock delivered upon conversion of Series 1997-A Convertible Preferred Stock will upon delivery be duly and validly issued and fully paid and nonassessable, free of all liens and charges and not subject to any preemptive rights except such preemptive rights as may exist pursuant to the Stock Purchase Agreement dated as of September 19, 1997, among the Company and Westbrook Berkshire Holdings, L.L.C., and its affiliates. The shares of Series 1997-A Convertible Preferred Stock so converted will no longer be deemed to be outstanding and all rights of the holder with respect to those shares will immediately terminate, except the right to receive the shares of Common Stock, the shares of Series 1997-A Convertible Preferred Stock not converted on a Mandatory Conversion Date, and, if applicable, other securities, cash or other assets to be issued or distributed as a result of the conversion. (d) Fractional Shares. No fractional shares of Common Stock will be issued upon conversion of shares of Series 1997-A Convertible Preferred Stock. Any fractional interest in a share of Common Stock resulting from conversion of shares of Series 1997-A Convertible Preferred Stock will be paid in cash (computed to the nearest cent) based on the Current Market Price (as herein defined) of the Common Stock on the Trading Date next preceding the date of conversion. If more than one share of Series 1997-A Convertible Preferred Stock is surrendered for conversion at substantially the same time by the same holder, the number of full shares of Common Stock issuable upon the conversion will be computed on the basis of all the shares of Series 1997-A Convertible Preferred Stock surrendered at that time by that holder. (e) Conversion Price. The "Conversion Price" per share of Series 1997-A Convertible Preferred Stock will initially be a price (the "Initial Conversion Price") equal to $12.125, unless adjusted pursuant to Section 5(e)(xi), and will be further adjusted as follows from time to time, subject to Section 5(e)(ix), if any of the events described below occurs: (i) If the Corporation (A) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock or (B) subdivides, splits or reclassifies its outstanding Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to that event will be reduced so that the holder of a share of Series 1997-A Convertible Preferred Stock surrendered for conversion after that event will receive the number of shares of Common Stock which the holder would have received if the share of Series 1997-A Convertible Preferred Stock had been converted immediately before the happening of the event (or, if there is more than one such event, if the share of Series 1997-A Convertible Preferred Stock had been converted immediately before the first of those events and the holder had retained all the Common Stock or other securities or assets received after the conversion). If the Corporation combines its outstanding Common Stock into a smaller number of shares, the 10 Conversion Price in effect immediately prior to that event will be increased so that the holder of a share of Series 1997-A Convertible Preferred Stock surrendered for conversion after that event will receive the number of shares of Common Stock which the holder would have received if the shares of Series 1997-A Convertible Preferred Stock had been converted immediately before the happening of the event (or, if there is more than one such event, if the share of Series 1997-A Convertible Preferred Stock had been converted immediately before the first of those events and the holder had retained all the Common Stock or other securities or assets received after the conversion). An adjustment made pursuant to this Section 5(e)(i) will become effective immediately after the Record Date in the case of a dividend or distribution, and will become effective immediately after the effective date in the case of a subdivision, split, reclassification or combination. If such dividend or distribution is declared but is not paid or made, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment of the Conversion Price will not affect any conversion which takes place before the readjustment. (ii) If the Corporation issues rights or warrants to the holders of its Common Stock as a class entitling them to subscribe for or purchase Common Stock at a price per share less than the Conversion Price then in effect at the Record Date for the determination of stockholders entitled to receive the rights or warrants minus $0.125, the Conversion Price in effect immediately before the issuance of the rights or warrants will be reduced in accordance with the equation set forth on Exhibit A hereto, which is hereby incorporated by reference herein. The adjustment provided for in this Section 5(e)(ii) will be made successively whenever any rights or warrants are issued, and will become effective immediately after each Record Date. In determining whether any rights or warrants entitle the holders of the Common Stock to subscribe for or purchase shares of Common Stock at less than the Conversion Price then in effect minus $0.125 and in determining the aggregate sale price of the shares of Common Stock issuable on the exercise of rights or warrants and any consideration to be received by the Corporation for the exercise of such rights or warrants, there will be taken into account any consideration received by the Corporation for the rights or warrants, with the value of that consideration, if other than cash, to be determined by the Board of Directors of the Corporation (whose determination, if made in good faith, will be conclusive). If any rights or warrants which lead to an adjustment of the Conversion Price expire or terminate without having been exercised, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment of the Conversion Price will not affect any conversion which takes place before the readjustment. (iii) If the Corporation distributes to the holders of its Common Stock as a class any shares of stock of the Corporation (other than Common Stock) or evidences of indebtedness or assets (other than cash dividends or distributions) or rights or warrants (other than those referred to in Section 5(e)(ii)) to subscribe for or purchase any of its securities, then, in each such case, the Conversion Price will be reduced so that it will equal the price determined by multiplying the Conversion Price in effect immediately prior to the Record Date for the distribution by a fraction of which the numerator is the Current Market Price of the Common Stock on the Record Date for the distribution less the then fair market value (as determined by the Board of Directors, whose determination, if made in good faith, will be conclusive) of the stock, evidences of indebtedness, assets, rights or warrants which are distributed with respect to one share of Common Stock, and of which the denominator is the Current Market Price of the Common Stock on that Record Date. Each adjustment will become effective immediately after the Record Date for the determination of the stockholders entitled to receive the distribution. If any distribution is declared but not made, or if any rights or warrants expire or terminate without having been exercised, effective immediately after the decision is made not to make the distribution or the rights or warrants expire or terminate, the Conversion Price then in effect will be appropriately readjusted. However, a readjustment will not affect any conversion which takes place before the readjustment. (iv) If the Corporation issues or sells (or the Operating Partnership issues or sells) any equity or debt securities which are convertible, directly or indirectly, into or exchangeable for shares of Common Stock ("Convertible Securities") or any rights, options (other than the issuance or exercise after the date hereof of stock options covering no more than 1,100,000 shares of Common Stock, subject to appropriate adjustment to the extent that the Corporation (A) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock, (B) subdivides its outstanding Common Stock into a greater number of shares or (C) combines its outstanding Common Stock into a smaller number of shares, issued to employees or directors of the Corporation or its Subsidiaries under the Corporation's existing employee stock incentive plans) or warrants (except the issuance after the date hereof of shares of Common Stock pursuant to the warrants to purchase not more than 11 2,664,629 shares of Common Stock at a price per share of $11.79 outstanding on the date hereof issued by the Corporation pursuant to that certain settlement effective September 6, 1994) to purchase Common Stock at conversion, exchange or exercise price per share which is less than the Conversion Price then in effect minus $0.125, unless the provisions of Section 5(e)(ii) or (iii) are applicable, the Corporation will be deemed to have issued or sold, on the date on which the Convertible Securities, rights, options or warrants are issued, the maximum number of shares of Common Stock into or for which the Convertible Securities may then be converted or exchanged or which are then issuable upon the exercise of the rights, options or warrants immediately prior to the close of business on the date on which the Convertible Securities, rights, options or warrants are issued, and the Conversion Price shall be adjusted downward as if it were an event covered by Section 5(e)(v). However, no further adjustment of the Conversion Price will be made as a result of the actual issuance of shares of Common Stock upon conversion, exchange or exercise of the Convertible Securities, rights, options or warrants. If any Convertible Securities, rights, options or warrants to which this Section applies are redeemed, retired or otherwise extinguished or expire without any shares of Common Stock having been issued upon conversion, exchange or exercise thereof, effective immediately after the Convertible Securities, rights, options or warrants expire, the Conversion Price then in effect will be readjusted to what it would have been if those Convertible Securities, rights, options or warrants had not been issued. However, a readjustment will not affect any conversion which takes place before the readjustment. For the purposes of this Section 5(e)(iv), (x) the price of shares of Common Stock issued or sold upon conversion or exchange of Convertible Securities or upon exercise of rights, options or warrants will be (A) the consideration paid to the Corporation for the Convertible Securities, rights, options or warrants, plus (B) the consideration paid to the Corporation upon conversion, exchange or exercise of the Convertible Securities, rights, options or warrants, with the value of the consideration, if other than cash, to be determined by the Board of Directors of the Corporation (whose determination, if made in good faith, will be conclusive) and (y) any change in the conversion or exchange price of Convertible Securities or the exercise price of rights, options or warrants will be treated as an extinguishment, when the change becomes effective, of the Convertible Securities, rights, options or warrants which had the old conversion, exchange or exercise price and an immediate issuance of new Convertible Securities, rights, options or warrants with the new conversion, exchange or exercise price. (v) If the Corporation issues or sells any Common Stock (other than (X) on conversion or exchange of Convertible Securities, (Y) exercise of rights, options or warrants to which Section 5(e)(ii), (iii) or (iv) applies, or (Z) not more than $150,000,000 in gross offering proceeds of Common Stock in an underwritten, widely distributed offering at a price per share to the public of not less than $11.3125 on or before November 30, 1997) for a consideration per share less than the Conversion Price then in effect minus $0.125, (or for a consideration per share of less than $11.3125 in the case of an issuance referred to in clause (Z) of the parenthetical in this paragraph (e)(v)) on the date of the issuance or sale (or on exercise of options or warrants, for less than the Conversion Price then in effect minus $0.125 on the date the options or warrants are issued), upon consummation of the issuance or sale, the Conversion Price in effect immediately prior to the issuance or sale will be reduced in accordance with the equation set forth on Exhibit A hereto, which is hereby incorporated by reference herein. (vi) If there is a reclassification or change of outstanding shares of Common Stock (other than a change in par value, or as a result of a subdivision or combination or as a result of the Corporation's open-market purchases of Common Stock pursuant to its Dividend Reinvestment Plan), or a merger or consolidation of the Corporation with any other entity that results in a reclassification, change, conversion, exchange or cancellation of outstanding shares of Common Stock, or a sale or transfer of all or substantially all of the assets of the Corporation, upon any subsequent conversion of Series 1997-A Convertible Preferred Stock, each holder of the Series 1997-A Convertible Preferred Stock will be entitled to receive the kind and amount of securities, cash and other property which the holder would have received if the holder had converted the shares of Series 1997-A Convertible Preferred Stock into Common Stock immediately before the first of those events and had retained all the securities, cash and other assets received as a result of all those events. In the event that a transaction may be viewed as causing this Section 5(e)(vi) to be applicable and 5(e)(iii) is also applicable, then Section 5(e)(iii) will be applied and this Section 5(e)(vi) will not be applied. (vii) From and after a Charter Breach (as defined below), the Conversion Price from time to time in effect as provided elsewhere in this Section 5(e) shall at all times be 50% of the amount elsewhere so determined such that holders of shares of Series 1997-A Convertible Preferred Stock shall receive, on conversion, two 12 times the number of shares of Common Stock to which they would be entitled in the absence of the occurrence of a Charter Breach and the application of this Section 5(e)(vii). A "Charter Breach" shall mean a failure by the Corporation to observe and comply with Sections 3, 4 and 7 of this Certificate of Designation or any successor provisions contained in any amendment to or restatement of the Charter. (viii) For the purpose of any computation under this Section 5(e), the "Current Market Price" of the Common Stock on any date will be the average of the last reported sale prices per share of the Common Stock on each of the twenty consecutive Trading Days (as defined below) preceding the date of the computation. The last reported sale price of the Common Stock on each day will be (A) the last reported sale price of the Common Stock on the principal stock exchange on which the Common Stock is listed, or (B) if the Common Stock is not listed on a stock exchange, the last reported sale price of the Common Stock on the principal automated securities price quotation system on which sale prices of the Common Stock are reported, or (C) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, the mean of the high bid and low asked price quotations for the Common Stock as reported by National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Common Stock on at least five of the ten preceding Trading Days. If the Common Stock is not traded or quoted as described in any of clause (A), (B) or (C), the Current Market Price of the Common Stock on a day will be the fair market value of the Common Stock on that day as determined by a member firm of The New York Stock Exchange, Inc., selected by the Board of Directors. As used with regard to the Series 1997-A Convertible Preferred Stock, the term "Trading Day" means (A) if the Common Stock is listed on at least one stock exchange, a day on which there is trading on the principal stock exchange on which the Common Stock is listed, (B) if the Common Stock is not listed on a stock exchange, but sale prices of the Common Stock are reported on an automated quotation system, a day on which trading is reported on the principal automated quotation system on which sales of the Common Stock are reported, or (C) if the Common Stock is not listed on a stock exchange and sale prices of the Common Stock are not reported on an automated quotation system, a day on which quotations are reported by National Quotation Bureau Incorporated. (ix) No adjustment in the Conversion Price will be required unless the adjustment would require a change of at least 1% in the Conversion Price; provided, however, that any adjustments which are not made because of this Section 5(e)(ix) will be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5 will be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. (x) If any one of the events in Sections 5(e)(i) through 5(e)(vii) occurs, then the Corporation will mail to the holders of record of the Series 1997-A Convertible Preferred Stock, at least 15 days before the applicable date specified below, a notice stating the applicable one of (i) the date on which a record is to be taken for the purpose of the dividend, distribution or grant of rights or warrants, or, if no record is to be taken, the date as of which the holders of Common Stock of record who will be entitled to the dividend, distribution or rights or warrants will be determined, (ii) the date on which it is expected the Convertible Securities will be issued or the date on which the change in the conversion, exchange or exercise price of the Convertible Securities, rights, options or warrants will be effective, (iii) the date on which the Corporation anticipates selling Common Stock for less than the Conversion Price on the date of the sale (except that no notice need be given of the anticipated date of sale of Common Stock upon exercise of options or warrants which have been described in a notice to the holders of record of Series 1997-A Convertible Preferred Stock given at least 15 days before the options or warrants are exercised), or (iv) the date on which the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of record of Common Stock will be entitled to exchange their shares of Common Stock for securities or other property deliverable upon the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up. Failure to give any such notice or any defect in the notice will not affect the legality or validity of the reclassification, consolidation, merger, share exchange, sale, transfer, dissolution, liquidation or winding-up. Whenever the Conversion Price is adjusted, the Corporation will promptly send each holder of record of shares of Series 1997-A Convertible Preferred Stock a notice of the adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which the adjustment becomes effective and containing a brief description of the events which caused the adjustment. 13 (xi) In the event (i) the last reported sale price per share of Common Stock is less than $11.3125 on any day during the three full Trading Day period (the "First Measurement Period) after the Corporation is required or elects to restate, amend or alter or to issue a public announcement restating, amending or altering any of its financial statements (or parts thereof) and (ii) during the 30 full Trading Day period (the "Second Measurement Period") after the end of the First Measurement Period, the last reported sale price per share of Common Stock is not equal to or greater than $11.3125 for any two full Trading Days within the Second Measurement Period, then the Initial Conversion Price per share of Series 1997-A Convertible Preferred Stock will be equal to the product of (i) the average of the last reported sale price per share of Common Stock for each of the last 10 full Trading Days of the Second Measurement Period and (ii) 107%, but in no event shall such Initial Conversion Price exceed $12.125. If the Initial Conversion Price is to be adjusted as set forth herein and, during the time from the initial issuance of Series 1997-A Convertible Preferred Stock to the last day of the Second Measurement Period there shall have occurred an adjustment to the Conversion Price as otherwise set forth in this Section 5(e), such other adjustment or adjustments shall be redetermined as if the Initial Conversion Price determined in accordance with this Section 5(e)(xi) had been in effect on the date of the initial issuance of Series 1997-A Convertible Preferred Stock. (f) (i) The Corporation will at all times reserve and keep available, free from preemptive rights, out of the authorized but unissued shares of Common Stock, for the purpose of effecting conversion of the Series 1997-A Convertible Preferred Stock, the maximum number of shares of Common Stock which the Corporation would be required to deliver upon the conversion of all the outstanding shares of Series 1997-A Convertible Preferred Stock. For the purposes of this Section 5(f)(i), the number of shares of Common Stock which the Corporation would be required to deliver upon the conversion of all the outstanding shares of Series 1997-A Convertible Preferred Stock will be computed as if at the time of the computation all the outstanding shares of Series 1997-A Convertible Preferred Stock were held by a single holder. (ii) Before taking any action would cause an adjustment reducing the Conversion Price below the then par value (if any) of the shares of Common Stock deliverable upon conversion of the Series 1997-A Convertible Preferred Stock, the Corporation will take all corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at the adjusted Conversion Price. (iii) The Corporation will seek to list the shares of Common Stock required to be delivered upon conversion of the Series 1997-A Convertible Preferred Stock, prior to the delivery, upon each national securities exchange, if any, upon which the outstanding shares of Common Stock are listed at the time of delivery. (g) The Corporation will pay any documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on conversion of Series 1997-A Convertible Preferred Stock; provided, however, that the Corporation will not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the holder of record of Series 1997-A Convertible Preferred Stock to be converted and no such issue or delivery will be made unless and until the person requesting the issue or delivery has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that the tax has been paid or is not payable. Section 6. Status. Shares of Series 1997-A Convertible Preferred Stock converted pursuant to the terms hereof or otherwise acquired by the Corporation shall automatically be retired upon such conversion or other acquisition, as the case may be, shall not be reissued as shares of Series 1997-A Convertible Preferred Stock and shall be restored to the status of authorized but unissued shares of Preferred Stock, undesignated as to series. Section 7. Redemption after Notice of Mandatory Conversion. (a) Notwithstanding anything to the contrary contained in Section 5, each holder of Series 1997-A Convertible Preferred Stock will have the right, exercised at any time after the Mandatory Conversion Notice 14 Date but prior to the Mandatory Conversion Date, to require the Corporation to redeem any or all of the number of shares of Series 1997-A Convertible Preferred Stock specified in the Notice of Mandatory Conversion that are owned of record by the holder (the number of shares as to which each holder elects redemption under this clause (a) being referred to as the "Identified Redemption Shares"), at a redemption price per share (the "Redemption Price") equal to 110% multiplied by the sum of (i) Stated Value plus (ii) the per share amount of the sum of all Accrued Dividends with regard to the Series 1997-A Convertible Preferred Stock (whether or not declared) through the Redemption Date, as herein defined. (b) In order to exercise a right to require the Corporation to redeem a holder's Series 1997-A Convertible Preferred Stock, the holder must deliver a request for redemption with respect to the Identified Redemption Shares, accompanied by the certificates representing the shares to be redeemed, to the Corporation at any time prior to the Mandatory Conversion Date. If a request for redemption is given with regard to shares of Series 1997-A Convertible Preferred Stock, promptly (but in no event more than five Business Days) after the request for redemption is given to the Corporation, the Corporation will pay the holder cash equal to the Redemption Price of the shares. The date of such payment is referred to herein as the "Redemption Date." (c) (i) If a request for redemption accompanied by the certificates representing the shares to be redeemed is delivered to the Corporation, on the Redemption Date dividends will cease to accrue with regard to the shares of Series 1997-A Convertible Preferred Stock to be redeemed, and at the close of business on that date the holders of those shares will cease to be stockholders with respect to those shares, will have no interest in or claims against the Corporation by virtue of such shares (other than as described in clause (ii) below) and will have no voting or other rights with respect to such shares. (ii) The dividend with respect to a share of Series 1997-A Convertible Preferred Stock which is the subject of a request for redemption delivered on a day which falls between the close of business on a dividend payment Record Date and the opening of business on the corresponding Dividend Payment Date will be payable on the Dividend Payment Date to the holder of record of the share of Series 1997-A Convertible Preferred Stock on the dividend payment Record Date notwithstanding the redemption of the share of Series 1997-A Convertible Preferred Stock after the dividend payment Record Date and prior to the Dividend Payment Date. (d) Notwithstanding the foregoing provisions of this Section 7, the Corporation may, on notice provided to each holder of Series 1997-A Convertible Preferred Stock which has delivered to the Corporation a request for redemption, not more than two Business Days after the delivery to the Corporation of such request for redemption, elect as to all but not less than all the Identified Redemption Shares of such holder so noticed for redemption pursuant to this Section 7, to deliver such number of shares of Common Stock on the Mandatory Conversion Date as shall equal the quotient of (i) the product of (A) 104%, (B) the Redemption Price, and (C) the number of the Identified Redemption Shares, divided by (ii) the Current Market Price computed two Trading Days prior to the Redemption Date. Section 8. REIT Declassification. (a) In the event that the Corporation should not qualify as a real estate investment trust within the meaning of Section 856 of the Internal Revenue Code of 1986, as amended (a "REIT Declassification"), each holder of Series 1997-A Convertible Preferred Stock shall, subject to the requirements of this Section 8, have the right to require the Corporation to redeem any or all of the shares of Series 1997-A Convertible Preferred Stock owned of record by such holder, at a redemption price (the "Declassification Redemption Price") per share equal to the product of (i) 115% and (ii) the sum of (A) Stated Value plus (B) the per share amount of Accrued Dividends with regard to the Series 1997-A Convertible Preferred Stock to the date of final distribution (whether or not distributed). The Corporation shall immediately notify (the "Declassification Notice") each holder of Series 1997-A Convertible Preferred Stock in writing of any REIT Declassification or any proposed REIT Declassification, and each holder of Series 1997-A Convertible Preferred Stock shall within ninety (90) days after receipt from the Corporation of the Declassification Notice notify the Corporation of its election pursuant to this Section 8(a). 15 (b) Each holder of Series 1997-A Convertible Preferred Stock may exercise its rights under Section 8(a) hereof by notifying the Corporation in writing of its election and surrendering the Series 1997-A Convertible Preferred Stock. If a request for redemption is given with respect to a REIT Declassification, promptly (but in no event more than five Business Days) after the request for redemption is given to the Corporation, the Corporation will pay the holder cash equal to the Declassification Redemption Price of the shares. The date of such payment is referred to herein as the "Declassification Redemption Date." (c) (i) If a request for redemption accompanied by the certificates representing the shares to be redeemed under this Section 8 is delivered to the Corporation, on the Declassification Redemption Date dividends will cease to accrue with regard to the shares of Series 1997-A Convertible Preferred Stock to be redeemed, and at the close of business on that date the holders of those shares will cease to be stockholders with respect to those shares, will have no interest in or claims against the Corporation by virtue of such shares (other than as described in clause (ii) below) and will have no voting or other rights with respect to such shares. (ii) The dividend with respect to a share of Series 1997-A Convertible Preferred Stock which is the subject of a request for redemption under this Section 8 delivered on a day which falls between the close of business on a dividend payment Record Date and the opening of business on the corresponding Dividend Payment Date will be payable on the Dividend Payment Date to the holder of record of the share of Series 1997-A Convertible Preferred Stock on the dividend payment Record Date notwithstanding the redemption of the share of Series 1997-A Convertible Preferred Stock under this Section 8 after the dividend payment Record Date and prior to the Dividend Payment Date. Section 9. Ranking. The shares of Series 1997-A Convertible Preferred Stock will, with respect to the payment of dividends, the right to redemption in accordance with Section 7, the right to receive the Change of Control Preference, the right to receive the Liquidation Preference, and any other distribution of assets on liquidation, dissolution or winding-up of the Corporation, rank prior to any other series of Preferred Stock, prior to Common Stock and prior to any other class or series of capital stock of the Corporation. Section 10. Miscellaneous. (a) Except as otherwise expressly provided to this Certificate of Designation, whenever a notice or other communication is required or permitted to be given to holders of shares of Series 1997-A Convertible Preferred Stock, the notice or other communication will be deemed properly given if deposited in the United States mail, postage prepaid, addressed to the persons shown on the books of the Corporation as the holders of the shares of Series 1997-A Convertible Preferred Stock at the addresses as they appear on the books of the Corporation, as of the Record Date or dates determined in accordance with applicable law and with the Charter and Bylaws, as in effect from time to time, with a copy sent to Westbrook Berkshire Holdings, L.L.C., c/o Westbrook Partners, L.L.C., at 599 Lexington Avenue, Suite 3800, New York, New York 10022 and at 13155 Noel Road, LB 54, Suite 2300, Dallas, Texas 75240, in each case by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service. (b) Shares of Series 1997-A Convertible Preferred Stock will not have any designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or terms and conditions of redemption, other than those specifically set forth herein, in the Charter, and as may be provided under applicable law insofar as any such provision does not conflict with the terms hereof. (c) The headings of the various subdivisions herein are for convenience only and will not affect the meaning or interpretation of any of the provisions herein. (d) Notwithstanding Section 3 hereof, the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption of the Series 1997-A Convertible Preferred Stock may be waived, and any of such provisions of the Series 16 A Convertible Preferred Stock may be amended, only with the approval of holders of at least a majority of the outstanding shares of Series 1997-A Convertible Preferred Stock, voting separately as a class. (e) Notwithstanding anything to the contrary contained in Section 2, 3, 4, 5 7, 8 or 10(d) hereof, each holder of record of Series 1997-A Convertible Preferred Stock hereby agrees (subject to relinquishment by Westbrook Real Estate Fund II, L.P. as permitted below) that, in determining whether any holder of Series 1997-A Convertible Preferred Stock has (i) voted to remove or elect any director of the Corporation under Section 3, (ii) approved any action by the Corporation under Section 3, (iii) elected the Change of Control Preference, or the Liquidation Preference, as the case may be, or shares of Common Stock in lieu of either thereof under Section 4, (iv) elected to cause the conversion of such holder's Series 1997-A Convertible Preferred Stock into Common Stock or other assets under Section 5, (v) elected to receive the Redemption Price under Section 7 after receiving a Notice of Mandatory Conversion, (vi) elected to receive the Declassification Redemption Price under Section 8 or (vi) received any notice of the Corporation required or permitted by this Certificate of Designation, Westbrook Real Estate Fund II, L.P. shall have the right to grant or deny such approvals, make or decline any such elections or receive any such notices with regard to all shares of the Series 1997-A Convertible Preferred Stock held of record by such holder, and a notice received by Westbrook Real Estate Fund II, L.P. and a document executed by Westbrook Real Estate Fund II, L.P. calling a meeting of shareholders, exercising the right to take action by written consent without a meeting, exercising voting rights either together with holders of shares of Common Stock or separately as a class, including without limitation the granting or denying of approval to any action by the Corporation, or electing or removing any director, or electing or declining to the Corporation to effect the conversion as to any shares of Series 1997-A Convertible Preferred Stock, or electing or declining to the Corporation to effect the redemption as to any shares of Series 1997-A Convertible Preferred Stock, shall determine the matter for such holders as Westbrook Real Estate Fund II, L.P. may indicate. Upon written notice by Westbrook Real Estate Fund II, L.P. to the Corporation, Westbrook Real Estate Fund II, L.P. may relinquish such rights and powers over any or all shares of Series 1997-A Convertible Preferred Stock. The foregoing may, but need not, be evidenced by execution by each holder of Series A Convertible Preferred Stock, other than Westbrook Real Estate Fund II, L.P., of a proxy in favor of Westbrook Real Estate Fund II, L.P. Section 11. Severability of Provisions. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law. 17 IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation by its President and attested by its Secretary this 30th day of September, 1997. BERKSHIRE REALTY COMPANY, INC. By: David F. Marshall --------------------------------------- David F. Marshall President Attest: Scott D. Spelfogel - --------------------------------- Name: Scott D. Spelfogel --------------------------- Title: Secretary 18 Exhibit A --------- OBJECTIVE: To keep the Preferred Stockholders' relative ownership of shares constant (as compared to transaction consummated at the Effective Conversion Price), upon issuance of a "New Dilutive Security" (see definition below), the then-applicable Conversion Price of the Preferred Stock will be adjusted as follows: PRIOR ANTI-DILUTION ADJUSTED CONVERSION PRICE ADJUSTMENT FORMULA CONVERSION PRICE - ---------------- ------------------- ---------------- (A+B+C)+EX X x ------------------- = X^ (A+B+C^)+EX^ [ARROW UP] ...must be solved for per calculation included in example below. DEFINITIONS: - ------------ "New Dilutive Security" - A Common stock or common stock equivalent issuance at a price below FX X - Conversion Price of Preferred Stock prior to issuance of "New Dilutive Security." X^ - Conversion Price of Preferred Stock adjusted for issuance of "New Dilutive Security." FX - Effective Conversion Price of Preferred Stock prior to issuance of "New Dilutive Security." FX^ - Effective Conversion Price of Preferred Stock adjusted for issuance of "New Dilutive Security" A - The number of fully diluted common shares outstanding B - Shares of Common Stock issuable upon conversion of all convertible Operating Partnership Units outstanding prior to issuance of New Dilutive Security. C - Shares of Common Stock issuable upon conversion of all Preferred Stock, assuming the prior Conversion Price, (or X). C^ - Shares of Common Stock issuable upon conversion of all outstanding Preferred Stock, assuming the adjusted Conversion Price for the New Dilutive Security issuance (or X^). EX - "New Dilutive Security" equivalent common shares, assuming prior Effective Conversion price, (FX) EX^ - "New Dilutive Security" equivalent common shares, based on actual conversion of security.
Exhibit A (continued) --------------------- Example - ------- Assume a 10,000,000 share common stock issuance of $10/share (the "New Dilutive Security") following an investment of $70,000,000 of Preferred Stock at a $12.125 Conversion Price ($11.995 Effective Conversion Price): Assumptions - -----------
- ------------------------------------------------------------------------------------------------- Outstanding Common Stock 25,480,851 Gross Proceeds - New Issue 100,000,000 OP Units Outstanding 6,527,022 New Shares Issued 10,000,000 Pref. Stock Equivalent Common Stock 5,773,196 New Share Issue Price $10.00 Preferred Conversion Price $12.125 Effective Pref. Conversion Price $11.995 - -------------------------------------------------------------------------------------------------
Prior to solving for C^, the following table must be created:
Post-New Dilutive Post-New Dilutive Security Issuance Security Issuance Pre-New Dilutive Issued at $10 per Issued at Effective Security Issuance Share and Unadjusted Conversion Price ---------------------- ------------------------- ------------------------ Share Capitalization of Corporation # of Shares % # of Shares % # of Shares % - --------------------------------------- ----------- ------- ----------- ------- ----------- ------- Common Stock Equivalent Shares (A) 25,480,851 67.44% 25,480,851 53.33% 25,480,851 55.25% Convertible OP Units Outstanding (B) 6,527,022 17.28% 6,527,022 13.66% 6,527,022 14.15% ------- Pref. Stock Equivalent Common Stock (C) 5,773,196 15.28% 5,773,196 12.08% 5,773,196 12.52% ------- New Dilutive Security Shares (EX^/EX) - 0.00% 10,000,000 20.93% 8,336,745 18.08% ---------- ------- ---------- ------- ---------- ------- Total 37,781,069 100.00% 47,781,069 100.00% 46,117,814 100.00%
C^ is the number of shares of Common stock into which the shares of Preferred stock must convert in order to maintain the Preferred Stockholder's ownership percentage at 12.5% (i.e. as if the issuance were done at the effective conversion price prior to the issuances) Share Capitalization, post New Dilutive Security Issuance as issued at $10 per share and unadjusted 47,781,069 Less Preferred Stock Equivalent Common Stock (5,773,196) ---------- Non-Preferred Share Capitalization 42,007,873 Ownership of Preferred Shareholders if New Security Issued at Effective Conversion Price 12.52% Remaining Shareholders Ownership Interest 87.48% Total Shares Grossed up to Maintain Preferred Ownership Percentage at 12.52% 48,019,076 Preferred Stock Ownership Percentage 12.52% ---------- Number of Shares Preferred must convert into in order to keep Ownersip Percentage at 12.52% 6,011,203 ==========
Exhibit A (continued) ---------------------
Prior Conversion Adjusted Conversion Price Price - ---------------- ------------------- $12.125 X ((A+B+C) + (dilutive issue proceeds / $12.125)) = X^ ---------------------------------------------- ((A+B+C^) + (dilutive issue proceeds / $10.00)) $12.125 X (37,781,069 + 8,336,745) = X^ ------------------------- (38,019,076 + 10,000,000) $12.125 X 46,117,814 = 96.04% = $11.6449 ---------- 48,019,076 Preferred Equivalent Common Stock at New Conversion Price = 70,000,000 = 6,011,203 ---------- 11.645
Checking the Calculation - ------------------------
Share Capitalization of Corporation Shares % - ----------------------------------- ---------- ------- Common Stock Equivalent Shares (A) 25,480,851 53.06% Convertible OP Units Outstanding (B) 6,527,022 13.59% -------- Preferred Stock Equivalent Common Stock (C^/C) 6,011,203 12.52% -------- New Dilutive Security Shares (EX^/EX) 10,000,000 20.83% ---------- ------- TOTAL 48,019,076 100.00%
EX-10.25 4 MATERIAL CONTRACTS DEVELOPMENT ACQUISITION AGREEMENT THIS DEVELOPMENT ACQUISITION AGREEMENT (this "Agreement") is made and entered into this ________ day of ____________________, 1997, by and among QUESTAR PROPERTIES, INC. (the "Developer"), Stephen M. Gorn, John B. Colvin and BRI OP LIMITED PARTNERSHIP, a limited partnership ("BRI OP"). BACKGROUND Developer is a Maryland corporation engaged in the business of land development and the construction of multifamily apartment projects. Stephen M. Gorn and John B. Colvin are principal shareholders of the Developer. BRI OP is a Delaware limited partnership engaged in the ownership and operation of multifamily apartment projects. Berkshire Realty Company, Inc. ("Berkshire"), a publicly traded real estate investment trust, is a limited partner in BRI OP. BRI OP desires to engage Developer to identify and acquire sites in the Mid-Atlantic region of the United States for multifamily apartment projects and to develop and construct multifamily apartment projects on the sites, and Developer desires to accept such engagement. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the Developer and BRI OP covenant and agree as follows: 1. Engagement of Developer. BRI OP hereby engages Developer and Developer hereby accepts such engagement to be BRI OP's exclusive developer/builder in connection with the identification, development and acquisition of multifamily apartment development sites in the Mid-Atlantic Region (i.e. Pennsylvania, Delaware, Maryland, Washington, D.C. and Virginia) of the United States (each a "New Development Site") and the engineering, design and construction of multifamily apartment projects of between 100 and 1,000 units (each a "New Development Project") on the New Development Sites. 1.1. BRI OP agrees, subject to the terms of this Agreement, that its engagement of Developer shall be exclusive for the Term (as hereinafter defined) of this Agreement and that, accordingly, during the Term of this Agreement: a. if BRI OP, Berkshire or any of its other affiliates is presented by a third party with any site in the Mid-Atlantic Region for the construction of a multifamily apartment project, BRI OP will advise Developer of such opportunity and allow Developer to negotiate for the acquisition of the site as a New Development Site in accordance with this Agreement; b. except as provided in this Agreement, if BRI OP, Berkshire or any of its other affiliates is or becomes the owner of any New Development Site in the Mid-Atlantic Region for the construction of a Multifamily Apartment Project, BRI OP will engage Developer to design and construct a Multifamily Apartment Project on the New Development Site in accordance with this Agreement; and c. except as provided in this Agreement, BRI OP will not engage any other person or entity to acquire, develop or construct New Development Sites or New Development Projects in the Mid-Atlantic Region nor will it, on its own behalf, or through Berkshire or any of its other affiliates, acquire, develop or construct New Development Sites or New Development Projects in the Mid-Atlantic Region. 1.2. Developer agrees that its engagement with BRI OP shall be exclusive for the Term of this Agreement and that, accordingly, during the Term of this Agreement: a. Developer, on its own behalf and on behalf of all of its affiliates (as defined in Section 7.11) shall acquire New Development Sites and construct New Development Projects only in the Mid-Atlantic Region and neither Developer, on its own behalf or on behalf of any other person or entity or of any of its affiliates, shall acquire any New Development Site in any location in the United States (other than the Mid-Atlantic Region) nor develop or construct any New Development Project in any location in the United States (other than the Mid-Atlantic Region); b. except as provided in this Agreement, Developer and all of its affiliates, shall acquire, develop and construct New Development Sites and New Development Projects in the Mid-Atlantic Region solely for BRI OP, or its affiliates and for no other person or party; c. except as provided in this Agreement, neither Developer, on its own behalf, nor any of its affiliates shall agree with any other person or entity, other than BRI OP or its affiliates to acquire, develop or construct any New Development Site or New Development Project in the Mid-Atlantic Region nor will Developer, on its own behalf, nor will any affiliate of Developer, acquire, develop or construct New Development Sites or New Development Projects for its own account in the Mid-Atlantic Region. d. Developer agrees that it will first present to BRI OP all opportunities for New Development Sites of which Developer or any of its affiliates (as defined in Section 7.11) becomes aware in accordance with the provisions of Section 3 hereof prior to presenting such opportunities to any other person or entity. -2- 1.3. Except as provided in this Agreement, Stephen M. Gorn and John B. Colvin agree that during the Term of this Agreement, they will not, directly or indirectly, as an individual, proprietor, partner stockholder, officer, employee, director, joint venturer, investor, lender, consultant, or as any other capacity whatsoever, acquire, develop or construct (or participate in the formation of a business which does any of the same and/or assist any other person in doing any of the same) any New Development Site or New Development Project for any person or party, including themselves, other than BRI OP and its affiliates except to the extent that the Developer is expressly permitted to do so under the terms of this Agreement. The foregoing sentence shall not, however, be construed to (a) prohibit Stephen M. Gorn and/or John B. Colvin from holding an ownership interest in an entity, whether as a partner, stockholder, investor or otherwise, in which he or they do not exercise or have the power to exercise managerial control, do not own 50% or more of the economic interests in a privately owned entity or 10% or more of the economic interests in a publicly traded entity and for which they perform no services for which they are paid, nor (b) apply to any of the properties that are the subject of the Related Agreements or the subject of those certain Development Contribution Agreements by and between affiliates of the Developer and BRI OP. 1.4. The provisions of this Section 1 shall not apply to the acquisition, development or construction of sites for the development of for-sale housing, including, but not limited to single family, townhouse and garden condominium projects and such sites shall not be deemed "New Development Sites". 2. Term. 2.1. The term of this Agreement (the "Term") shall commence on that date on which closing occurs under those certain agreements by and among Developer and/or its affiliates and/or entities in which affiliates of Developer are partners and BRI OP and/or its affiliates, as identified on Exhibit A hereto (the "Related Agreements"), and shall expire on the fifth anniversary of such date (the "Termination Date"). Notwithstanding the foregoing, if, after the Term of this Agreement commences, both of the Termination Events (as hereinafter defined) occur, then either party, by written notice to the other party, may terminate this Agreement, in which event (a) the Termination Date shall be deemed to have occurred upon receipt of such notice by the other party and the Term of this Agreement shall expire on such Termination Date, (b) neither party hereto shall have any further rights or obligations hereunder (except as otherwise provided in Section 2.3), and (c) the Employment Agreements between BRI OP and Stephen M. Gorn and John B. Colvin and the Consulting Agreement between BRI OP and Morton Gorn shall terminate. The Termination Events shall consist of (1) closing occurring under both of the Development Contribution Agreements between BRI OP and Ironhorse Associates, L.L.C. ("Ironhorse") or if closing does not occur under one or both of such Development Contribution Agreements, such Development Contribution Agreement(s) as to which closing does not occur having terminated for any reason (other than a default by the party giving notice of termination), and (2) pursuant to Section 3.2, BRI OP having determined on a -3- preliminary basis that the Threshold Conditions have not been satisfied with respect to four consecutive New Development Sites presented by Developer. 2.2. If closing under such Related Agreements has not occurred by October 31, 1997, (such date being subject to further extension by mutual written agreement of both parties) then this Agreement shall automatically terminate and neither party hereto shall have any further rights or obligations hereunder. 2.3. Notwithstanding the occurrence of the Termination Date, (a) this Agreement shall continue in effect as to any New Development Site acquired by Developer or BRI OP prior to the Termination Date or placed under contract to be acquired by Developer or BRI OP prior to the Termination Date, and (b) termination upon the Termination Date however shall not affect the rights and obligations of the parties hereto under any separate agreement including, but not limited to, a Project Development Agreement (as hereinafter defined) or a Tri Party Agreement (as hereinafter defined) hereafter entered into pursuant to the provisions of this Agreement, which rights and obligations shall continue in full force and effect. 3. Acquisition of New Development Sites. 3.1. BRI OP agrees to purchase on an annual basis from or through Developer New Development Sites, to the extent available, which can accommodate an aggregate minimum of 500 apartment units in New Development Projects which satisfy the following conditions (the "Threshold Conditions"): a. Each New Development Site shall have potential for development of a New Development Project of no less than 100 and no more than 1,000 apartment units. b. Each New Development Site shall be located in the Mid-Atlantic Region. c. Each New Development Site shall have potential for development of a 100% market rental New Development Project, with no rent controls or rent subsidies. d. BRI OP shall have conducted and approved, in its reasonable discretion, all due diligence inspections necessary to determine that an adequate market for the New Development Project exists and that the proposed New Development Project is appropriate for the market. e. BRI OP shall have no obligation to purchase and/or develop a New Development Site unless the development costs (i.e. (i) hard development costs, (ii) soft development costs, including interest and third party professional costs, (iii) Land Acquisition Costs (as hereinafter defined), and (iv) a G.C. Development Fee of 7% of the costs listed in (i) through (iii) payable to Developer) reasonably projected by Developer and reasonably agreed to by BRI OP (the "Projected Total Development Cost") to develop the New Development Project are equal or less -4- than the Target Development Cost. The Target Development Cost is equal to Stabilized NOI (as hereinafter defined) divided by the New Development Cap Rate (as hereinafter defined). (i) Stabilized NOI is the net operating income at 93% occupancy reasonably projected by Developer for the New Development Project and reasonably agreed to by BRI OP for the 12-month period of operations of the New Development Project commencing on the first month after 90% of the units in the New Development Project have been leased for a period of 3 months. (ii) Operating expenses used in determining net operating income shall consist of the following: the customary and reasonable operating expenses of the Property, including, but not limited to, expenses for insurance, on-site employees, utilities, lawn care, ordinary maintenance and repair, real estate taxes, a management fee of 5%, advertising and leasing, interior painting and redecorating, and general and administrative, but not including depreciation or capital expenses. (iii) The New Development Cap Rate is the greater of (x) 10.0% or (y) the sum of the BRI OP Blended Cost of Capital (as hereinafter defined) plus 100 basis points. (iv) The BRI OP Blended Cost of Capital is the sum of (x) the BRI OP Equity Rate (as hereinafter defined) multiplied by 0.6, plus (y) the BRI OP Debt Rate (as hereinafter defined) multiplied by 0.4. (v) The BRI OP Equity Rate is calculated as follows: (x) the BRI OP Budgeted FFO (i.e. funds from operations as determined in accordance with the NAREIT standards), as established by BRI OP (for the calendar year in which the development and construction of the New Development Site is to commence) divided by (y) the share price of the Common Stock of Berkshire at the time of analysis divided by (z) the BRI OP Offering Cost Percentage (as hereinafter defined). (vi) The BRI OP Offering Cost Percentage is the quotient of the total offering costs incurred by Berkshire in its 1997 public offering of Common Stock divided by the total dollars raised by Berkshire in connection with the public offering. (vii) The BRI OP Debt Rate is the permanent debt rate available at the time of the analysis to qualified borrowers for a mortgage loan by the Federal National Mortgage Association under its Tier IV loan guidelines. (viii) An example of the calculation of the BRI OP Blended Cost of Capital is attached as Exhibit B. 3.2. Developer shall make a formal, preliminary presentation to BRI OP of the proposed New Development Site. BRI OP shall determine, on a preliminary basis, whether all -5- Threshold Conditions have been satisfied within 15 days of formal preliminary presentation by Developer. If BRI OP determines that the Threshold Conditions are not satisfied, then notwithstanding the provisions of Section 1, Developer shall be free to acquire the New Development Site and develop it free of all exclusive and non-competition agreements contained in this Agreement and in any of the Related Agreements or in any other documents executed in connection therewith or pursuant thereto, including, but not limited to any Employment Agreement or Consulting Agreement between BRI OP and any of Morton Gorn, Stephen M. Gorn or John B. Colvin; provided, that if Developer so elects to acquire and begins development of a multifamily apartment project on any such New Development Site which BRI OP has not approved (a "Non-Approved New Development Site"), for each Non-Approved New Development Site in number which Developer acquires and begins development, notwithstanding the provisions of Section 1, BRI OP shall be permitted to acquire and/or develop with other BRI OP personnel or with any third party an equal number of multifamily apartment projects in the Mid-Atlantic Region, free of all exclusive and non-competition agreements contained in this Agreement and in any Related Agreement. If, based on the preliminary presentation, BRI OP determines that the Threshold Conditions are satisfied, then BRI OP shall proceed to acquire the New Development Site as provided under Section 3.3. All determinations by BRI OP shall be made by written notice to Developer, and the specific reasons for any determination shall be set forth in the notice. 3.3. Each New Development Site to be acquired by BRI OP shall either be owned by Developer (or an affiliate of Developer that is either a general partnership, limited partnership, or limited liability company) or, at the option of Developer, under a binding purchase agreement between Developer and a third-party seller. Closing on the acquisition of the New Development Site shall occur either (a) within 60 days after BRI OP determines, on a preliminary basis, that the Threshold Conditions have been satisfied if Developer or an affiliate of Developer owns the New Development Site or (b) if the New Development Site is under a binding purchase agreement, then on the date required for closing under the binding purchase agreement. At Closing, as applicable, either Developer shall convey the New Development Site to BRI OP, or at the option of BRI OP, assign all of the partnership interests or limited liability company interests in the entity owning the New Development Site to BRI OP. If Developer owns the New Development Site, the land purchase price payable by BRI OP shall be equal to the total price paid by Developer (including all closing costs) at the time it acquired the New Development Site (i.e., a sale "at cost"). If the New Development Site is under a binding purchase agreement, the Developer shall assign the existing purchase agreement and the third-party seller shall convey the New Development Site directly to BRI OP, in which event the land purchase price shall be equal to the price set forth in the existing purchase agreement (in either case, the "Land Purchase Price"). In addition, regardless of the method by which BRI OP acquires the New Development Site, at Closing, BRI shall pay to Developer an acquisition fee equal to 7% of the Land Purchase Price (the "Land Acquisition Fee"). Regardless of the method by which BRI OP acquires the New Development Site, all closing costs not borne by a third-party seller, including, but not limited to, title insurance premiums, survey costs and all transfer recordation, documentary -6- stamp and other taxes imposed on the conveyance, shall be paid by BRI OP. The Land Purchase Price, such closing costs and the Land Acquisition Fee are referred to collectively as the "Land Acquisition Costs." 4. Development and Construction. 4.1. Within 30 days after closing by BRI OP on the New Development Site, Developer and BRI OP shall agree upon a projected timetable and schedule of responsibilities for obtaining the information and performing such studies and analyses as are necessary to determine, on a final basis, whether the Threshold Conditions are satisfied. 4.2. Within 6 months after Closing by BRI OP on the New Development Site, Developer shall make a formal, final presentation to BRI OP of the New Development Project. BRI OP shall determine, on a final basis, whether all Threshold Conditions for development of the New Development Project upon the New Development Site are satisfied within 15 days of formal, final presentation by Developer. At the time that BRI OP makes such decision, BRI OP shall elect one of the following options to proceed after acquisition: (a) promptly begin development of the New Development Site with Developer as provided in Section 4.3, or (b) if and only if, in BRI OP's reasonable judgment, the capital markets do not currently make available sufficient capital for the New Development Project, but the New Development Site represents an attractive site for future development of a New Development Project when capital market conditions improve, hold the New Development Site for future development in accordance with Section 5 below, or (c) if, based upon the final, formal presentation of Developer, BRI OP has determined that the Threshold Conditions for development of the New Development Site have not been met, hold and/or dispose of the New Development Site in accordance with Section 5 below. Once a final determination is made to proceed with development under Section 4.3, BRI OP shall be obligated to proceed with the development and construction of the New Development Project unless, in BRI OP's reasonable judgment, a material adverse change occurs in the capital markets which makes the capital contemplated for the New Development Project unavailable, in which case, BRI OP shall immediately notify Developer, and the provisions of Section 5 below shall apply. All determinations by BRI OP shall be made by written notice to Developer, and the specific reasons for any determination shall be set forth in the notice. 4.3. If development of the New Development Site is to proceed, then, within 30 days after the final determination that the Threshold Conditions have been satisfied, BRI OP and Developer, or an affiliate of Developer designated by Developer, shall enter into a development agreement for the development of a New Development Project on the New Development Site acquired by BRI OP (a "Project Development Agreement"). Under the terms of the Project Development Agreement, the parties shall agree, among other terms: -7- a. Developer shall be solely responsible to develop the New Development Project, including without limitation, Developer shall (i) engage the project architect and engineer to design the project, (ii) obtain all governmental permits and approvals, (iii) engage and supervise all contractors and suppliers (which may include affiliates of Developer), (iv) obtain the construction loan financing, (v) clear, grade and develop the New Development Site, and (vi) construct the New Development Project substantially in accordance with the plans and specifications. Berkshire Property Management, at the sole cost and expense of BRI OP shall be responsible for lease-up during and after construction and property management of buildings following their completion and as they are placed in service. b. With respect to construction financing, BRI OP shall not have any liability or obligation for payment or performance under the construction loan; it being agreed that the Developer shall be the borrower under the construction loan and Stephen M. Gorn and John B. Colvin shall provide all recourse guaranties and/or credit enhancement if required by the construction lender; however, BRI OP shall agree to grant an accommodation first mortgage of the New Development Site to the construction lender to secure the construction loan. In consideration thereof, Stephen M. Gorn and John B. Colvin ("Guarantors") shall provide BRI OP with a recourse indemnity which shall provide that if the construction lender forecloses the mortgage due to a failure of the Developer to perform its obligations under the Project Development Agreement, then the Guarantors shall pay to BRI OP a sum equal to the Land Acquisition Cost paid by BRI OP for the New Development Site. Until the Payment Date, Developer shall be responsible to pay for all costs of construction (hard and soft costs) and to satisfy all requirements of the construction lender (whether monetary or otherwise). c. On the Payment Date, the amount to be paid by BRI OP to Developer for the New Development Project (the "Development Purchase Price") shall be equal to the lesser of (i) the actual development costs (i.e. (x) hard costs, (y) soft costs and (z) a G.C. Development Fee of 7% of the costs listed in (a) and (b) above) or (ii) a guaranteed maximum price (as specified and agreed to in the Project Development Agreement). All such sums shall be paid in full on the Payment Date, without deduction, escrow or set off. On the Payment Date, Developer shall be obligated to pay-off the construction loan in full and to cause release of all deeds of trust, mortgages and other liens on the New Development Project being held by the Lender. d. The payment of the Development Purchase Price by BRI OP to the Developer on the New Development Project shall occur (such date of payment being called the "Payment Date") upon the first business day of the first month after the last to occur of (a) the substantial completion of construction of the New Development Project, excluding punch-list items not affecting occupancy (provided Developer shall thereafter complete all punch-list items at no expense to BRI OP) (the "Completion Date") as evidenced by satisfaction of each of the following conditions (the "Closing Conditions"): (i) final certificates of occupancy issued by the appropriate governmental authority, and (ii) a certificate of substantial completion issued by Developer or such affiliate of Developer as Developer may designate to be the general contractor -8- for construction of the Improvements ("Questar Builders") certifying that the Improvements have been substantially completed in accordance with the plans and specifications for the New Development Project, as such may be modified from time to time by Developer, in accordance with the provisions of the Project Development Agreement. The issuance of final lien waivers by Questar Builders and subcontractors covering at least 95% of the construction cost shall be a condition precedent to payment of the Development Purchase Price. If a dispute shall exist as to whether substantial completion has occurred, the dispute shall be promptly submitted to binding arbitration by a qualified third party mutually acceptable to the parties or, if they are unable to agree upon a third party, then by arbitrators appointed pursuant to the applicable rules of the American Arbitration Association. The status of occupancy of the New Development Project by rent-paying tenants and the rents generated by such occupancy by such occupancy shall not be conditions to Closing. e. The Developer or any affiliate of Developer that enters into a Project Development Agreement shall also have the right to collaterally assign its interests under a Project Development Agreement to a construction lender providing construction financing to the Developer for the New Development Project (the "Lender"). If Developer so assigns the Project Development Agreement, then BRI OP agrees to enter into an agreement with the Lender (the "Tri Party Agreement") providing that: (a) BRI OP agrees to provide the Lender with reasonable notice and opportunity to cure any default by Developer thereunder; (b) BRI OP agrees not to modify or amend the Project Development Agreement without the prior written consent of Lender, (c) BRI OP, at the written request of Lender upon a default under the loan, will pay the Development Purchase Price or such lesser amount as is required to satisfy the loan directly to Lender provided that all conditions to payment of the Development Purchase Price provided in the Project Development Agreement have been satisfied; (d) BRI OP will permit Lender to perform any obligations of Developer thereunder and will agree to recognize Lender as the Developer thereunder should Lender succeed to the interest of Developer, provided, however, that, in such event, Lender's liability under the Project Development Agreement shall be limited to its interest in the New Development Site; and further provided that (e) BRI OP will have no liability for payment of the Lender's loan or the performance of any obligations under any of the loan documents other than the Tri-Party Agreement. f. The parties shall negotiate in good faith to agree upon the terms of the Project Development Agreement within the 30 day period after the final determination that the Threshold Conditions have been satisfied as provided in the introductory paragraph of this Section 4.3. If a dispute exists as to the terms, the parties shall endeavor in good faith to resolve such dispute within such 30 day period, but if the dispute cannot be resolved, then such failure to agree shall be deemed a decision by BRI OP under Section 4.2(c) that the Threshold Conditions have not been satisfied and the provisions of Section 5 of this Agreement shall be applicable. -9- 5. BRI OP Hold. If BRI OP opts not to promptly develop the New Development Project as provided in paragraph 4.2(b) or to hold and/or dispose of the New Development Site as provided in paragraph 4.2.c., then the following provisions shall apply: 5.1. BRI OP shall not be permitted to sell the New Development Site to any third party (other than an affiliate) or to develop the New Development Project with any third party developer or for its own account for a period of 24 months after the closing by BRI OP on the acquisition of the New Development Site (the "Exclusivity Period") without the prior consent of Developer; provided, however, that if BRI OP elected to hold and/or dispose of the New Development Site under paragraph 4.2.c. or if BRI OP is deemed to have so elected under paragraph 4.3.f., then the Exclusivity Period shall be reduced to 3 months. If the New Development Site is owned by or transferred or sold to an affiliate of BRI OP, then the provisions of this Section 5 shall continue to apply. 5.2. At the end of the Exclusivity Period, if BRI OP has not subsequently determined that the Threshold Conditions are satisfied and proceeded to commence development with Developer under the provisions of Section 4.3, Developer shall have 120 days from the later of (i) the end of the Exclusivity Period, or (ii) the date on which Developer receives written notice from BRI OP of the expiration date of the Exclusivity Period, within which to elect, by written notice to BRI OP, to purchase the New Development Site from BRI OP for a purchase price equal to the Land Acquisition Costs. If Developer purchases the New Development Site, it shall not be subject to any of the exclusivity or non-competition agreements contained in this Agreement, the Related Agreements or in any other documents executed in connection therewith or pursuant thereto, including, but not limited to, any Employment Agreement or Consulting Agreement between BRI OP and any of Morton Gorn, Stephen M. Gorn or John B. Colvin. All closing costs, including, but not limited to, all transfer, recordation, documentary stamp and other taxes imposed on the conveyance shall be paid by Developer. Closing on the acquisition of the New Development Site by Developer shall occur within 90 days after Developer's written election. At Closing, BRI OP shall convey good and marketable title to the New Development Site to Developer or an affiliate of Developer. Developer may elect, in lieu of a conveyance of the New Development Site to Developer, to require BRI OP to convey to Developer good and marketable title to 100% of the partnership or membership interests in the entity owning the New Development Site. 5.3. If Developer does not elect to purchase the New Development Site, then, upon the expiration of the Developer's 120 day election period, (i) BRI OP shall pay Developer an additional land acquisition fee (the "Second Land Acquisition Fee") in the amount of 7% of the Land Price, (ii) Developer shall have no further rights to acquire the New Development Site, and (iii) BRI OP shall be free to either (a) continue to hold the New Development Site, (b) sell the New Development Site to any third party or (c) decide in the future to develop the New Development Site with Developer. If within three years thereafter, Developer enters into a Project Development Agreement to develop the New Development Site for BRI OP, then -10- Developer shall give a credit to BRI OP against the Development Purchase Price of the New Development Project equal to one-half of the Second Land Acquisition Fee. Section 6. Default. If either party defaults in performing any of its obligations hereunder, then the other party shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance, an action for injunctive relief or an action for money damages. In any litigation between the parties, the prevailing party shall be entitled to reimbursement by the non-prevailing party for all court costs and reasonable attorneys' fees. The restrictions contained in Section 1.2 and 1.3 of this Agreement are necessary for the protection of the business and goodwill of BRI OP and its affiliates and are considered by the Developer and Messrs. Gorn and Colvin to be reasonable for such purpose. The Developer and Messrs. Gorn and Colvin agree that any breach of Section 1.2 or 1.3 of this Agreement is likely to cause BRI OP and its affiliates substantial and irrevocable damage and therefore, in the event of any such breach, the Developer and Messrs. Gorn and Colvin agree that BRI OP, in addition to such other remedies which may be available, shall be entitled to specific performance and other injunctive relief. Section 7. Miscellaneous. 7.1. Assignment. Except as hereinafter provided, this Agreement may not be assigned by either party hereto. BRI OP shall have the right to designate an affiliate to accept title to a New Development Site, but shall remain fully liable for the performance of all of its obligations hereunder notwithstanding such designation. Developer may designate an affiliate of Developer to acquire title to a New Development Site and/or to enter into a Project Development Agreement, such designated affiliate alone being responsible for the performance of all of the obligations hereunder with respect to the New Development Site or for the performance of the obligations under the Project Development Agreement. 7.2. 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, including, but not limited to, the agreements contained in the letter of intent dated May 5, 1997, as amended to date, 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. 7.3. Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of Maryland. Developer and BRI OP 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. -11- 7.4. 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. 7.5. 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. 7.6. Drafts. This Agreement shall not be binding or effective until properly executed and delivered by both the Developer and BRI OP. 7.7. 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. 7.8. 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. 7.9. Publicity. In no event shall either the Developer or the BRI OP 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 BRI OP or Berkshire 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 the BRI OP or Berkshire 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 7.9 shall survive any closing on a New Development Site or New Development Project. -12- 7.10. Force Majeure. Each party is excused from performing any act required under this Agreement (except for payment of money) while delayed or prevented by a cause not within its reasonable control, such as a strike, lockout, or other labor dispute, insurrection, riot, mob violence, or other civil commotion, sabotage, inability to obtain labor, material, equipment or utility services in the open market, failure of transportation, water, sewer or other utility or building permit moratorium, road construction moratorium, or other governmental action (including enforcement of requirements of any adequate public facilities ordinance) condemnation, adverse weather, fire or other casualty event, or other act of God (each of which is called a "Force Majeure Event"). Time periods and dates in this Agreement are extended to account for the delay or prevention caused by the Force Majeure Event. 7.11. Affiliates. For purposes hereof, an "affiliate" of a party shall be deemed to include any person or entity controlling, controlled by, or under common control with such party. Berkshire shall be deemed an affiliate of BRI OP, and Morton Gorn, Stephen M. Gorn and John B. Colvin and any entities controlled by them shall be deemed affiliates of Developer. 7.12. Interpretation. If any restriction set forth in Sections 1.1, 1.2 or 1.3 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their respective hands and seals as of the day and year first above written. WITNESS: DEVELOPER ________________________________ QUESTAR PROPERTIES, INC. By:________________________________ Name: Title: -------------------------------- Stephen M. Gorn -13- -------------------------------- John B. Colvin BRI OP LIMITED PARTNERSHIP By: BRI OP Apartments, Inc. General Partner ____________________________ By: _________________________ Name: Title: - BRI OP - -14- EXHIBIT A --------- - List of Related Agreements - -15- EXHIBIT B --------- - Example of BRI OP Blended Cost of Capital - Blended Cost of Capital = (BRI OP Equity Rate x .6) + (BRI OP Debt Rate x .4) BRI OP Equity Rate = BRI OP Budgeted FFO/ Share Price/ OP Offering Cost Percentage BRI OP Debt Rate = Permanent Debt Rate FNMA Tier IV Loan If the following assumptions are used, then the calculation is as follows: Budgeted FFO = $1.14 Share Price = $11.25 FNMA Tier IV = 7.5% Offering Cost Percentage = 1-.07 = .93% BRI OP Equity Rate = (1.14/11.25) / .93 = 10.896% BRI OP Debt Rate = 7.5% Blended Cost of Capital = (10.896% x .6) 6.537% + (7.5% x .4) 3.00% = 9.537% -16- EX-10.26 5 MATERIAL CONTRACTS DEVELOPMENT CONTRIBUTION AGREEMENT (Avalon 1, 3, 4) THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as of the 25th day of August, 1997, by and between the individuals and entities listed on Exhibit I attached hereto with an address c/o Questar Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen M. Gorn, individually, John B. Colvin, individually, 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. BACKGROUND WHEREAS, the Transferor Members are the legal and beneficial owners of all of the membership interests, as set forth on Exhibit I, of Ironhorse Associates, L.L.C., a Maryland limited liability company (the "Transferor Company") pursuant to the Operating Agreement dated as of June 26, 1996, as amended (a copy of which, including all amendments, is attached hereto as Exhibit II and is referred to as the "Transferor Operating 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 Company is the owner of the following: a. that certain tract or parcel of land located in Baltimore County, Maryland, more particularly described in Schedule A attached hereto (the "Land"); b. the 258-unit apartment complex, commonly known as Avalon Apartments, which contains related improvements, facilities, amenities, structures, driveways, walkways, plumbing and heating pipes, culverts, and mains, all of which have been constructed, are under construction or are to be constructed on the Land (collectively, the "Improvements") pursuant to certain plans and specifications that have been approved by the Transferor Members and BRI Partnership, as modified by certain change orders, a complete listing of which (including the latest revision date and change orders) is attached hereto as Schedule C (the "Plans and Specifications"); c. all right, title and interest of the Transferor Company 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 Company 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 Company 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 Company 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 Company's interest in any intangible property now or hereafter, owned by the Transferor Company 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 and other current assets relating to periods prior to Closing and (ii) amounts, if any, due to the Transferor Members 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 Members desire to contribute all of the membership interests in the Transferor Company (collectively referred to as the "Transferor Membership Interests") to the BRI Partnership, and the BRI Partnership desires to admit the Transferor Members as limited partners in the BRI Partnership and to accept such contribution from the Transferor Members; and WHEREAS, in exchange for such contribution, the Transferor Members desire to, at their election, either receive cash or BRI Partnership Units (as hereinafter defined) 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 Members and the BRI Partnership hereby covenant and agree as follows: -2- SECTION 1 --------- CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE ------------------------------------------------------ 1.01 The Transferor Members shall contribute to the BRI Partnership, and the BRI Partnership shall accept from the Transferor Members, in exchange for either cash or BRI Partnership Units, and upon the terms and conditions set forth in this Agreement, all of the Transferor Members' membership interests in the Transferor Company (the "Transferor Membership Interests"). The percentage of interest that each of the Transferor Members owns in the Transferor Company is listed on Exhibit I. At the Closing (as defined in Section 3.01), the Transferor Members shall, respectively, contribute, assign, transfer and deliver the Transferor Membership Interests to the BRI Partnership, or its designees as provided in Section 18.01 hereof, by an Assignment and Assumption of Membership Interest in the form of Exhibit III attached hereto (the "Transferor Assignment"). Immediately thereafter, the Transferor Members and the BRI Partnership, or its designees, shall execute and deliver an Amended and Restated Operating Agreement in the form of Exhibit IV attached hereto (the "Amended Transferor Operating Agreement") and an Amended and Restated Articles of Organization in the form of Exhibit V attached hereto (the "Amended Transferor Company Articles") pursuant to which the BRI Partnership, or its designees, shall be admitted and the Transferor Members shall withdraw, as the members of the Transferor Company and be released of all liability thereunder, and the terms of the Transferor Company shall be amended in accordance with the Amended Transferor Operating Agreement. 1.02 Property Title. On or before September 22, 1997, the Transferor Members shall deliver to the BRI Partnership a copy of the Transferor Company's existing title insurance commitment or policy (the "Commitment") 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"). 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 Company on or before October 1, 1997 if any such exceptions are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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". Any easements or other agreements reasonably required for the development and construction of the Property and the Improvements now or hereafter entered into by the Transferor Company; including an agreement for the shared use and the sharing of the operating expenses of the common recreational facilities located on the Property and an easement declaration creating cross-easements for the roads, storm water management ponds and the sewage pumping station on the Property, in form and content reasonably satisfactory to the BRI Partnership, all of which are consistent with the Plans and Specifications and, in the reasonable -3- discretion of the BRI Partnership, do not materially interfere with the intended use of the Property nor materially affect the value of the Property, shall also constitute Permitted Exceptions. Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the "Title Insurer"). The Updated Commitment shall insure fee simple title to the Property in the sole name of the Transferor Company and shall be in the amount of $25,862,791. The Updated 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 and are available under the law of the state in which the Property is located. If any new exceptions to title appear in the Updated Commitment that do not constitute Permitted Exceptions and that are unacceptable to the BRI Partnership, in its reasonable discretion, the BRI Partnership may notify the Transferor Company within thirty (30) days after the Completion Date Notice. If any exceptions in the Commitment or the Updated Commitment are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable exceptions, at the option of the Transferor Company, to remove or cure such exceptions, provided further, the Transferor Company 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 liens for real estate taxes and current water and sewer charges for the fiscal year in which Closing occurs, 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 Company at Closing. The Transferor Company shall be deemed to have refused to cure any unacceptable exceptions unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable exceptions. If the Transferor Company 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 Company 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 Company or (ii) waive such exceptions and accept title subject thereto, in which event there shall be a reduction in the Purchase Price (as defined in Section 2.01(a)) in an amount necessary to enable the BRI Partnership to remove all Monetary Liens. -4- 1.03 Survey. On or before September 22, 1997, the Transferor Company shall provide to the BRI Partnership a copy of its existing survey (the "Survey") of the Land and any Improvements. 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 Company on or before October 1, 1997 if any such survey matters are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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." Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at its sole cost and expense, shall obtain an updated survey (the "Updated Survey") by a registered land surveyor (the "Surveyor") acceptable to the BRI Partnership, which Updated 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 Updated Survey and the recorded legal description. The BRI Partnership shall provide a copy of the Updated Survey to the Transferor Company promptly after its receipt thereof. If any new matters appear on the Updated Survey that do not constitute Permitted Exceptions, do not simply reflect the construction of the Improvements in locations that do not encroach upon property lines, setback lines or easements, and are unacceptable to the BRI Partnership in its reasonable discretion, the BRI Partnership may notify the Transferor Company within forty (40) days after the Substantial Completion Date Notice. If any survey matters are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable survey matters, at the option of the Transferor Company, to cure such unacceptable survey matters. The Transferor Company shall be deemed to have refused to cure any unacceptable survey matters unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable survey matters. If the Transferor Company 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 -5- after the Transferor Company 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 Company or (ii) waive such survey matters and accept title subject thereto, in which event there shall be no reduction in the Consideration Amount. 1.04 Construction and Inspection. (a) Plans and Specifications. Prior to the date of this Agreement, Transferor Company has delivered to BRI Partnership true, correct and complete copies of the Plans and Specifications for the construction of the Improvements as set forth on Schedule C attached hereto. (b) Transferor Company to Construct Improvements. Transferor Company shall, at Transferor Company's expense, obtain all permits and construct the Improvements on the Land in accordance with the Plans and Specifications, as the same may be modified by change order in accordance with this Agreement. All work shall be done in a good and workmanlike manner using new, good quality materials, free of all defects and in compliance with all Codes (as defined in Section 5.21), permits, approvals, title restrictions and insurance requirements. Transferor Company shall obtain builder's risk insurance on the Improvements in the amount of the construction cost of those buildings from time to time for which construction has commenced. Transferor Company shall deliver a certificate of such insurance to BRI Partnership. Transferor Company shall maintain such insurance in force and effect through the course of construction and until Closing hereunder. (c) Inspection of Construction; Correction of Defects. BRI Partnership and its engineers, consultants and agents may inspect the construction of the Improvements from time to time during the course of construction upon reasonable notice to the Transferor Company. After receipt from the Transferor Company of written notice that the requirements of Section 3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI Partnership and its engineers, consultants and agents shall inspect the construction of the Improvements upon reasonable notice to Transferor Company to determine whether such construction is completed in accordance with the Plans and Specifications. Within 30 days after the Inspection Notice, BRI Partnership will give written notice to Transferor Company of any nonconformities with the Plans and Specifications and defects or deficiencies in construction identified by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership, which disagreement shall be expressed by giving written notice to the BRI Partnership stating the basis for said disagreements, within 10 days after such BRI Partnership notice, Transferor Company, at Transferor Company's expense, shall commence to correct, repair or replace any such nonconformities, defects or deficiencies and shall diligently continue thereafter until completion of such corrections, repairs or replacements, and, if such deficiencies are of such a magnitude that Closing would not otherwise be required to occur under Section 3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies are corrected. Any dispute shall be resolved by arbitration in accordance with Section 3.02. -6- (d) Change Orders. The Transferor Company shall not change or modify the Plans and Specifications without prior written approval of the BRI Partnership, such approval not to be unreasonably withheld, provided, however that the following changes shall not require BRI Partnership's approval: (i) changes required by the construction lender or governmental authorities, and (ii) changes in the design of the Improvements resulting in a decrease or increase in construction cost by less than $100,000 for an individual change and less than $250,000 in the aggregate. The Transferor Company shall give written notice to BRI Partnership of all proposed changes to the Plans and Specifications by sending a complete copy of the change, together with copies of any plans or drawings related thereto. BRI Partnership shall give its written approval or disapproval within five (5) business days thereafter. If BRI Partnership disapproves any such change, the Transferor Company shall not implement same. (e) Completion. The Transferor Company shall diligently attempt to complete construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes (as defined in Section 5.21 hereof) by December 31, 2003 (the "Scheduled Completion Date"). For purposes of this Agreement, the "Completion Date" shall be the date upon which all of the Closing Conditions shall have been satisfied as set forth in Section 3.02. (f) Force Majeure. In the event that the Transferor Company is delayed in the commencement or completion of construction of the Improvements by acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, strikes, shortages of labor, materials or equipment, undue delay in action by governmental authorities, governmental or utility company refusal to issue building, construction, utility, occupancy or other permits or approvals, water, sewer or other utility moratorium (including enforcement of the requirements of any adequate public facilities ordinance) or other causes beyond the Transferor Company's reasonable control (a "Force Majeure Event"), the Scheduled Completion Date shall be extended for the period of delay, not to exceed 12 months. If a Force Majeure Event continues in effect for a period in excess of 12 months, during which construction is delayed, then the Transferor Company may, by notice to BRI Partnership terminate this Agreement, in which event the Deposit shall be returned to the BRI Partnership and neither party shall have any further liability to the other hereunder. In addition, simultaneously with closing under the Related Agreements, the Transferor Company shall execute and deliver to BRI Partnership the Right of First Offer Agreement attached hereto as Exhibit IX, which Right of First Offer Agreement shall contain, among other provisions a Right of First Refusal which provides: (a) that the BRI Partnership shall have a right of first refusal to purchase the Property following the termination of this Agreement pursuant to this Section 1.04(f), (b) BRI Partnership shall have a period of 15 business days, following receipt of a bona fide third party letter of intent to purchase the Property, to agree to purchase the Property on the same terms and conditions as set forth in the letter of intent, and (c) such Right of First Offer Agreement shall be subordinate to any mortgage or deed of trust securing construction financing on the Property. -7- 1.05 Environmental Due Diligence Inspection. (a) On or before September 22, 1997, the Transferor Company shall deliver to the BRI Partnership a copy of its environmental report for the Property (the "Initial Environmental Report"). Should the BRI Partnership decide, in its sole judgment, during the period up to and including October 1, 1997 (the "Due Diligence Period") that the Initial Environmental Report is unsatisfactory, the BRI Partnership shall have the right to terminate this Agreement by giving written notice of its election to do so 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. 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 the period expiring 30 days after the Substantial Completion Date Notice during regular business hours and on reasonable prior notice to the Transferor Company, inspect the Property to determine the presence of any Hazardous Materials (as defined in Section 5.20) and the compliance of the Property with Environmental Laws (as defined in Section 5.20) 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 Company 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 Company in this Agreement. Should the BRI Partnership decide, in its reasonable judgment, that there exists an environmental risk with respect to the Property (excluding such items as asbestos roof shingles, asbestos floor tile and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the presence of usual and customary cleaning and maintenance supplies and similar items that are typically handled through the adoption of appropriate operations policies), during the period expiring 30 days after the Substantial Completion Date Notice 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 Company on or before 30 days after the Substantial Completion Date, and upon the giving of such notice this Agreement shall be of no further force or effect. Notwithstanding the foregoing, the BRI Partnership may not disapprove or object to any matter disclosed by the Environmental Inspection that was disclosed in the Initial Environmental Report. If the BRI Partnership shall fail to exercise such termination right within any such 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 1.05. The BRI Partnership shall pay when due all fees and expenses incurred in the performance of the Environmental Inspection performed at its request. (b) From and after the date of this Agreement, the Transferor Company shall permit the BRI Partnership's authorized agents and representatives (including its accountants) to -8- examine (including, without limitation, the right to audit) the Transferor Company's books, financial records, Service Contracts, Leases and 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 Company's financial records relating to the Property have been audited, the Transferor Company agrees to deliver any reports relating to such audits to the BRI Partnership. The Transferor Company shall provide the BRI Partnership with such information as the Transferor Company 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 Company, all taxes and utility payments made 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 1.05(b) 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 Company if the Closing does not occur. (c) The BRI Partnership shall indemnify the Transferor Members 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 Members 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 Members 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 1.05(c) shall survive the Closing or any termination of this Agreement; provided, however, that no claim by the Transferor Members under this Section 1.05(c) 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 Members 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 Members hereunder. 1.06 Tax Treatment. The parties intend that, to the extent the Transferor Members receive BRI Partnership Units as the consideration for the contribution of the Transferor Membership Interests by the Transferor Members to the BRI Partnership in accordance with Section 1.01 of this Agreement, such contribution shall be treated for federal (and applicable state) income 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 -9- provisions). The BRI Partnership and the Transferor Members agree to report such transaction for federal and applicable state income tax purposes consistently with the intent set forth in this Section 1.06. SECTION 2 --------- CONSIDERATION ------------- The consideration for the Membership Interests (the "Consideration Amount"), subject to the adjustments contained in Section 12 of this Agreement, shall be determined pursuant to the provisions of Section 2.04, and shall be paid by the the BRI Partnership to the Transferor Members in the following manner: 2.01 Deposit. (a) Simultaneously with the execution of this Agreement, the the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the "Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check (subject to collection) as a Deposit to be held in an interest-bearing escrow account on account of the Consideration Amount. Said sum, together with any interest earned thereon, is hereinafter called the "Deposit." (b) At the Closing, the Deposit shall be returned by the Escrow Agent to BRI Partnership. 2.02 Balance. At the Closing, the BRI Partnership shall deliver to the Transferor Members the Base Consideration, plus, if then due, any Additional Consideration Installments, subject to the adjustments described in Section 12 of this Agreement by federal wired funds. Prior to any delivery to the Transferor Members of the Base Consideration, there shall be deducted from the Base Consideration an amount equal to the sum required to pay off the Construction Loan in full and to remove all other Monetary Liens and simultaneously with the Closing, the BRI Partnership shall pay off the Construction Loan. At the Transferor members' option, to be exercised irrevocably by written notice to the BRI Partnership given at least 15 days prior to the satisfaction of the Closing Conditions, all or a portion of the Consideration Amount shall be delivered to the Transferor Members in the form of BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise such option, then the number of BRI Partnership Units, the rights and limitations upon such units and the method by which the units are delivered to the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b) and (c) below. If the Transferor Members do not exercise the foregoing option in a timely manner, all consideration payable under this Agreement shall be paid in cash by federal wired funds and the following Sections of this Agreement shall be, without further action by any party, null and void and without any further force or effect upon the parties: 1.06, 2.02(a) through (c), 5.34, 6.03, 6.05, 6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii) and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04. -10- (a) The number of BRI Partnership Units to be issued to the Transferor Members at Closing shall be that number determined by dividing the portion of the Consideration Amount to be paid in BRI Partnership Units to each Transferor Member by the value of one BRI Partnership Unit. The parties agree that, for purposes of this Agreement, the value of each BRI Partnership Unit 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 ten (10) business days prior to the day which is five (5) business days before the Closing. If the calculation provided for above results in a fraction of a BRI Partnership Unit to be delivered to a Transferor Member, the number of BRI Partnership Units to be delivered shall be rounded up or down to the nearest whole number of BRI Partnership Units. Attached hereto as Exhibit I is a schedule (the "Transferor Allocation Schedule") prepared by the Transferor Members setting forth (i) the name of each Transferor Member, and (ii) the percentage interest of each Transferor Member, together with an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each Transferor Member. In the event that any Transferor Member 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 Members all of the BRI Partnership Confirmations evidencing the issuance of the BRI Partnership Units to the Transferor Members in accordance with the Transferor Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership owes any amounts to the Transferor Members 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 Members in accordance with the election made by the Transferor Members pursuant to Section 2.02. The BRI Partnership shall have no obligation or liability with respect to the preparation or accuracy of the Transferor Allocation Schedule. (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. At the time that any Transferor Member 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 Member 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 Members and Berkshire 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 Members a certified copy of the Registration Rights Agreement. -11- (c) The Transferor Members, 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, 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 Units have been established as provided in this Section, 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 Members in the event of a decrease or increase in the market value of the common stock of BRI. 2.03 Payment of Monies. Any monies payable under this Agreement, unless otherwise specified in this Agreement, shall be paid by wire transfer. 2.04 Calculation of Consideration Amount. The Consideration Amount for the Transferor Membership Interests shall consist of a base consideration amount ("Base Consideration") plus additional consideration installments ("Additional Consideration Installments"). (a) The Base Consideration for the Transferor Membership Interests shall be Twenty-Five Million, Eight Hundred Sixty-Two Thousand, Seven Hundred Ninety-One Dollars ($25,862,791). (b) In addition to the Base Consideration, the BRI Partnership shall pay one or more additional consideration installments (the "Additional Consideration Installments"), if any, on a quarterly basis with the first payment, if then due, on the date of Closing and on the first day of each quarter (defined as a period of three full calendar months, plus, for the first quarter, any partial calendar month after the date of Closing) thereafter for a total of 18 full calendar months after the Closing (the "Earn Out Period"). As of the Closing and as of the first day of each quarter thereafter, Stabilized NOI shall be determined as provided below, and each Additional Consideration Installment, if any, will be equal to the Stabilized NOI divided by 10% (the "Cap Rate") and then reduced by the Base Consideration and any prior Additional Consideration Installments. (c) Stabilized NOI shall be calculated for purposes of determining the Additional Consideration Installments as follows: 12 times the monthly actual income for the Property, (provided that if occupancy rates exceed 95%, then actual income shall be calculated as if the Property had an occupancy rate of 95%) for the month preceding the payment date less Seven Hundred Eighty-Eight Thousand, Four Hundred Forty Dollars ($788,440) (representing the agreed-upon annual Projected Operating Expenses for the Property), provided that, on the first anniversary of the date of Closing under this Agreement, the Projected Operating Expenses shall be adjusted by the percentage change in the CPI-U, U.S. Cities Average for the period from the date of Closing under this Agreement until the anniversary date. SECTION 3 --------- -12- THE CLOSING ----------- 3.01 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 in Washington, D.C., or such other place as the Transferor Company and the BRI Partnership shall mutually agree. The "Time of Closing" shall be on that date specified in Section 3.02 at which 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 Members 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 Members. It is agreed that time is of the essence of this Agreement. 3.02 Closing under this Agreement shall occur on the first business day of the month after the Transferor Members have given to the BRI Partnership 60 days prior notice (the "Substantial Completion Date Notice") of the occurrence of the last to occur of (a) the substantial completion of construction of the Property excluding punch-list items not affecting occupancy (provided Transferor Members shall thereafter complete all punch-list items at no expense to the BRI Partnership within 30 days after Closing or within such additional time as may be reasonably required) ("Completion Date") as evidenced by satisfaction of each of the following conditions (the "Closing Conditions"): (i) final certificates of occupancy issued by the appropriate governmental authority, and (ii) a certificate of substantial completion issued by Questar Builders, Inc. or such affiliate of Transferor Members as Transferor Members may designate to be the general contractor for construction of the Improvements ("Questar Builders") certifying that the Improvements have been substantially completed in accordance with the Plans and Specifications and all Codes, as such may be modified from time to time by the Transferor Company in accordance with this Agreement, or (b) the Stabilization Date. If a dispute shall exist as to whether substantial completion has occurred, the dispute shall be promptly submitted to binding arbitration by a qualified third party mutually acceptable to the parties or, if they are unable to agree upon a third party, then by arbitrators appointed pursuant to the applicable rules of the American Arbitration Association. 3.03 The Stabilization Date for the Property shall be as follows: The first day of that month which first occurs after 90% of the apartment units in the Property have been leased for a period of 3 months to Qualified Tenants. 3.04 "Qualified Tenants" are those tenants with annual income equal to not less than 3 times the annual rent who are in occupancy and have commenced the payment of rent. SECTION 4 --------- -13- TRANSFEROR'S PRE-CLOSING DELIVERIES ----------------------------------- At least thirty (30) days prior to the date of Closing, the Transferor Company shall deliver or otherwise make 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 Company shall provide the BRI Partnership with access on-site to the originals of all Leases and related lease files. 4.02 Certificates of Occupancy and Permits. Original, final certificates of occupancy for all buildings in the Property and 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. 4.03 Taxes. To the extent in the Transferor Company'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. A set of original Plans and Specifications, and a copy of all guaranties and warranties made by any person for the benefit of the Transferor Company 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 each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing, and detailed operating statements for each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing; provided that all such statements and records shall be provided only for periods after the Property was first leased and occupied by rent paying tenants. 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). 4.07 Current Rent Roll. The "Rent Roll" which consists of a list of the current rents now being collected on each of the apartment units in the Improvements which includes: -14- apartment number, unit status, tenant name, commencement and termination dates, lease rent, deposits and details of any concessions, in the form attached hereto as Schedule D. 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). 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 Company 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 Company which shall be attached hereto as Schedule B. SECTION 5 --------- A. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR COMPANY ------------------------- The Transferor Company represents, warrants and covenants to the BRI Partnership, as of the date hereof, as follows: 5.01 Organization and Standing of the Transferor Company. The Transferor Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland. The Transferor Company 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 Company 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 Company's business (a "Material Adverse Effect"). 5.02 Compliance with Other Instruments, etc. Except as set forth in Section 5.05 hereof, the Transferor Company is not in violation of any term contained in the Transferor Operating Agreement, or to the Transferor Company's knowledge in any other material instrument or contract to which the Transferor Company is a party relating to the Property, and to the Transferor Company's knowledge the Transferor Company is not in violation of any order, statute, rule or regulation applicable to it, except for such violations which would not have a -15- Material Adverse Effect. Neither the execution, delivery and performance of this Agreement by the Transferor Members, nor the contribution of the Transferor Membership Interests by the Transferor Members hereunder, will result in any Material Adverse Effect or be in conflict with or constitute a default under the Transferor Operating Agreement or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Transferor Company, except for Permitted Exceptions. 5.03 Governmental Consent, etc. Except for filing the Amended Transferor Company Articles to reflect the transactions contemplated hereby, 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 Members or the Transferor Company in connection with the valid execution and delivery of this Agreement by the Transferor Members and the performance of the Transferor Members' obligations hereunder. 5.04 Company Capitalization. The Transferor Operating Agreement (i) is the only agreement among the members relating to the organization, operation, or management of the Transferor Company, (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 and residence addresses of all of the Transferor Members of the Transferor Company, and the Transferor Members' respective membership interests in the Transferor Company. Except as set forth on Exhibit I, no other person or party owns any membership interest in the Transferor Company. No Transferor Member is in default with respect to any capital contribution required to be paid by him or it pursuant to the Transferor Operating Agreement. A true, correct and complete copy of the Transferor Operating Agreement is attached hereto as Exhibit II. The Transferor Company has no commitment to issue any right to purchase or acquire or to issue or distribute to any of the Transferor Members, any evidences of indebtedness or assets; and the Transferor Company has no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire any interest in the Transferor Company 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 Company's knowledge, proceeding or investigation pending or, to the Transferor Company's knowledge, any threat thereof, against the Transferor Members, the Transferor Company or the Property or any part thereof which questions the validity of this Agreement or the right of the Transferor Members 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 Company as such is presently contemplated; or (ii) the rights represented by the Transferor Membership Interests. During the period commencing on the date hereof and ending on the Closing Date, the Transferor Company will promptly inform the BRI Partnership in writing of any material action, suit, proceeding or investigation pending, or to the Transferor Company's knowledge, threat thereof against the Transferor Members, the Transferor Company or the Property or any part thereof. -16- 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 Company is a party or to which any agent of the Transferor Company is a party on behalf of the Transferor Company or has entered into on behalf of the Transferor Company, relating to the Transferor Company 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 (collectively "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 Company. Except as noted on Schedule E, each Service Contract is cancelable on thirty (30) days notice. Transferor Company has no knowledge of any material breach or material default under any Service Contract. As of Closing, the Transferor Company 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 financial statements of the Transferor Company, including balance sheets, statements of operations and statements of partners' capital (collectively, the "Financial Statements") for the fiscal year ended December 31, 1996 (the "Statement Date"). The Financial Statements fairly present the financial condition of the Transferor Company as of the Statement Date in accordance with generally accepted accounting principles consistently applied, and reflect all liabilities, fixed, contingent or otherwise, required to be disclosed in such Financial Statements in accordance with generally accepted accounting principles. 5.08 Title to Properties and Assets. The Transferor Company is the sole owner of the Property. Except as disclosed in Section 18.01, the Transferor Company 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 Company or to be obtained by the Transferor Company prior to Closing, no other material license, permit or authorization is necessary to own and operate the Transferor Company's business as such is presently conducted and neither the conduct of the Transferor Company'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 indebtedness for borrowed money incurred or to be incurred to acquire and construct the Property (collectively, the "Construction Loan"), the Transferor Company has no indebtedness for borrowed money and the Transferor Company has not, directly or indirectly, created, incurred, assumed or guaranteed or otherwise become directly or indirectly liable for the payment of any borrowed money. No Transferor Member, nor any affiliate of any Transferor Member nor any employee of the Transferor Company is presently indebted to the Transferor Company for borrowed money and, except for the Construction Loan, the Transferor Company is not presently indebted for borrowed money to any of the foregoing -17- persons. As of the Closing Date, the Transferor Company 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 Company's business which are either (i) in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership in writing; and (b) liabilities resulting from or incurred in the ordinary course of business arising under the Service Contracts. The Transferor Company has conducted its business only in the ordinary course and, except for the Construction Loan, the Transferor Company 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 Company (the "Insurance Policies") and a list of all presently outstanding claims thereunder. The Transferor Company has done nothing to reduce or impair the insurance afforded by the Insurance Policies. To the Transferor 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. 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 Company or for which the Transferor 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 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 Company. All taxes due with respect to completed and settled examinations or concluded litigation have been paid. (b) The Transferor 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) The Transferor Company does not know of (A) any audit or investigation of the Transferor Company with respect to any liability for taxes relating to the Transferor Company for which any Transferor Member may be liable, or (B) any threatened claims or assessments for taxes against or relating to the Transferor Company. 5.13 Employees. The Transferor Company has no employees, has not entered into any employment contracts, and has no obligations to pay any wages, withholding, social security -18- taxes, unemployment insurance premiums or other similar employee benefits, payments or obligations. 5.14 Retirement Obligations. The Transferor Company 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 those given to the holder of the Construction Loan, as provided in the Construction Loan Documents, no person holds a power of attorney from or agency agreement with the Transferor Company. 5.16 Bank Accounts. On or before Closing, the Transferor Company shall have closed every bank account and safe deposit box of the Transferor Company for which the Transferor Members or their representatives are signatories, and no representative of the Transferor Members shall be a signatory on any other account or safe deposit box of the Transferor Company or shall have the power to borrow, discount debt obligations, cash or draw checks, or otherwise act on behalf of the Transferor Company in any dealings with any banks or other financial institutions. 5.17 Ownership. The Transferor Company has not received any written notice challenging the validity of the Transferor Company's title to the Property. The Transferor Company 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 Stabilization Date, there shall be 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, to be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and correct in all material respects as of the Stabilization Date. Except as otherwise specifically set forth in the Rent Roll or elsewhere in this Agreement: (a) to the Transferor Company'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 Company; -19- (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 Company, except as set forth on Schedule 5.18 hereof, no action or proceeding instituted against the Transferor Company 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, except as provided in (c) above. 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 Company, no apartment unit is subject to any rent control law, ordinance or regulation. 5.20 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 Company or any of the Transferor Members' affiliates, with respect to the Property (collectively, the "Environmental Reports"). The Transferor Company 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 1.05 hereof (the "BRI Environmental Reports"), the Transferor Company 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 Company has any material liability with respect thereto. To the Transferor Company'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 Company's knowledge, except as disclosed in the Environmental Reports or in the BRI Environmental Reports, neither the Transferor Company 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 -20- thereof. For purposes of this Agreement, "Environmental Laws" shall mean the Resource Conservation and Recovery Act (42 U.S.C. s. 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. s. 9601 et seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49 U.S.C. s. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. s. 2601 et seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the Clean Water Act (33 U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. s. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C. s. 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. 5.21 Permits and Compliance with Laws. Upon completion of construction of the Improvements, all approvals, consents, permits, licenses or certificates of occupancy (whether governmental or otherwise) required for the use, operation and occupancy of the Property shall have been granted to the Transferor Company and shall be in full force and effect, and any fees and charges shall have been fully paid. Upon completion of construction of the Improvements, the Property shall be in compliance in all material respects with all zoning, building, health, traffic, fire safety, flood control, handicap and other laws, regulations and ordinances of all governmental authorities having jurisdiction over the Property (collectively "Codes"). To the Transferor Members' knowledge, no 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 as would not have a Material Adverse Effect. The parties agree that all matters relating to compliance with Environmental Laws shall be covered by Section 5.20 and not by this Section 5.21. 5.22 Utilities. Upon completion of construction of the Improvements, 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) shall be installed, and shall comply in all material respects with the requirements of the Plans and Specifications and all applicable Codes, and all necessary easements, permits, licenses and agreements in respect of any of the foregoing shall be installed and operating and all installation and connection charges, to the extent due and payable, shall have been paid for in full. 5.23 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 Company, 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. -21- 5.24 Pre-Closing Deliveries Accurate. All of the materials to be delivered by the Transferor Company to the BRI Partnership pursuant to Section 4 or attached hereto as Schedules or Exhibits when delivered, will be true, accurate and complete in all material respects. 5.25 Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other similar proceedings are pending or, to the Transferor Company's knowledge, threatened against the Transferor Company, nor are any of such proceedings, against or by the Transferor Company, anticipated or contemplated by the Transferor Company. 5.26 Liens. The Transferor Company agrees to keep the Property free from mechanics and materialmen's liens or other liens or encumbrances occasioned by the actions of the Transferor Company or its contractors or subcontractors and agrees to indemnify and save BRI Partnership harmless from any such liens or encumbrances and all attorneys' fees and other costs and expenses incurred by reason thereof. 5.27 Essential Facilities. Except as set forth in Schedule 5.27, 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 5.27, no property not included in the Property relies for its operation, maintenance or legal compliance on any facilities located on the Property. 5.28 Legal Access. There is, or prior to Closing will be, direct legal access from a public way to the Property. Upon completion of construction of the Improvements, all necessary curb cuts, access permits and other governmental approvals required to provide such access shall have been issued and shall be in full force and effect. 5.29 Public Improvements. To the best knowledge of the Transferor Company and except as shown on the Plans and Specifications, 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 that would have a Material Adverse Effect. To the best knowledge of the Transferor Company, there are no presently planned public improvements which would result in the creation of a special improvement or similar lien upon the Property. 5.30 Condition of Improvements. The Property, including, without limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical, HVAC systems and equipment, plumbing, drainage and heating systems and other mechanical systems, shall at the time of Closing be in good order and operating condition, subject to normal wear and tear, and will be constructed substantially in accordance with (i) the Plans and Specifications, (ii) all applicable -22- Codes, permits, approvals, title encumbrances and insurance requirements and (iii) accepted standards of good materials and workmanship. As of the time of Closing, there will be no physical or mechanical defects having a Material Adverse Effect on the use or marketability of the Property and no condition which impairs or could impair, the structure of the Property or renders it in noncompliance with the requirements of this Agreement. No fire or other casualty shall have occurred on any of the Property, the damage related to which has not been repaired or restored to the condition the Property was in prior to such fire or other casualty. B. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR MEMBERS ------------------------- Each of the Transferor Members on behalf of itself, severally and not jointly, represents and warrants to the BRI Partnership, as of the date hereof, as follows: 5.31 Authorization. Such Transferor Member 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 Members Closing Documents (as defined in Section 10.01 hereof) required to be executed and delivered by such Transferor Member under this Agreement, each in accordance with their respective terms, and on the Closing Date the Transferor Members Closing Documents will constitute valid and binding obligations, enforceable against such Transferor Member in accordance with their respective terms. 5.32 Additional Authorization. No approval of any person not a party to this Agreement is necessary for the contribution by such Transferor Member of the Transferor Membership Interests held by such Transferor Member and the performance of such Transferor Member's obligations under this Agreement. 5.33 Membership Interest. Except as provided in this Agreement and the Transferor Operating Agreement, no right (contingent or otherwise) to purchase or acquire the Transferor Membership Interests held by such Transferor Member is authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor Member owns and holds the Transferor Membership Interests set forth opposite its name on Exhibit 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 5.33 will be paid in full. Upon the Closing, good, valid, marketable, and indefeasible title to such Transferor Membership 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 5.33 shall survive the Closing indefinitely. -23- 5.34 Investment Representations and Warranties. Each Transferor Member for itself, severally and not jointly, represents, warrants, acknowledges and agrees as follows: (a) Such Transferor Member 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 Member understands that the BRI Partnership Units to be issued to each Transferor Member 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 Member. (c) Such Transferor Member acknowledges and agrees that, for the reasons set forth in Sections 5.34(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 Member 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 Member 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 Member 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 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, 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 -24- acquisition of the BRI Partnership Units. Such Transferor Member 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 Member is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Act. (e) Such Transferor Member understands that an investment in the BRI Partnership and BRI involves substantial risks. Such Transferor Member 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 Member 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 "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.) -25- 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 Member's principal residence or principal place of business, and such Transferor Member 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 5.34 shall survive the Closing indefinitely. 5.35 Receipt of Documents. Such Transferor Member 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 Members 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 Members 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 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 -26- 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 Company 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 ended adjustments). 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 -27- Partnership Units shall be vested in the Transferor Members 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. (d) The BRI Partnership has previously delivered to the Transferor Company 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, 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. -28- 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 Members, 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 Company 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. 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. -29- 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. SECTION 7 --------- INSURANCE AND CASUALTY ---------------------- 7.01 Maintenance of Insurance. Until the Closing Date, the Transferor Company shall 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 Members 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 and are not restored by the Transferor Company prior to the Time of Closing, 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 Members 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 Membership Interests, and in such case, unless the Transferor Members shall have previously restored the Property to its condition prior to the occurrence of any such damage or destruction, the Transferor Members shall pay over or assign to the BRI Partnership, on behalf of the Transferor Company, 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 such damage or destruction shall occur and be restored by the Transferor Company prior to the Time of Closing, or if any eminent domain notice or proceeding is commenced which does not affect any material -30- portion of the Property, the BRI Partnership shall proceed to accept the contribution and transfer of the Transferor Membership Interests in accordance with the provisions of clause (b) above. 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 be removed or complied with by the Transferor Company, at the expense of the Transferor Company, prior to the Closing Date. SECTION 9 --------- OBLIGATIONS PRIOR TO CLOSING ---------------------------- The Transferor Company covenants that between the date of this Agreement and the Closing Date: 9.01 Condition of Units. Up to the Time of Closing, all apartment units on the Property which become vacant shall, if necessary, be repaired or otherwise maintained in accordance with the Transferor Company's usual and customary practice without regard to the Closing contemplated by this Agreement. 9.02 Service Contracts. The Transferor Company shall not 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. 9.03 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. 9.04 Tax Procedure. Except as to real property tax assessment appeal proceedings now or hereafter filed by the Transferor Company to reduce real property tax assessments, the Transferor Company 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 Members and the BRI Partnership, based upon the relative time periods -31- 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 Members, in either case after deducting the expenses of collection thereof, which obligation shall survive the Closing. 9.05 Property Operating and Maintenance. The Transferor Company shall lease, manage, maintain and operate the Improvements in the ordinary course of business. Without limiting the generality of the foregoing, the Transferor Company shall perform all ordinary maintenance and repair of the mechanical, electrical and plumbing facilities and equipment within the Improvements so as to keep such facilities in good operating condition and repair, taking into account ordinary wear and tear; and to the extent any such facilities or equipment have heretofore been serviced under a Service Contract, the Transferor Company shall keep such Service Contracts in full force and effect up to Closing. For purposes hereof, the parties agree that the Transferor Company has retained or will retain the BRI Partnership or its affiliate (the "Management Company") as the manager for the Property pursuant to the Management Agreement attached hereto as Exhibit 7. The parties agree that the Management Agreement shall remain in effect until the expiration of the Earn Out Period and, until then, may not be modified, amended or terminated without the consent of both parties. Notwithstanding that the BRI Partnership is or will become the owner of the Management Company, until the expiration of the Earn Out Period, the Transferor Members shall have control over the activities of the Management Company and its personnel (including both on-site and managerial) with respect to the Property, including but not limited to, appointment, hiring, firing, supervision and compensation (both base and incentive, of personnel, operation, marketing, promotions and advertising, hours of operation and all other decisions as to the Property and its leasing and management; provided that such control shall be exercised in a commercially reasonable manner as compared with comparable properties in comparable locations. To facilitate this continued control, BRI Partnership agrees that Patrick Connelly, currently a vice president of The Questar Management Company, shall remain employed by the Management Company until the expiration of the Earn Out Period, his principal place of employment shall remain at the principal regional office of the Transferor Company and he shall devote such efforts to the Property as the Transferor Members shall require. Notwithstanding the foregoing, if the employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then the Transferor Members at their option, may elect (a) to terminate the management agreement with BRI Partnership and either manage, lease and operate the Property on their own behalf or retain such other persons or entities to do so as they deem appropriate on substantially the same terms (including, but not limited to, the same management fee) as are provided in the management agreement with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their full-time employee. 9.06 Lease Amendments. The Transferor Company shall not amend, alter, modify or vary the terms and provisions of any of Leases except in the ordinary course of business, without first obtaining the written consent of the BRI Partnership, which consent shall not be unreasonably withheld or delayed. -32- 9.07 New Leases. From and after the date hereof, the Transferor Company shall not make, execute nor permit any new Lease for any apartment in the Property without first obtaining the written consent of the BRI Partnership, unless such Lease (i) is on the form lease provided to the BRI Partnership, and (ii) is with a Qualified Tenant. 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 Company shall not cause, acquiesce in, or agree to: (a) a material amendment, modification, termination or cancellation of the Transferor Operating Agreement without the prior written consent of the BRI Partnership, which shall not be unreasonably withheld or delayed, provided that such amendment modification, termination or cancellation does not adversely affect the BRI Partnership's rights under this Agreement; (b) any willful action by the Transferor Company which would render any of 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; and, except with the prior written consent of the BRI Partnership, the Transferor Company shall not cause, acquiesce in or agree to any action allowing the Transferor Company taking or agreeing to take any of the following actions: (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, enter into any contract, transaction or agreement which shall survive the Closing (except as permitted by Section 9.02); or (e) enter into any agreement, transaction or arrangement with any affiliate that will survive the Closing; or (f) subject any portion of the Property to any option contract or sales contract. 9.09 Conduct of Business. Except with the prior written consent of BRI Partnership, on and after the date hereof the Transferor Company shall conduct its business only in the ordinary course and do the following: -33- (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, 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 Company in connection with the use and ownership of the Property up to the date of Closing. 9.10 Access to Information. Upon reasonable notice and during regular business hours, the Transferor Company will give the BRI Partnership and their attorneys, accountants, and other representatives reasonable access to Transferor Company's personnel and all properties, documents, contracts, books, and records of the Transferor Company, relating to the consummation of the transactions contemplated hereunder and will furnish the BRI Partnership with copies of such documents (certified by the Transferor Company if so requested) and with such information with respect to the affairs of the Transferor Company as the BRI Partnership may from time to time reasonably request. -34- SECTION 10 ---------- TRANSFEROR MEMBERS CLOSING OBLIGATIONS AND ------------------------------------------- POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY --------------------------------------------------- 10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the Transferor Members shall deliver the following to the BRI Partnership (the "Transferor Members Closing Documents"): (a) Assignment of Transferor Membership Interests. An assignment of the Transferor Membership Interests from each of the respective Transferor Members to the BRI Partnership in the form of the Transferor Assignment attached hereto as Exhibit III, duly executed and delivered by each of the Transferor Members, which shall transfer the Transferor Membership Interests to the BRI Partnership free and clear of any lien, pledge, restriction, encumbrance or other claim by any third party. (b) UCC Search - Transferor Members. A Uniform Commercial Code lien search for each of the Transferor Members, indicating that the membership interest of each Transferor Partner in the Transferor Company is unencumbered by any security interest therein and the cost of which shall be paid by BRI Partnership. (c) Amended Transferor Operating Agreement and Articles. The Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended and Restated Transferor Company Articles in the form of Exhibit V hereto duly executed and delivered by the Transferor Members, pursuant to which the Transferor Members shall withdraw as members from the Transferor Company. (d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to the effect that the Transferor Company has been duly formed in accordance with Maryland law and is validly existing and in good standing under such laws, that the Transferor Members are all of the members of the Transferor Company, 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 Members. (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 Members and a BRI Questionnaire, in the form of Exhibit 5 attached hereto, duly executed by each of the Transferor Members. -35- (f) Occupancy Permit. Final Certificates of Occupancy 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, 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 Company. 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 Company 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 and Licenses. An as-built set of original Plans and Specifications together with original copies (or photocopies if original copies are unavailable to the Transferor Company) of all current site plans, surveys, 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 Company shall also deliver: 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 Member 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 Company'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 Members, advising the tenants under the Leases of the transfer of ownership of the Transferor Company 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 Members to the effect that, to its knowledge, all of the representations and warranties of the Transferor Company set forth in this Agreement remain true and correct as of the Closing Date. -36- (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 Company. (n) Non-Foreign Affidavit. The Transferor Members 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 Members with the Foreign Investment and Real Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended. (o) Construction Contract Retentions. Final mechanics' lien waivers from the general contractor and subcontractors covering at least 95% of the construction cost, together with an amount equal to 125% of all unpaid retentions and disputed amounts under the Construction Contract, which amount shall be placed in an escrow account with the Escrow Agent to be released on a monthly basis to pay amounts coming due under the Construction Contract to the general contractor, all subcontractors and material suppliers; provided that any request for payment shall be accompanied by all documentation required as a prerequisite to payment under the Construction Contract, including lien waivers, and further provided that payment of any retention shall be subject to receipt of final lien waivers and acknowledgments of payment in full executed by the general contractors, all subcontractors and material suppliers. In any event, the Transferor Members shall remain liable for payment of all such unpaid retentions and disputed amounts to the extent not covered by the escrow, which obligation shall survive Closing. (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 Company 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 by the BRI Partnership. (q) Certificate of Completion. The original certificate of substantial completion required under Section 3.02. (r) Questar Builders Warranty. An original one year construction warranty for the Improvements to be provided by Questar Builders, Inc., which construction warranty shall be identical to that required under the standard AIA Construction Contract substantially in the form of Exhibit X hereto. (s) Warranties and Guarantees. Originals of all warranties and guarantees provided by subcontractors and material suppliers for the Improvements. -37- (t) Other Documents. Such other documents, instruments or agreements which the Transferor Members 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 Membership Interests. The provisions of this Section 10.01(t) shall survive the Closing indefinitely. 10.02 The Transferor Members' Expenses. The Transferor Members shall pay all of the fees and expenses of their own separate legal, tax or other advisors. 10.03 Accuracy of Representations and Warranties. Each Transferor Member agrees that such Transferor Member will notify the Transferor Company in writing on or prior to the Closing Date if any of the representations and warranties of such Transferor Member cease to be true and correct on and as of the Closing Date. Each Transferor Member further agrees that, subject to Section 10.05(g), if no such notice is given to the Transferor Company, the representations and warranties of such Transferor Member shall be deemed to be true and correct on and as of the Closing Date and that the BRI Partnership and the Transferor Company shall be entitled to rely on the agreements contained in this Section 10.03. 10.04 Post-Closing Restrictions on the Transferor Members. In order to induce the BRI Partnership to enter into this Agreement, each Transferor Member, hereby agrees that until the tenth (10th) day following the first anniversary of the Closing: (a) each Transferor Member 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 Member 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 given to the BRI Partnership pursuant to the Pledge Agreement (described on Schedule K), no Transferor Member 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 10.04 shall survive the Closing indefinitely. 10.05 Indemnification. (a) The Transferor Members' Indemnity. In the event the parties proceed to Closing, each Transferor Member agrees, severally and not jointly, to indemnify and hold the -38- 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 Company set forth in Section 5A or of such Transferor Member set forth in Section 5B or (B) resulting from any breach or default by the Transferor Company or such Transferor Member of any obligation of the Transferor Company or such Transferor Member under this Agreement or (ii) from liabilities for borrowed money incurred by the Transferor Company or the Property prior to the Closing; provided that no Transferor Member 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 Member as of the date such indemnification obligation is satisfied (except for indemnification obligations with respect to representations of each of the Transferor Members in Section 5.33, 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 Member) (collectively, the "Cap"); and provided further that to the extent any of the Transferor Members have any indemnification obligation to the BRI Partnership, the Transferor Members may elect to satisfy such indemnification obligation by directing the BRI Partnership to cancel such amount of BRI Partnership Units acquired by such Transferor Member pursuant to this Agreement having a fair market value (measured at the time such BRI Partnership Units are returned or canceled) equal to the indemnification obligation of such Transferor Member. (b) The BRI Partnership's Indemnity. In the event the parties proceed to Closing, the BRI Partnership agrees to indemnify and hold the Transferor Members harmless against and with respect to (i) any loss or damage (including reasonable attorney's fees) to the Transferor Members, 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 Company or the Property after the Closing (except for such liabilities resulting from a breach or default by the Transferor Members or the Transferor Company 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 Member under this 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 Member (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 Member). (c) The indemnification obligations of the Transfer Members 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. (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. -39- (e) Neither the BRI Partnership nor any of the Transferor Members 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 Members 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 Company or the Property. (g) Each of the Transferor Members, the Transferor Company 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 Company 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 Members 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 Company with respect to all tax years or periods ending on or prior to the Closing Date. The Transferor Members shall prepare and timely file the terminating tax returns for the Transferor Company 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 Members 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 Members in obtaining such data and information regarding the Transferor Company to permit the Transferor Members to prepare such returns or to respond to any audits or assessments for the periods covered by such returns. SECTION 11 ---------- BRI PARTNERSHIP'S CLOSING OBLIGATIONS ------------------------------------- AND POST-CLOSING AGREEMENTS --------------------------- 11.01 Closing Deliveries and Agreements. At the Closing, the BRI Partnership shall: -40- (a) Transfer of Consideration; Execution and Delivery of BRI Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver to the Transferor Members (i) the Base Consideration and, if applicable, the Additional Consideration Installments, 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 Operating Agreement and Amended Transferor Company Articles. Deliver to the Transferor Members (i) the Transferor Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended Transferor Company Articles 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 Company. (c) Record Amended Transferor Company Articles. Cause the Amended Transferor Company Articles to be filed with all appropriate state and, if applicable, local filing offices. (d) Opinion. An opinion of counsel satisfactory to the Transferor Members 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 Members 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 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 Members 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. -41- (g) BRI Partnership Agreement. Deliver to the Transferor Members 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 Members pursuant to any other provisions of this Agreement or which the Transferor Members 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 Members title to the BRI Partnership Units. The provisions of this Section 11.01(h) shall survive the Closing indefinitely. 11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC search costs and (v) all other Closing costs. 11.03 Post-Closing Agreements of the BRI Partnership. (a) The BRI Partnership hereby grants the Transferor Members, in their capacity as a limited partner of the BRI Partnership and so long as the Transferor Company has not dissolved, terminated or liquidated, the right to receive the Transferor Membership Interests as a distribution in kind in satisfaction of the Transferor Members' distribution rights under Section 8.2 of the BRI Partnership Agreement. If the Transferor Membership 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 Members. (b) Until the expiration of the period (the "No Transfer Period") ending on the earlier of (I) such time as all of the Transferor Members have redeemed all of the BRI Partnership Units received by the Transferor Members 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 Membership 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 (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; and (iv) voluntary transfers arising in connection with any financing or refinancing of the Property, which shall include, without limitation, a mortgage, deed of trust, or any other related financing liens or security interests, the parties affirmatively acknowledging that there shall be no restriction on the financing or refinancing of the Property by the BRI Partnership. -42- (c) 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 paid in cash at Closing by the party owing such amount to the other party unless the Transferor Members have made an election to receive BRI Partnership Units, in which event such proration 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) charges or prepayments under transferable Service Contracts; and (d) 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 Members and the BRI Partnership shall prepare and exchange preliminary calculations of all adjustments and prorations to be made pursuant to this Section 12. The Transferor Members and the BRI Partnership shall cooperate in the furnishing of all information and documentation necessary to prepare such calculations. If the Transferor Members have elected to receive BRI Partnership Units pursuant to Section 2.02, then prior to Closing, the Transferor Members shall deliver to the BRI -43- 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 Member, and (ii) the number of BRI Partnership Units to be received by each Transferor Member. 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 Members and the Transferor Members hereby release the BRI Partnership from any such obligation or liability. Subject to Section 12.04, all cash (including any escrow deposits) shall be used by the Transferor Company to pay amounts payable by the Transferor Company and/or distributed to the Transferor Members prior to Closing, and if any of such cash applicable to preclosing periods is not removed from the Transferor Company prior to Closing, the BRI Partnership shall hold such cash as agent for the Transferor Members and refund such cash to the Transferor Members subsequent to Closing. 12.02 Application of Rent Payments. If any tenant is in arrears in the payment of rent on the Closing Date, the Transferor Company shall distribute the right to receive such rent to the Transferor Members immediately prior to Closing. The BRI Partnership shall act as agent for the Transferor Members in collecting such rents. 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 Company 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 Members 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 Company 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 Members owe an amount to the BRI Partnership, the Transferor Members shall have the right to elect to adjust for such amounts owing by the Transferor Members to the BRI Partnership in the form of BRI Partnership Units rather than -44- 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 Members, such amount shall be paid in the form of BRI Partnership Units rather than cash, if the Transferor Members have elected under Section 2.02 to receive BRI Partnership Units. The Transferor Members shall notify the BRI Partnership at least seven (7) business days prior to the Closing Date of the manner in which the Transferor Members shall have elected to settle adjustments under this Section 12. SECTION 13 ---------- FAILURE TO PERFORM ------------------ 13.01 Defective Title or Condition. If the Transferor Members are unable to give title or to contribute and transfer the Transferor Membership 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 Membership Interests or the Property does not conform with the provisions hereof, the BRI Partnership may elect by written notice given to the Transferor Members 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 Members can deliver to the Transferor Membership Interests and the Property in its then condition and to deliver in exchange therefor the Consideration Amount then required to be paid subject to reduction of the Consideration Amount by the amounts required to remove all Monetary Liens. 13.03 Transferor Default. If the Transferor Company or any of the Transferor Members default in the performance of their obligations under this Agreement, or if any representation or warranty of the Transferor Company or the Transferor Members is false or misleading (a "Transferor Default"), the BRI Partnership shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. By their execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby guarantee the performance by the Transferor Company of all of its obligations hereunder and, as part of such guaranty, shall be jointly and severally liable with the Transferor Company of the payment of all damages to which BRI Partnership may be entitled. 13.04 The BRI Partnership's Default. If the BRI Partnership defaults in performing any of its obligations hereunder, then the Transferor Members shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. SECTION 14 ---------- -45- BROKERAGE FEES -------------- 14.01 Brokerage Fees. The Transferor Company 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 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 QPI and the Related Entities in accordance with the provisions of the Related Agreements. 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 Company have any obligation to pay any commission to APC. 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 to such address as the Transferor Members 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 Members c/o Questar Properties, Inc. 124 Slade Avenue, Suite 200 Baltimore, MD 21208 Attn: Mr. Stephen M. Gorn Telecopier No. 410-486-7692 -46- 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. SECTION 16 ---------- LIMITATIONS ON SURVIVAL ----------------------- 16.01 Survival. The representations, warranties, covenants and other obligations set forth in Sections 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05 and the covenant and agreements of the BRI Partnership contained in Sections 2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing indefinitely and an action based thereon may be brought at any time after the Closing Date. The representations, warranties, covenants and other obligations of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04, 10.05, 12 and 14 and the representations and warranties, covenants and other obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 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 Members or the BRI Partnership set forth in this Agreement shall survive the Closing, and no action based thereon shall be commenced after Closing. 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. 16.02 Merger. The delivery of the Transferor Assignments and Amended Transferor Operating Agreement by the Transferor Members (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 Members, shall be deemed the full performance and discharge of every obligation to be performed by the parties hereunder and the -47- 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 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 Members and the Transferor Company shall have performed or complied with, in all material respects, all of their respective covenants, agreements and obligations under this Agreement, (ii) the Transferor Members shall have delivered the Transferor Members Closing Documents and (iii) all of the representations and warranties of the Transferor Company and the Transferor Members set forth in this Agreement shall be true and correct, in all material respects, as of the Closing Date. (b) No Adverse Changes. After the date of notice of satisfaction of the Closing Conditions, there shall not have occurred any material adverse change in the financial condition, business, properties, assets or liabilities of the Transferor Company; (c) Consents. Any and all consents, authorizations and approvals necessary to be obtained before Closing shall have been obtained. (d) Title to Membership Interests. The Transferor Membership 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 Company 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) Construction. The Transferor Company shall have completed construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes all to the extent required under Sections 3.02 and 5.30, and, if such completion shall have occurred prior to the occurrence of the Stabilization Date, then, in addition to the foregoing, as of the Closing, the Improvements shall remain completed to the extent required under Sections 3.02 and 5.30 and shall be in -48- substantially the same condition (subject to the provisions of Section 7.02 and to any damage to the Improvements caused by tenants) as they were in at the time of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all identified construction deficiencies corrected. In the event that any condition set forth in Section 17.01(a) through Section 17.07(e) 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 Members 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. 17.02 Transferor Conditions. Without limiting any other conditions to Closing of the Transferor Members contained herein, the obligation of the Transferor Members 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 Members 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. After the date of any election by the Transferor Members to accept BRI Partnership Units, 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 Members 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 Members in writing, on or before the Closing Date, the Transferor Members 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. -49- 17.03 Related Agreements. Simultaneously herewith, the BRI Partnership has entered into with various parties (the "Related Entities") 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 Questar Investment Corporation 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, this Agreement shall terminate automatically simultaneously with the termination of any such Related Agreement 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 provisions of this Section 17.03 shall be of no further force or effect once closing occurs under any one or more of the Related Agreements. SECTION 18 ---------- MISCELLANEOUS PROVISIONS ------------------------ 18.01. Assignment. Except as hereinafter provided, this Agreement may not be assigned prior to Closing by either party hereto. The BRI Partnership shall have the right to designate an entity affiliated with the BRI Partnership to accept title to some of the Membership Interests, but the BRI Partnership shall remain fully liable for the performance of all of its obligations hereunder. The Transferor Members and the Transferor Company shall have the right to collaterally assign their interests under this Agreement to a construction lender providing construction financing for the Improvements (the "Lender"). This Agreement shall be automatically subject and subordinate to the mortgage, deed of trust and all other loan documents now or hereafter entered into evidencing the loan and security of the Lender. If the Transferor Members and Transferor Company so assign this Agreement, then the the BRI Partnership agrees to enter into an agreement with the Lender (the "Tri Party Agreement") providing that: (a) the BRI Partnership agrees to provide the Lender with reasonable notice and opportunity to cure any default by the Transferor Members or the Transferor Company hereunder; (b) the BRI Partnership agrees not to modify or amend this Agreement without the prior written consent of Lender, (c) the BRI Partnership, at the written request of Lender upon a default under the loan, will pay the Base Consideration or such lesser amount as is required to satisfy the loan directly to Lender provided that all of the conditions to Closing provided herein have been satisfied; (d) the Lender agrees to recognize the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will permit Lender to perform any obligations of the Transferor Company and Transferor Members hereunder and will agree to recognize Lender as the Transferor Company and the Transferor Members hereunder should Lender succeed to the interest of the Transferor Company and Transferor Members, provided, however, that, in such event, Lender's liability -50- under this Agreement shall be limited to its interest in the Transferor Company and the Property; and further provided that (f) the BRI Partnership will have no liability for payment of the Lender's loan or the performance of any obligations under any of the loan documents other than the Tri-Party Agreement; and (g) the amount to be paid to Lender shall be payable in cash only and not in BRI Partnership Units and shall be limited to the amount provided in clause (c). The parties acknowledge and agree that the Transferor Company is currently the owner of land in addition to the Land (the "Additional Avalon Land") which is the subject of a separate Development Contribution Agreement (the "Other Avalon Agreement") between the BRI Partnership and the Transferor Company and Transferor Members. To facilitate the transactions contemplated hereby and by the Other Avalon Agreement, prior to the commencement of construction, the Transferor Company will transfer either or both of the Land and the Additional Land to a newly-formed limited partnership(s) or limited liability company(s) such that the Land will be owned by one entity and the Additional Land will be owned by another entity. At said time, the newly-formed entity(s) and its owners will assume all of the obligations of either this Agreement or the Other Avalon Agreement (whichever is applicable to the land it then owns) and the original Transferor Company and Transferor Members shall be released from all liability thereunder, and pursuant to instruments in form reasonably satisfactory to all parties. 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 Members, Transferor Company 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 hereto and their respective successors and permitted assigns. In no event shall the Transferor Members have the right to assign or transfer their right to receive BRI Partnership Units. -51- 18.06 Drafts. This Agreement shall not be binding or effective until properly executed and delivered by all of the Transferor Members and the BRI Partnership. The delivery by the BRI Partnership to the Transferor Members 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 Members 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 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. SECTION 19 ---------- -52- ADDITIONAL PROVISIONS RELATING TO --------------------------------- THE TRANSFEROR MEMBERS ---------------------- 19.01 Transferor Allocation Schedule. Each Transferor Member acknowledges and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I is true, correct and complete in all respects as it relates to such Transferor Member. 19.02 Time of Effectiveness. The Transferor Members 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 counterparts to such agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their respective hands and seals as of the day and year first above written. WITNESS: - ------------------------------ ---------------------------- Stephen M. Gorn - ------------------------------ ---------------------------- John B. Colvin - ------------------------------ ---------------------------- Morton Gorn - Transferor Members - BRI OP LIMITED PARTNERSHIP By: Berkshire Apartments, Inc. General Partner ____________________________ By: _________________________ Name: Title: - the BRI Partnership - -53- Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in accordance with the provisions of Section 13.03. - ------------------------------ -------------------------------- Stephen M. Gorn - ------------------------------ -------------------------------- John B. Colvin - the Guarantors- RECEIPT BY ESCROW AGENT The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by certified check to be held as the Deposit pursuant to this Agreement. WITNESS: LAWYERS TITLE INSURANCE CORPORATION ________________________ By: _______________________ Name: Title: Date: -54- List of Schedules Schedule A - Description of Land Schedule B - Personal Property Schedule C - List of Plans and Specifications Schedule D - Form of Rent Roll Schedule E - Service Contracts Schedule F - Financial Statements Schedule G - Insurance Schedule J - Environmental Reports Schedule K - Related Agreements Schedule 3.03 - Pro Forma Rents Schedule 5.05 - Litigation Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants Schedule 5.27 - Shared Facilities/Utilities Schedule 5.33 - Liens on Membership Interests 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 - Kickout Agreement Exhibit 7 - BRI Management Agreement Transferor Exhibits ------------------- Exhibit I - List of Transferor Members (with address and membership interest of each member) Exhibit II - Transferor Operating Agreement Exhibit III - Assignment of Transferor Membership Interests Exhibit IV - Amended and Restated Operating Agreement of Transferor Company Exhibit V - Amended and Restated Articles of Organization of Transferor Company Exhibit VI - Gap Indemnity Exhibit VII - Non-Imputation Affidavit Exhibit VIII - Title Affidavit Exhibit IX - Right of First Offer Agreement Exhibit X - AIA Construction Warranty -55- Schedule 5.27 - Shared Facilities/Utilities (Avalon 1, 3, 4) 1. Recreational Facilities Agreement relating to the use of pool and clubhouse facilities on Avalon 1, 3, 4, by tenants of Avalon 2, and the sharing of costs associated with these facilities. 2. Easement Agreement relating to the sewage pumping station and storm water basin #2 servicing Avalon 1, 3, 4 and Avalon 2, and the sharing of costs associated with these facilities. EX-10.27 6 MATERIAL CONTRACTS DEVELOPMENT CONTRIBUTION AGREEMENT (Liriope) THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as of the 25th day of August, 1997, by and between the individuals and entities listed on Exhibit I attached hereto with an address c/o Questar Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen M. Gorn, individually, John B. Colvin, individually, 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. BACKGROUND WHEREAS, the Transferor Members are the legal and beneficial owners of all of the membership interests, as set forth on Exhibit I, of Foxglove Associates, L.L.C., a Maryland limited liability company (the "Transferor Company") pursuant to the Operating Agreement dated as of July 29, 1996, as amended (a copy of which, including all amendments, is attached hereto as Exhibit II and is referred to as the "Transferor Operating 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 Company is the owner of the following: a. that certain tract or parcel of land located in Harford County, Maryland, more particularly described in Schedule A attached hereto (the "Land"); b. the 84-unit apartment complex, commonly known as Liriope Apartments, which contains related improvements, facilities, amenities, structures, driveways, walkways, plumbing and heating pipes, culverts, and mains, all of which have been constructed, are under construction or are to be constructed on the Land (collectively, the "Improvements") pursuant to certain plans and specifications that have been approved by the Transferor Members and BRI Partnership, as modified by certain change orders, a complete listing of which (including the latest revision date and change orders) is attached hereto as Schedule C (the "Plans and Specifications"); c. all right, title and interest of the Transferor Company 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 Company 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 Company 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 Company 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 Company's interest in any intangible property now or hereafter, owned by the Transferor Company 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 and other current assets relating to periods prior to Closing and (ii) amounts, if any, due to the Transferor Members 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 Members desire to contribute all of the membership interests in the Transferor Company (collectively referred to as the "Transferor Membership Interests") to the BRI Partnership, and the BRI Partnership desires to admit the Transferor Members as limited partners in the BRI Partnership and to accept such contribution from the Transferor Members; and WHEREAS, in exchange for such contribution, the Transferor Members desire to, at their election, either receive cash or BRI Partnership Units (as hereinafter defined) 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 Members and the BRI Partnership hereby covenant and agree as follows: -2- SECTION 1 --------- CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE ------------------------------------------------------ 1.01 The Transferor Members shall contribute to the BRI Partnership, and the BRI Partnership shall accept from the Transferor Members, in exchange for either cash or BRI Partnership Units, and upon the terms and conditions set forth in this Agreement, all of the Transferor Members' membership interests in the Transferor Company (the "Transferor Membership Interests"). The percentage of interest that each of the Transferor Members owns in the Transferor Company is listed on Exhibit I. At the Closing (as defined in Section 3.01), the Transferor Members shall, respectively, contribute, assign, transfer and deliver the Transferor Membership Interests to the BRI Partnership, or its designees as provided in Section 18.01 hereof, by an Assignment and Assumption of Membership Interest in the form of Exhibit III attached hereto (the "Transferor Assignment"). Immediately thereafter, the Transferor Members and the BRI Partnership, or its designees, shall execute and deliver an Amended and Restated Operating Agreement in the form of Exhibit IV attached hereto (the "Amended Transferor Operating Agreement") and an Amended and Restated Articles of Organization in the form of Exhibit V attached hereto (the "Amended Transferor Company Articles") pursuant to which the BRI Partnership, or its designees, shall be admitted and the Transferor Members shall withdraw, as the members of the Transferor Company and be released of all liability thereunder, and the terms of the Transferor Company shall be amended in accordance with the Amended Transferor Operating Agreement. 1.02 Property Title. Liriope: On or before September 22, 1997, the BRI Partnership, at the BRI Partnership's sole cost, 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 Company promptly after its receipt thereof. The Commitment shall insure fee simple title to the Property in the sole name of the Transferor Company and shall be in the amount of $7,622,857. 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 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 Company on or before October 1, 1997 if any such exceptions are unacceptable. If the BRI Partnership fails to so notify the Transferor Company of any unacceptable exceptions as described above, the -3- 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". Any easements or other agreements reasonably required for the development and construction of the Property and the Improvements now or hereafter entered into by the Transferor Company which are consistent with the Plans and Specifications and, in the reasonable discretion of the BRI Partnership, do not materially interfere with the intended use of the Property nor materially affect the value of the Property, shall also constitute Permitted Exceptions. Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at the BRI Partnership's sole cost, shall obtain an updated commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the "Title Insurer"). If any new exceptions to title appear in the Updated Commitment that do not constitute Permitted Exceptions and that are unacceptable to the BRI Partnership, in its reasonable discretion, the BRI Partnership may notify the Transferor Company within thirty (30) days after the Completion Date Notice. If any exceptions in the Commitment or the Updated Commitment are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable exceptions, at the option of the Transferor Company, to remove or cure such exceptions, provided further, the Transferor Company 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 liens for real estate taxes and current water and sewer charges for the fiscal year in which Closing occurs, 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 Company at Closing. The Transferor Company shall be deemed to have refused to cure any unacceptable exceptions unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable exceptions. If the Transferor Company 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 Company 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 Company or (ii) waive such exceptions and accept title subject thereto, in which event there shall be a reduction in the Purchase Price (as defined in Section 2.01(a)) in an amount necessary to enable the BRI Partnership to remove all Monetary Liens. 1.03 Survey. On or before September 22, 1997, the BRI Partnership, at the BRI Partnership's sole cost, shall obtain an as-built survey (the "Survey") of the Land and the -4- 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 Company 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 Company on or before October 1, 1997 if any such survey matters are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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." Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at its sole cost and expense, shall obtain an updated survey (the "Updated Survey") by a registered land surveyor (the "Surveyor") acceptable to the BRI Partnership, which Updated 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 Updated Survey and the recorded legal description. The BRI Partnership shall provide a copy of the Updated Survey to the Transferor Company promptly after its receipt thereof. If any new matters appear on the Updated Survey that do not constitute Permitted Exceptions, do not simply reflect the construction of the Improvements in locations that do not encroach upon property lines, setback lines or easements, and are unacceptable to the BRI Partnership in its reasonable discretion, the BRI Partnership may notify the Transferor Company within forty (40) days after the Substantial Completion Date Notice. -5- If any survey matters are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable survey matters, at the option of the Transferor Company, to cure such unacceptable survey matters. The Transferor Company shall be deemed to have refused to cure any unacceptable survey matters unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable survey matters. If the Transferor Company 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 Company 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 Company or (ii) waive such survey matters and accept title subject thereto, in which event there shall be no reduction in the Consideration Amount. 1.04 Construction and Inspection. (a) Plans and Specifications. Prior to the date of this Agreement, Transferor Company has delivered to BRI Partnership true, correct and complete copies of the Plans and Specifications for the construction of the Improvements as set forth on Schedule C attached hereto. (b) Transferor Company to Construct Improvements. Transferor Company shall, at Transferor Company's expense, obtain all permits and construct the Improvements on the Land in accordance with the Plans and Specifications, as the same may be modified by change order in accordance with this Agreement. All work shall be done in a good and workmanlike manner using new, good quality materials, free of all defects and in compliance with all Codes (as defined in Section 5.21), permits, approvals, title restrictions and insurance requirements. Transferor Company shall obtain builder's risk insurance on the Improvements in the amount of the construction cost of those buildings from time to time for which construction has commenced. Transferor Company shall deliver a certificate of such insurance to BRI Partnership. Transferor Company shall maintain such insurance in force and effect through the course of construction and until Closing hereunder. (c) Inspection of Construction; Correction of Defects. BRI Partnership and its engineers, consultants and agents may inspect the construction of the Improvements from time to time during the course of construction upon reasonable notice to the Transferor Company. After receipt from the Transferor Company of written notice that the requirements of Section 3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI Partnership and its engineers, consultants and agents shall inspect the construction of the Improvements upon reasonable notice to Transferor Company to determine whether such construction is completed in accordance with the Plans and Specifications. The parties acknowledge that the Transferor Company has -6- delivered the Inspection Notice as of September 8, 1997. On or before October 7, 1997, BRI Partnership will give written notice to Transferor Company of any nonconformities with the Plans and Specifications and defects or deficiencies in construction identified by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership, which disagreement shall be expressed by giving written notice to the BRI Partnership stating the basis for said disagreements, within 10 days after such BRI Partnership notice, Transferor Company, at Transferor Company's expense, shall commence to correct, repair or replace any such nonconformities, defects or deficiencies and shall diligently continue thereafter until completion of such corrections, repairs or replacements, and, if such deficiencies are of such a magnitude that Closing would not otherwise be required to occur under Section 3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies are corrected. Any dispute shall be resolved by arbitration in accordance with Section 3.02. (d) Change Orders. The Transferor Company shall not change or modify the Plans and Specifications without prior written approval of the BRI Partnership, such approval not to be unreasonably withheld, provided, however that the following changes shall not require BRI Partnership's approval: (i) changes required by the construction lender or governmental authorities, and (ii) changes in the design of the Improvements resulting in a decrease or increase in construction cost by less than $100,000 for an individual change and less than $250,000 in the aggregate. The Transferor Company shall give written notice to BRI Partnership of all proposed changes to the Plans and Specifications by sending a complete copy of the change, together with copies of any plans or drawings related thereto. BRI Partnership shall give its written approval or disapproval within five (5) business days thereafter. If BRI Partnership disapproves any such change, the Transferor Company shall not implement same. (e) Completion. The Transferor Company shall diligently attempt to complete construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes (as defined in Section 5.21 hereof) by December 31, 2000 (the "Scheduled Completion Date"). For purposes of this Agreement, the "Completion Date" shall be the date upon which all of the Closing Conditions shall have been satisfied as set forth in Section 3.02. (f) Force Majeure. In the event that the Transferor Company is delayed in the commencement or completion of construction of the Improvements by acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, strikes, shortages of labor, materials or equipment, undue delay in action by governmental authorities, governmental or utility company refusal to issue building, construction, utility, occupancy or other permits or approvals, water, sewer or other utility moratorium (including enforcement of the requirements of any adequate public facilities ordinance) or other causes beyond the Transferor Company's reasonable control (a "Force Majeure Event"), the Scheduled Completion Date shall be extended for the period of delay, not to exceed 12 months. If a Force Majeure Event continues in effect for a period in excess of 12 months, during which construction is delayed, then the Transferor Company may, by notice to BRI Partnership terminate this Agreement, in which event the -7- Deposit shall be returned to the BRI Partnership and neither party shall have any further liability to the other hereunder. In addition, simultaneously with closing under the Related Agreements, the Transferor Company shall execute and deliver to BRI Partnership the Right of First Offer Agreement attached hereto as Exhibit IX, which Right of First Offer Agreement shall contain, among other provisions a Right of First Refusal which provides: (a) that the BRI Partnership shall have a right of first refusal to purchase the Property following the termination of this Agreement pursuant to this Section 1.04(f), (b) BRI Partnership shall have a period of 15 business days, following receipt of a bona fide third party letter of intent to purchase the Property, to agree to purchase the Property on the same terms and conditions as set forth in the letter of intent, and (c) such Right of First Offer Agreement shall be subordinate to any mortgage or deed of trust securing construction financing on the Property. 1.05 Environmental Due Diligence Inspection. (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 October 1, 1997 (the "Due Diligence Period") during regular business hours and on reasonable prior notice to the Transferor Company, inspect the Property to determine the presence of any Hazardous Materials (as defined in Section 5.20) and the compliance of the Property with Environmental Laws (as defined in Section 5.20) 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 Company 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 Company in this Agreement. Should the BRI Partnership decide, in its reasonable judgment, that there exists an environmental risk with respect to the Property (excluding such items as asbestos roof shingles, asbestos floor tile and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the presence of usual and customary cleaning and maintenance supplies and similar items that are typically handled through the adoption of appropriate operations policies), 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 Company 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 1.05. The BRI Partnership shall pay when due all fees and expenses incurred in the performance of the Environmental Inspection performed at its request. -8- (b) From and after the date of this Agreement, the Transferor Company shall permit the BRI Partnership's authorized agents and representatives (including its accountants) to examine (including, without limitation, the right to audit) the Transferor Company's books, financial records, Service Contracts, Leases and 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 Company's financial records relating to the Property have been audited, the Transferor Company agrees to deliver any reports relating to such audits to the BRI Partnership. The Transferor Company shall provide the BRI Partnership with such information as the Transferor Company 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 Company, all taxes and utility payments made 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 1.05(b) 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 Company if the Closing does not occur. (c) The BRI Partnership shall indemnify the Transferor Members 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 Members 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 Members 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 1.05(c) shall survive the Closing or any termination of this Agreement; provided, however, that no claim by the Transferor Members under this Section 1.05(c) 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 Members 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 Members hereunder. 1.06 Tax Treatment. The parties intend that, to the extent the Transferor Members receive BRI Partnership Units as the consideration for the contribution of the Transferor Membership Interests by the Transferor Members to the BRI Partnership in accordance with Section 1.01 of this Agreement, such contribution shall be treated for federal (and applicable -9- state) income 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 Members agree to report such transaction for federal and applicable state income tax purposes consistently with the intent set forth in this Section 1.06. SECTION 2 --------- CONSIDERATION ------------- The consideration for the Membership Interests (the "Consideration Amount"), subject to the adjustments contained in Section 12 of this Agreement, shall be determined pursuant to the provisions of Section 2.04, and shall be paid by the the BRI Partnership to the Transferor Members in the following manner: 2.01 Deposit. (a) Simultaneously with the execution of this Agreement, the the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the "Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check (subject to collection) as a Deposit to be held in an interest-bearing escrow account on account of the Consideration Amount. Said sum, together with any interest earned thereon, is hereinafter called the "Deposit." (b) At the Closing, the Deposit shall be returned by the Escrow Agent to BRI Partnership. 2.02 Balance. At the Closing, the BRI Partnership shall deliver to the Transferor Members the Base Consideration, plus, if then due, any Additional Consideration Installments, subject to the adjustments described in Section 12 of this Agreement by federal wired funds. Prior to any delivery to the Transferor Members of the Base Consideration, there shall be deducted from the Base Consideration an amount equal to the sum required to pay off the Construction Loan in full and to remove all other Monetary Liens and simultaneously with the Closing, the BRI Partnership shall pay off the Construction Loan. At the Transferor members' option, to be exercised irrevocably by written notice to the BRI Partnership given at least 15 days prior to the satisfaction of the Closing Conditions, all or a portion of the Consideration Amount shall be delivered to the Transferor Members in the form of BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise such option, then the number of BRI Partnership Units, the rights and limitations upon such units and the method by which the units are delivered to the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b) and (c) below. If the Transferor Members do not exercise the foregoing option in a timely manner, all consideration payable under this Agreement shall be paid in cash by federal wired funds and the following Sections of this Agreement shall be, without further action by any party, null and void and without any further force or effect upon the parties: 1.06, 2.02(a) through (c), -10- 5.34, 6.03, 6.05, 6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii) and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04. (a) The number of BRI Partnership Units to be issued to the Transferor Members at Closing shall be that number determined by dividing the portion of the Consideration Amount to be paid in BRI Partnership Units to each Transferor Member by the value of one BRI Partnership Unit. The parties agree that, for purposes of this Agreement, the value of each BRI Partnership Unit 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 ten (10) business days prior to the day which is five (5) business days before the Closing. If the calculation provided for above results in a fraction of a BRI Partnership Unit to be delivered to a Transferor Member, the number of BRI Partnership Units to be delivered shall be rounded up or down to the nearest whole number of BRI Partnership Units. Attached hereto as Exhibit I is a schedule (the "Transferor Allocation Schedule") prepared by the Transferor Members setting forth (i) the name of each Transferor Member, and (ii) the percentage interest of each Transferor Member, together with an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each Transferor Member. In the event that any Transferor Member 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 Members all of the BRI Partnership Confirmations evidencing the issuance of the BRI Partnership Units to the Transferor Members in accordance with the Transferor Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership owes any amounts to the Transferor Members 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 Members in accordance with the election made by the Transferor Members pursuant to Section 2.02. The BRI Partnership shall have no obligation or liability with respect to the preparation or accuracy of the Transferor Allocation Schedule. (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. At the time that any Transferor Member 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 Member 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 Members and Berkshire 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 -11- Partnership shall deliver to the Transferor Members a certified copy of the Registration Rights Agreement. (c) The Transferor Members, 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, 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 Units have been established as provided in this Section, 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 Members in the event of a decrease or increase in the market value of the common stock of BRI. 2.03 Payment of Monies. Any monies payable under this Agreement, unless otherwise specified in this Agreement, shall be paid by wire transfer. 2.04 Calculation of Consideration Amount. The Consideration Amount for the Transferor Membership Interests shall consist of a base consideration amount ("Base Consideration") plus additional consideration installments ("Additional Consideration Installments"). (a) The Base Consideration for the Transferor Membership Interests shall be Six Million, Fourteen Thousand, Seven Hundred Seventeen Dollars ($6,014,717), provided, however, that, it shall be a condition of Closing that, on the date of Closing, the value of the Property (determined by dividing Stabilized NOI for the month preceding the date of Closing by the Cap Rate, as such terms are hereinafter defined) is not less than the Base Consideration, and if such amount is less than the Base Consideration, Closing shall be extended until such time as such calculation is not less than the Base Consideration. (b) In addition to the Base Consideration, the BRI Partnership shall pay one or more additional consideration installments (the "Additional Consideration Installments"), if any, on a quarterly basis with the first payment, if then due, on the date of Closing and on the first day of each quarter (defined as a period of three full calendar months, plus, for the first quarter, any partial calendar month after the date of Closing) thereafter for a total of 18 full calendar months after the Closing (the "Earn Out Period"). As of the Closing and as of the first day of each quarter thereafter, Stabilized NOI shall be determined as provided below, and each Additional Consideration Installment, if any, will be equal to the Stabilized NOI divided by 8.75% (the "Cap Rate") and then reduced by the Base Consideration and any prior Additional Consideration Installments. The maximum Consideration Amount, (i.e. the sum of the Base Consideration plus all Additional Consideration Installments) shall not exceed Seven Million, Six Hundred Twenty-Two Thousand, Eight Hundred Fifty-Seven Dollars ($7,622,857). (c) Stabilized NOI shall be calculated for purposes of determining both the Base Consideration and the Additional Consideration Installments as follows: 12 times the -12- monthly actual income for the Property, (provided that if occupancy rates exceed 95%, then actual income shall be calculated as if the Property had an occupancy rate of 95%) for the month preceding the payment date less Two Hundred Twenty-Seven Thousand, One Hundred Dollars ($227,100) (representing the agreed-upon annual Projected Operating Expenses for the Property), provided that, on the first anniversary of the date of Closing under this Agreement, the Projected Operating Expenses shall be adjusted by the percentage change in the CPI-U, U.S. Cities Average for the period from the date of Closing under this Agreement until the anniversary date. SECTION 3 --------- THE CLOSING ----------- 3.01 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 in Washington, D.C., or such other place as the Transferor Company and the BRI Partnership shall mutually agree. The "Time of Closing" shall be on that date specified in Section 3.02 at which 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 Members 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 Members. It is agreed that time is of the essence of this Agreement. 3.02 Closing under this Agreement shall occur on the first business day of the month after the Transferor Members have given to the BRI Partnership 60 days prior notice (the "Substantial Completion Date Notice") of the occurrence of the last to occur of (a) the substantial completion of construction of the Property excluding punch-list items not affecting occupancy (provided Transferor Members shall thereafter complete all punch-list items at no expense to the BRI Partnership within 30 days after Closing or within such additional time as may be reasonably required) ("Completion Date") as evidenced by satisfaction of each of the following conditions (the "Closing Conditions"): (i) final certificates of occupancy issued by the appropriate governmental authority, and (ii) a certificate of substantial completion issued by Questar Builders, Inc. or such affiliate of Transferor Members as Transferor Members may designate to be the general contractor for construction of the Improvements ("Questar Builders") certifying that the Improvements have been substantially completed in accordance with the Plans and Specifications and all Codes, as such may be modified from time to time by the Transferor Company in accordance with this Agreement, or (b) the Stabilization Date. If a dispute shall exist as to whether substantial completion has occurred, the dispute shall be promptly submitted to binding arbitration by a qualified third party mutually acceptable to the parties or, if they are unable to agree upon a third party, then by arbitrators appointed pursuant to the applicable rules of the American Arbitration Association. -13- 3.03 The Stabilization Date for the Property shall be as follows: The first day of that month which first occurs after 90% of the apartment units in the Property have been leased for a period of 3 months to Qualified Tenants at average rents not less than 95% of the pro-forma rents shown on Schedule 3.03; provided, however, that the value of the Property, calculated by dividing Stabilized NOI (using monthly actual income for the month preceding the date of Closing) divided by 8.75% is not less than the Base Consideration. 3.04 "Qualified Tenants" are those tenants with annual income equal to not less than 3 times the annual rent who are in occupancy and have commenced the payment of rent. SECTION 4 --------- TRANSFEROR'S PRE-CLOSING DELIVERIES ----------------------------------- At least thirty (30) days prior to the date of Closing, the Transferor Company shall deliver or otherwise make 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 Company shall provide the BRI Partnership with access on-site to the originals of all Leases and related lease files. 4.02 Certificates of Occupancy and Permits. Original, final certificates of occupancy for all buildings in the Property and 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. 4.03 Taxes. To the extent in the Transferor Company'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. A set of original Plans and Specifications, and a copy of all guaranties and warranties made by any person for the benefit of the Transferor Company 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 each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing, and detailed operating statements -14- for each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing; provided that all such statements and records shall be provided only for periods after the Property was first leased and occupied by rent paying tenants. 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). 4.07 Current Rent Roll. The "Rent Roll" which consists of 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, in the form attached hereto as Schedule D. 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). 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 Company 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 Company which shall be attached hereto as Schedule B. SECTION 5 --------- A. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR COMPANY ------------------------- The Transferor Company represents, warrants and covenants to the BRI Partnership, as of the date hereof, as follows: 5.01 Organization and Standing of the Transferor Company. The Transferor Company is a limited liability company duly organized, validly existing and in good standing under the -15- laws of the State of Maryland. The Transferor Company 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 Company 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 Company's business (a "Material Adverse Effect"). 5.02 Compliance with Other Instruments, etc. Except as set forth in Section 5.05 hereof, the Transferor Company is not in violation of any term contained in the Transferor Operating Agreement, or to the Transferor Company's knowledge in any other material instrument or contract to which the Transferor Company is a party relating to the Property, and to the Transferor Company's knowledge the Transferor Company 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 Members, nor the contribution of the Transferor Membership Interests by the Transferor Members hereunder, will result in any Material Adverse Effect or be in conflict with or constitute a default under the Transferor Operating Agreement or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Transferor Company, except for Permitted Exceptions. 5.03 Governmental Consent, etc. Except for filing the Amended Transferor Company Articles to reflect the transactions contemplated hereby, 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 Members or the Transferor Company in connection with the valid execution and delivery of this Agreement by the Transferor Members and the performance of the Transferor Members' obligations hereunder. 5.04 Company Capitalization. The Transferor Operating Agreement (i) is the only agreement among the members relating to the organization, operation, or management of the Transferor Company, (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 and residence addresses of all of the Transferor Members of the Transferor Company, and the Transferor Members' respective membership interests in the Transferor Company. Except as set forth on Exhibit I, no other person or party owns any membership interest in the Transferor Company. No Transferor Member is in default with respect to any capital contribution required to be paid by him or it pursuant to the Transferor Operating Agreement. A true, correct and complete copy of the Transferor Operating Agreement is attached hereto as Exhibit II. The Transferor Company has no commitment to issue any right to purchase or acquire or to issue or distribute to any of the Transferor Members, any evidences of indebtedness or assets; and the Transferor Company has no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire any interest in the Transferor Company 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 Company's knowledge, proceeding or investigation pending or, to the -16- Transferor Company's knowledge, any threat thereof, against the Transferor Members, the Transferor Company or the Property or any part thereof which questions the validity of this Agreement or the right of the Transferor Members 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 Company as such is presently contemplated; or (ii) the rights represented by the Transferor Membership Interests. During the period commencing on the date hereof and ending on the Closing Date, the Transferor Company will promptly inform the BRI Partnership in writing of any material action, suit, proceeding or investigation pending, or to the Transferor Company's knowledge, threat thereof against the Transferor Members, the Transferor Company 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 Company is a party or to which any agent of the Transferor Company is a party on behalf of the Transferor Company or has entered into on behalf of the Transferor Company, relating to the Transferor Company 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 (collectively "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 Company. Except as noted on Schedule E, each Service Contract is cancelable on thirty (30) days notice. Transferor Company has no knowledge of any material breach or material default under any Service Contract. As of Closing, the Transferor Company 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 financial statements of the Transferor Company, including balance sheets, statements of operations and statements of partners' capital (collectively, the "Financial Statements") for the fiscal year ended December 31, 1996 (the "Statement Date"). The Financial Statements fairly present the financial condition of the Transferor Company as of the Statement Date in accordance with generally accepted accounting principles consistently applied, and reflect all liabilities, fixed, contingent or otherwise, required to be disclosed in such Financial Statements in accordance with generally accepted accounting principles. 5.08 Title to Properties and Assets. The Transferor Company is the sole owner of the Property. Except as disclosed in Section 18.01, the Transferor Company 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 Company or to be obtained by the Transferor Company prior to Closing, no other material license, permit or authorization is necessary to own and operate the Transferor Company's business as such is presently conducted and neither the conduct of the -17- Transferor Company'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 indebtedness for borrowed money incurred or to be incurred to acquire and construct the Property (collectively, the "Construction Loan"), the Transferor Company has no indebtedness for borrowed money and the Transferor Company has not, directly or indirectly, created, incurred, assumed or guaranteed or otherwise become directly or indirectly liable for the payment of any borrowed money. No Transferor Member, nor any affiliate of any Transferor Member nor any employee of the Transferor Company is presently indebted to the Transferor Company for borrowed money and, except for the Construction Loan, the Transferor Company is not presently indebted for borrowed money to any of the foregoing persons. As of the Closing Date, the Transferor Company 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 Company's business which are either (i) in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership in writing; and (b) liabilities resulting from or incurred in the ordinary course of business arising under the Service Contracts. The Transferor Company has conducted its business only in the ordinary course and, except for the Construction Loan, the Transferor Company 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 Company (the "Insurance Policies") and a list of all presently outstanding claims thereunder. The Transferor Company has done nothing to reduce or impair the insurance afforded by the Insurance Policies. To the Transferor 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. 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 Company or for which the Transferor 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 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 Company. All taxes due with respect to completed and settled examinations or concluded litigation have been paid. -18- (b) The Transferor 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) The Transferor Company does not know of (A) any audit or investigation of the Transferor Company with respect to any liability for taxes relating to the Transferor Company for which any Transferor Member may be liable, or (B) any threatened claims or assessments for taxes against or relating to the Transferor Company. 5.13 Employees. The Transferor Company 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 Company 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 those given to the holder of the Construction Loan, as provided in the Construction Loan Documents, no person holds a power of attorney from or agency agreement with the Transferor Company. 5.16 Bank Accounts. On or before Closing, the Transferor Company shall have closed every bank account and safe deposit box of the Transferor Company for which the Transferor Members or their representatives are signatories, and no representative of the Transferor Members shall be a signatory on any other account or safe deposit box of the Transferor Company or shall have the power to borrow, discount debt obligations, cash or draw checks, or otherwise act on behalf of the Transferor Company in any dealings with any banks or other financial institutions. 5.17 Ownership. The Transferor Company has not received any written notice challenging the validity of the Transferor Company's title to the Property. The Transferor Company 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 Stabilization Date, there shall be 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, to be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and correct in all material respects as of the Stabilization Date. Except as otherwise specifically set forth in the Rent Roll or elsewhere in this Agreement: -19- (a) to the Transferor Company'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 Company; (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 Company, except as set forth on Schedule 5.18 hereof, no action or proceeding instituted against the Transferor Company 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, except as provided in (c) above. 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 Company, no apartment unit is subject to any rent control law, ordinance or regulation. 5.20 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 Company or any of the Transferor Members' affiliates, with respect to the Property (collectively, the "Environmental Reports"). The Transferor Company 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 1.05 hereof (the "BRI Environmental Reports"), the Transferor Company has not received any written notice from any -20- 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 Company has any material liability with respect thereto. To the Transferor Company'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 Company's knowledge, except as disclosed in the Environmental Reports or in the BRI Environmental Reports, neither the Transferor Company 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. s. 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. s. 9601 et seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49 U.S.C. s. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. s. 2601 et seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the Clean Water Act (33 U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. s. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C. s. 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. 5.21 Permits and Compliance with Laws. Upon completion of construction of the Improvements, all approvals, consents, permits, licenses or certificates of occupancy (whether governmental or otherwise) required for the use, operation and occupancy of the Property shall have been granted to the Transferor Company and shall be in full force and effect, and any fees and charges shall have been fully paid. Upon completion of construction of the Improvements, the Property shall be in compliance in all material respects with all zoning, building, health, traffic, fire safety, flood control, handicap and other laws, regulations and ordinances of all governmental authorities having jurisdiction over the Property (collectively "Codes"). To the Transferor Members' knowledge, no 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 as would not have a Material Adverse Effect. The parties agree that all matters relating to compliance with Environmental Laws shall be covered by Section 5.20 and not by this Section 5.21. 5.22 Utilities. Upon completion of construction of the Improvements, all utilities and all public and quasi-public improvements upon or adjacent to the Property (including, without -21- limitation, all applicable electric lines, sewer and water lines, and telephone lines) shall be installed, and shall comply in all material respects with the requirements of the Plans and Specifications and all applicable Codes, and all necessary easements, permits, licenses and agreements in respect of any of the foregoing shall be installed and operating and all installation and connection charges, to the extent due and payable, shall have been paid for in full. 5.23 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 Company, 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. 5.24 Pre-Closing Deliveries Accurate. All of the materials to be delivered by the Transferor Company to the BRI Partnership pursuant to Section 4 or attached hereto as Schedules or Exhibits when delivered, will be true, accurate and complete in all material respects. 5.25 Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other similar proceedings are pending or, to the Transferor Company's knowledge, threatened against the Transferor Company, nor are any of such proceedings, against or by the Transferor Company, anticipated or contemplated by the Transferor Company. 5.26 Liens. The Transferor Company agrees to keep the Property free from mechanics and materialmen's liens or other liens or encumbrances occasioned by the actions of the Transferor Company or its contractors or subcontractors and agrees to indemnify and save BRI Partnership harmless from any such liens or encumbrances and all attorneys' fees and other costs and expenses incurred by reason thereof. 5.27 Essential Facilities. Except as set forth in Schedule 5.27, 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 5.27, no property not included in the Property relies for its operation, maintenance or legal compliance on any facilities located on the Property. 5.28 Legal Access. There is, or prior to Closing will be, direct legal access from a public way to the Property. Upon completion of construction of the Improvements, all necessary curb cuts, access permits and other governmental approvals required to provide such access shall have been issued and shall be in full force and effect. -22- 5.29 Public Improvements. To the best knowledge of the Transferor Company and except as shown on the Plans and Specifications, 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 that would have a Material Adverse Effect. To the best knowledge of the Transferor Company, there are no presently planned public improvements which would result in the creation of a special improvement or similar lien upon the Property. 5.30 Condition of Improvements. The Property, including, without limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical, HVAC systems and equipment, plumbing, drainage and heating systems and other mechanical systems, shall at the time of Closing be in good order and operating condition, subject to normal wear and tear, and will be constructed substantially in accordance with (i) the Plans and Specifications, (ii) all applicable Codes, permits, approvals, title encumbrances and insurance requirements and (iii) accepted standards of good materials and workmanship. As of the time of Closing, there will be no physical or mechanical defects having a Material Adverse Effect on the use or marketability of the Property and no condition which impairs or could impair, the structure of the Property or renders it in noncompliance with the requirements of this Agreement. No fire or other casualty shall have occurred on any of the Property, the damage related to which has not been repaired or restored to the condition the Property was in prior to such fire or other casualty. B. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR MEMBERS ------------------------- Each of the Transferor Members on behalf of itself, severally and not jointly, represents and warrants to the BRI Partnership, as of the date hereof, as follows: 5.31 Authorization. Such Transferor Member 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 Members Closing Documents (as defined in Section 10.01 hereof) required to be executed and delivered by such Transferor Member under this Agreement, each in accordance with their respective terms, and on the Closing Date the Transferor Members Closing Documents will constitute valid and binding obligations, enforceable against such Transferor Member in accordance with their respective terms. 5.32 Additional Authorization. No approval of any person not a party to this Agreement is necessary for the contribution by such Transferor Member of the Transferor Membership Interests held by such Transferor Member and the performance of such Transferor Member's obligations under this Agreement. 5.33 Membership Interest. Except as provided in this Agreement and the Transferor Operating Agreement, no right (contingent or otherwise) to purchase or acquire the Transferor Membership Interests held by such Transferor Member is authorized or outstanding. Except as -23- disclosed on Schedule 5.33, such Transferor Member owns and holds the Transferor Membership 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 5.33 will be paid in full. Upon the Closing, good, valid, marketable, and indefeasible title to such Transferor Membership 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 5.33 shall survive the Closing indefinitely. 5.34 Investment Representations and Warranties. Each Transferor Member for itself, severally and not jointly, represents, warrants, acknowledges and agrees as follows: (a) Such Transferor Member 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 Member understands that the BRI Partnership Units to be issued to each Transferor Member 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 Member. (c) Such Transferor Member acknowledges and agrees that, for the reasons set forth in Sections 5.34(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 Member 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 Member 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 Member acknowledges, represents and agrees that -24- (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 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, 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 Member 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 Member is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Act. (e) Such Transferor Member understands that an investment in the BRI Partnership and BRI involves substantial risks. Such Transferor Member 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 Member 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: -25- "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) 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 Member's principal residence or principal place of business, and such Transferor Member 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 5.34 shall survive the Closing indefinitely. 5.35 Receipt of Documents. Such Transferor Member 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 Members 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 Members 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 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. -26- 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 Company 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 ended adjustments). 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. -27- 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 Members 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. (d) The BRI Partnership has previously delivered to the Transferor Company 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, did not contain an untrue statement of material fact or omit to state a material fact required to be stated -28- 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 Members, 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 Company 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. 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. -29- 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. SECTION 7 --------- INSURANCE AND CASUALTY ---------------------- 7.01 Maintenance of Insurance. Until the Closing Date, the Transferor Company shall 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 Members 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 and are not restored by the Transferor Company prior to the Time of Closing, 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 Members 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 -30- termination; or (b) proceed with the contribution and transfer of the Transferor Membership Interests, and in such case, unless the Transferor Members shall have previously restored the Property to its condition prior to the occurrence of any such damage or destruction, the Transferor Members shall pay over or assign to the BRI Partnership, on behalf of the Transferor Company, 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 such damage or destruction shall occur and be restored by the Transferor Company prior to the Time of Closing, 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 Membership Interests in accordance with the provisions of clause (b) above. 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 be removed or complied with by the Transferor Company, at the expense of the Transferor Company, prior to the Closing Date. SECTION 9 --------- OBLIGATIONS PRIOR TO CLOSING ---------------------------- The Transferor Company covenants that between the date of this Agreement and the Closing Date: 9.01 Condition of Units. Up to the Time of Closing, all apartment units on the Property which become vacant shall, if necessary, be repaired or otherwise maintained in accordance with the Transferor Company's usual and customary practice without regard to the Closing contemplated by this Agreement. 9.02 Service Contracts. The Transferor Company shall not 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. -31- 9.03 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. 9.04 Tax Procedure. Except as to real property tax assessment appeal proceedings now or hereafter filed by the Transferor Company to reduce real property tax assessments, the Transferor Company 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 Members 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 Members, in either case after deducting the expenses of collection thereof, which obligation shall survive the Closing. 9.05 Property Operating and Maintenance. The Transferor Company shall lease, manage, maintain and operate the Improvements in the ordinary course of business. Without limiting the generality of the foregoing, the Transferor Company shall perform all ordinary maintenance and repair of the mechanical, electrical and plumbing facilities and equipment within the Improvements so as to keep such facilities in good operating condition and repair, taking into account ordinary wear and tear; and to the extent any such facilities or equipment have heretofore been serviced under a Service Contract, the Transferor Company shall keep such Service Contracts in full force and effect up to Closing. For purposes hereof, the parties agree that the Transferor Company has retained or will retain the BRI Partnership or its affiliate (the "Management Company") as the manager for the Property pursuant to the Management Agreement attached hereto as Exhibit 7. The parties agree that the Management Agreement shall remain in effect until the expiration of the Earn Out Period and, until then, may not be modified, amended or terminated without the consent of both parties. Notwithstanding that the BRI Partnership is or will become the owner of the Management Company, until the expiration of the Earn Out Period, the Transferor Members shall have control over the activities of the Management Company and its personnel (including both on-site and managerial) with respect to the Property, including but not limited to, appointment, hiring, firing, supervision and compensation (both base and incentive, of personnel, operation, marketing, promotions and advertising, hours of operation and all other decisions as to the Property and its leasing and management; provided that such control shall be exercised in a commercially reasonable manner as compared with comparable properties in comparable locations. To facilitate this continued control, BRI Partnership agrees that Patrick Connelly, currently a vice president of The Questar Management Company, shall remain employed by the Management Company until the expiration of the Earn Out Period, his principal place of employment shall remain at the principal regional office of the Transferor Company and he shall devote such efforts to the Property as the Transferor Members shall require. Notwithstanding the foregoing, if the employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then the Transferor Members at their -32- option, may elect (a) to terminate the management agreement with BRI Partnership and either manage, lease and operate the Property on their own behalf or retain such other persons or entities to do so as they deem appropriate on substantially the same terms (including, but not limited to, the same management fee) as are provided in the management agreement with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their full-time employee. 9.06 Lease Amendments. The Transferor Company shall not amend, alter, modify or vary the terms and provisions of any of Leases except in the ordinary course of business, without first obtaining the written consent of the BRI Partnership, which consent shall not be unreasonably withheld or delayed. 9.07 New Leases. From and after the date hereof, the Transferor Company shall not make, execute nor permit any new Lease for any apartment in the Property without first obtaining the written consent of the BRI Partnership, unless such Lease (i) is on the form lease provided to the BRI Partnership, and (ii) is with a Qualified Tenant. 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 Company shall not cause, acquiesce in, or agree to: (a) a material amendment, modification, termination or cancellation of the Transferor Operating Agreement without the prior written consent of the BRI Partnership, which shall not be unreasonably withheld or delayed, provided that such amendment modification, termination or cancellation does not adversely affect the BRI Partnership's rights under this Agreement; (b) any willful action by the Transferor Company which would render any of 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; and, except with the prior written consent of the BRI Partnership, the Transferor Company shall not cause, acquiesce in or agree to any action allowing the Transferor Company taking or agreeing to take any of the following actions: (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, enter into any contract, transaction or agreement which shall survive the Closing (except as permitted by Section 9.02); or -33- (e) enter into any agreement, transaction or arrangement with any affiliate that will survive the Closing; or (f) subject any portion of the Property to any option contract or sales contract. 9.09 Conduct of Business. Except with the prior written consent of BRI Partnership, on and after the date hereof the Transferor Company shall conduct its business only in the ordinary course 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, 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 Company in connection with the use and ownership of the Property up to the date of Closing. 9.10 Access to Information. Upon reasonable notice and during regular business hours, the Transferor Company will give the BRI Partnership and their attorneys, accountants, and other representatives reasonable access to Transferor Company's personnel and all properties, documents, contracts, books, and records of the Transferor Company, relating to the consummation of the transactions contemplated hereunder and will furnish the BRI Partnership with copies of such documents (certified by the Transferor Company if so requested) and with such information with respect to the affairs of the Transferor Company as the BRI Partnership may from time to time reasonably request. -34- SECTION 10 ---------- TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND ------------------------------------------- POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY --------------------------------------------------- 10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the Transferor Members shall deliver the following to the BRI Partnership (the "Transferor Members Closing Documents"): (a) Assignment of Transferor Membership Interests. An assignment of the Transferor Membership Interests from each of the respective Transferor Members to the BRI Partnership in the form of the Transferor Assignment attached hereto as Exhibit III, duly executed and delivered by each of the Transferor Members, which shall transfer the Transferor Membership Interests to the BRI Partnership free and clear of any lien, pledge, restriction, encumbrance or other claim by any third party. (b) UCC Search - Transferor Members. A Uniform Commercial Code lien search for each of the Transferor Members, indicating that the membership interest of each Transferor Partner in the Transferor Company is unencumbered by any security interest therein and the cost of which shall be paid by BRI Partnership. (c) Amended Transferor Operating Agreement and Articles. The Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended and Restated Transferor Company Articles in the form of Exhibit V hereto duly executed and delivered by the Transferor Members, pursuant to which the Transferor Members shall withdraw as members from the Transferor Company. (d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to the effect that the Transferor Company has been duly formed in accordance with Maryland law and is validly existing and in good standing under such laws, that the Transferor Members are all of the members of the Transferor Company, 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 Members. (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 Members and a BRI Questionnaire, in the form of Exhibit 5 attached hereto, duly executed by each of the Transferor Members. -35- (f) Occupancy Permit. Final Certificates of Occupancy 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, 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 Company. 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 Company 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 and Licenses. An as-built set of original Plans and Specifications together with original copies (or photocopies if original copies are unavailable to the Transferor Company) of all current site plans, surveys, 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 Company shall also deliver: 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 Member 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 Company'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 Members, advising the tenants under the Leases of the transfer of ownership of the Transferor Company 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 Members to the effect that, to its knowledge, all of the representations and warranties of the Transferor Company set forth in this Agreement remain true and correct as of the Closing Date. -36- (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 Company. (n) Non-Foreign Affidavit. The Transferor Members 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 Members with the Foreign Investment and Real Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended. (o) Construction Contract Retentions. Final mechanics' lien waivers from the general contractor and subcontractors covering at least 95% of the construction cost, together with an amount equal to 125% of all unpaid retentions and disputed amounts under the Construction Contract, which amount shall be placed in an escrow account with the Escrow Agent to be released on a monthly basis to pay amounts coming due under the Construction Contract to the general contractor, all subcontractors and material suppliers; provided that any request for payment shall be accompanied by all documentation required as a prerequisite to payment under the Construction Contract, including lien waivers, and further provided that payment of any retention shall be subject to receipt of final lien waivers and acknowledgments of payment in full executed by the general contractors, all subcontractors and material suppliers. In any event, the Transferor Members shall remain liable for payment of all such unpaid retentions and disputed amounts to the extent not covered by the escrow, which obligation shall survive Closing. (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 Company 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 by the BRI Partnership. (q) Certificate of Completion. The original certificate of substantial completion required under Section 3.02. (r) Questar Builders Warranty. An original one year construction warranty for the Improvements to be provided by Questar Builders, Inc., which construction warranty shall be identical to that required under the standard AIA Construction Contract substantially in the form of Exhibit X hereto. (s) Warranties and Guarantees. Originals of all warranties and guarantees provided by subcontractors and material suppliers for the Improvements. -37- (t) Other Documents. Such other documents, instruments or agreements which the Transferor Members 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 Membership Interests. The provisions of this Section 10.01(t) shall survive the Closing indefinitely. 10.02 The Transferor Members' Expenses. The Transferor Members shall pay all of the fees and expenses of their own separate legal, tax or other advisors. 10.03 Accuracy of Representations and Warranties. Each Transferor Member agrees that such Transferor Member will notify the Transferor Company in writing on or prior to the Closing Date if any of the representations and warranties of such Transferor Member cease to be true and correct on and as of the Closing Date. Each Transferor Member further agrees that, subject to Section 10.05(g), if no such notice is given to the Transferor Company, the representations and warranties of such Transferor Member shall be deemed to be true and correct on and as of the Closing Date and that the BRI Partnership and the Transferor Company shall be entitled to rely on the agreements contained in this Section 10.03. 10.04 Post-Closing Restrictions on the Transferor Members. In order to induce the BRI Partnership to enter into this Agreement, each Transferor Member, hereby agrees that until the tenth (10th) day following the first anniversary of the Closing: (a) each Transferor Member 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 Member 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 given to the BRI Partnership pursuant to the Pledge Agreement (described on Schedule K), no Transferor Member 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 10.04 shall survive the Closing indefinitely. 10.05 Indemnification. (a) The Transferor Members' Indemnity. In the event the parties proceed to Closing, each Transferor Member agrees, severally and not jointly, to indemnify and hold the -38- 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 Company set forth in Section 5A or of such Transferor Member set forth in Section 5B or (B) resulting from any breach or default by the Transferor Company or such Transferor Member of any obligation of the Transferor Company or such Transferor Member under this Agreement or (ii) from liabilities for borrowed money incurred by the Transferor Company or the Property prior to the Closing; provided that no Transferor Member 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 Member as of the date such indemnification obligation is satisfied (except for indemnification obligations with respect to representations of each of the Transferor Members in Section 5.33, 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 Member) (collectively, the "Cap"); and provided further that to the extent any of the Transferor Members have any indemnification obligation to the BRI Partnership, the Transferor Members may elect to satisfy such indemnification obligation by directing the BRI Partnership to cancel such amount of BRI Partnership Units acquired by such Transferor Member pursuant to this Agreement having a fair market value (measured at the time such BRI Partnership Units are returned or canceled) equal to the indemnification obligation of such Transferor Member. (b) The BRI Partnership's Indemnity. In the event the parties proceed to Closing, the BRI Partnership agrees to indemnify and hold the Transferor Members harmless against and with respect to (i) any loss or damage (including reasonable attorney's fees) to the Transferor Members, 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 Company or the Property after the Closing (except for such liabilities resulting from a breach or default by the Transferor Members or the Transferor Company 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 Member under this 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 Member (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 Member). (c) The indemnification obligations of the Transfer Members 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. (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. -39- (e) Neither the BRI Partnership nor any of the Transferor Members 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 Members 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 Company or the Property. (g) Each of the Transferor Members, the Transferor Company 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 Company 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 Members 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 Company with respect to all tax years or periods ending on or prior to the Closing Date. The Transferor Members shall prepare and timely file the terminating tax returns for the Transferor Company 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 Members 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 Members in obtaining such data and information regarding the Transferor Company to permit the Transferor Members to prepare such returns or to respond to any audits or assessments for the periods covered by such returns. SECTION 11 ---------- BRI PARTNERSHIP'S CLOSING OBLIGATIONS ------------------------------------- AND POST-CLOSING AGREEMENTS --------------------------- 11.01 Closing Deliveries and Agreements. At the Closing, the BRI Partnership shall: -40- (a) Transfer of Consideration; Execution and Delivery of BRI Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver to the Transferor Members (i) the Base Consideration and, if applicable, the Additional Consideration Installments, 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 Operating Agreement and Amended Transferor Company Articles. Deliver to the Transferor Members (i) the Transferor Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended Transferor Company Articles 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 Company. (c) Record Amended Transferor Company Articles. Cause the Amended Transferor Company Articles to be filed with all appropriate state and, if applicable, local filing offices. (d) Opinion. An opinion of counsel satisfactory to the Transferor Members 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 Members 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 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 Members 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. -41- (g) BRI Partnership Agreement. Deliver to the Transferor Members 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 Members pursuant to any other provisions of this Agreement or which the Transferor Members 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 Members title to the BRI Partnership Units. The provisions of this Section 11.01(h) shall survive the Closing indefinitely. 11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC search costs and (v) all other Closing costs. 11.03 Post-Closing Agreements of the BRI Partnership. (a) The BRI Partnership hereby grants the Transferor Members, in their capacity as a limited partner of the BRI Partnership and so long as the Transferor Company has not dissolved, terminated or liquidated, the right to receive the Transferor Membership Interests as a distribution in kind in satisfaction of the Transferor Members' distribution rights under Section 8.2 of the BRI Partnership Agreement. If the Transferor Membership 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 Members. (b) Until the expiration of the period (the "No Transfer Period") ending on the earlier of (I) such time as all of the Transferor Members have redeemed all of the BRI Partnership Units received by the Transferor Members 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 Membership 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 (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; and (iv) voluntary transfers arising in connection with any financing or refinancing of the Property, which shall include, without limitation, a mortgage, deed of trust, or any other related financing liens or security interests, the parties affirmatively acknowledging that there shall be no restriction on the financing or refinancing of the Property by the BRI Partnership. -42- (c) 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 paid in cash at Closing by the party owing such amount to the other party unless the Transferor Members have made an election to receive BRI Partnership Units, in which event such proration 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) charges or prepayments under transferable Service Contracts; and (d) 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 Members and the BRI Partnership shall prepare and exchange preliminary calculations of all adjustments and prorations to be made pursuant to this Section 12. The Transferor Members and the BRI Partnership shall cooperate in the furnishing of all information and documentation necessary to prepare such calculations. If the Transferor Members have elected to receive BRI Partnership Units pursuant to Section 2.02, then prior to Closing, the Transferor Members shall deliver to the BRI -43- 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 Member, and (ii) the number of BRI Partnership Units to be received by each Transferor Member. 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 Members and the Transferor Members hereby release the BRI Partnership from any such obligation or liability. Subject to Section 12.04, all cash (including any escrow deposits) shall be used by the Transferor Company to pay amounts payable by the Transferor Company and/or distributed to the Transferor Members prior to Closing, and if any of such cash applicable to preclosing periods is not removed from the Transferor Company prior to Closing, the BRI Partnership shall hold such cash as agent for the Transferor Members and refund such cash to the Transferor Members subsequent to Closing. 12.02 Application of Rent Payments. If any tenant is in arrears in the payment of rent on the Closing Date, the Transferor Company shall distribute the right to receive such rent to the Transferor Members immediately prior to Closing. The BRI Partnership shall act as agent for the Transferor Members in collecting such rents. 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 Company 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 Members 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 Company 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 Members owe an amount to the BRI Partnership, the Transferor Members shall have the right to elect to adjust for such amounts owing by the Transferor Members to the BRI Partnership in the form of BRI Partnership Units rather than -44- 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 Members, such amount shall be paid in the form of BRI Partnership Units rather than cash, if the Transferor Members have elected under Section 2.02 to receive BRI Partnership Units. The Transferor Members shall notify the BRI Partnership at least seven (7) business days prior to the Closing Date of the manner in which the Transferor Members shall have elected to settle adjustments under this Section 12. SECTION 13 ---------- FAILURE TO PERFORM ------------------ 13.01 Defective Title or Condition. If the Transferor Members are unable to give title or to contribute and transfer the Transferor Membership 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 Membership Interests or the Property does not conform with the provisions hereof, the BRI Partnership may elect by written notice given to the Transferor Members 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 Members can deliver to the Transferor Membership Interests and the Property in its then condition and to deliver in exchange therefor the Consideration Amount then required to be paid subject to reduction of the Consideration Amount by the amounts required to remove all Monetary Liens. 13.03 Transferor Default. If the Transferor Company or any of the Transferor Members default in the performance of their obligations under this Agreement, or if any representation or warranty of the Transferor Company or the Transferor Members is false or misleading (a "Transferor Default"), the BRI Partnership shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. By their execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby guarantee the performance by the Transferor Company of all of its obligations hereunder and, as part of such guaranty, shall be jointly and severally liable with the Transferor Company of the payment of all damages to which BRI Partnership may be entitled. 13.04 The BRI Partnership's Default. If the BRI Partnership defaults in performing any of its obligations hereunder, then the Transferor Members shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. SECTION 14 ---------- -45- BROKERAGE FEES -------------- 14.01 Brokerage Fees. The Transferor Company 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 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 QPI and the Related Entities in accordance with the provisions of the Related Agreements. 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 Company have any obligation to pay any commission to APC. 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 to such address as the Transferor Members 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 Members c/o Questar Properties, Inc. 124 Slade Avenue, Suite 200 Baltimore, MD 21208 Attn: Mr. Stephen M. Gorn Telecopier No. 410-486-7692 -46- 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. SECTION 16 ---------- LIMITATIONS ON SURVIVAL ----------------------- 16.01 Survival. The representations, warranties, covenants and other obligations set forth in Sections 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05 and the covenant and agreements of the BRI Partnership contained in Sections 2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing indefinitely and an action based thereon may be brought at any time after the Closing Date. The representations, warranties, covenants and other obligations of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04, 10.05, 12 and 14 and the representations and warranties, covenants and other obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 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 Members or the BRI Partnership set forth in this Agreement shall survive the Closing, and no action based thereon shall be commenced after Closing. 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. 16.02 Merger. The delivery of the Transferor Assignments and Amended Transferor Operating Agreement by the Transferor Members (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 Members, shall be deemed the full performance and discharge of every obligation to be performed by the parties hereunder and the -47- 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 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 Members and the Transferor Company shall have performed or complied with, in all material respects, all of their respective covenants, agreements and obligations under this Agreement, (ii) the Transferor Members shall have delivered the Transferor Members Closing Documents and (iii) all of the representations and warranties of the Transferor Company and the Transferor Members set forth in this Agreement shall be true and correct, in all material respects, as of the Closing Date. (b) No Adverse Changes. After the date of notice of satisfaction of the Closing Conditions, there shall not have occurred any material adverse change in the financial condition, business, properties, assets or liabilities of the Transferor Company; (c) Consents. Any and all consents, authorizations and approvals necessary to be obtained before Closing shall have been obtained. (d) Title to Membership Interests. The Transferor Membership 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 Company 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) Construction. The Transferor Company shall have completed construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes all to the extent required under Sections 3.02 and 5.30, and, if such completion shall have occurred prior to the occurrence of the Stabilization Date, then, in addition to the foregoing, as of the Closing, the Improvements shall remain completed to the extent required under Sections 3.02 and 5.30 and shall be in -48- substantially the same condition (subject to the provisions of Section 7.02 and to any damage to the Improvements caused by tenants) as they were in at the time of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all identified construction deficiencies corrected. In the event that any condition set forth in Section 17.01(a) through Section 17.07(e) 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 Members 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. 17.02 Transferor Conditions. Without limiting any other conditions to Closing of the Transferor Members contained herein, the obligation of the Transferor Members 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 Members 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. After the date of any election by the Transferor Members to accept BRI Partnership Units, 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 Members 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 Members in writing, on or before the Closing Date, the Transferor Members 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. -49- 17.03 Related Agreements. Simultaneously herewith, the BRI Partnership has entered into with various parties (the "Related Entities") 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 Questar Investment Corporation 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, this Agreement shall terminate automatically simultaneously with the termination of any such Related Agreement 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 provisions of this Section 17.03 shall be of no further force or effect once closing occurs under any one or more of the Related Agreements. SECTION 18 ---------- MISCELLANEOUS PROVISIONS ------------------------ 18.01. Assignment. Except as hereinafter provided, this Agreement may not be assigned prior to Closing by either party hereto. The BRI Partnership shall have the right to designate an entity affiliated with the BRI Partnership to accept title to some of the Membership Interests, but the BRI Partnership shall remain fully liable for the performance of all of its obligations hereunder. The Transferor Members and the Transferor Company shall have the right to collaterally assign their interests under this Agreement to a construction lender providing construction financing for the Improvements (the "Lender"). This Agreement shall be automatically subject and subordinate to the mortgage, deed of trust and all other loan documents now or hereafter entered into evidencing the loan and security of the Lender. If the Transferor Members and Transferor Company so assign this Agreement, then the the BRI Partnership agrees to enter into an agreement with the Lender (the "Tri Party Agreement") providing that: (a) the BRI Partnership agrees to provide the Lender with reasonable notice and opportunity to cure any default by the Transferor Members or the Transferor Company hereunder; (b) the BRI Partnership agrees not to modify or amend this Agreement without the prior written consent of Lender, (c) the BRI Partnership, at the written request of Lender upon a default under the loan, will pay the Base Consideration or such lesser amount as is required to satisfy the loan directly to Lender provided that all of the conditions to Closing provided herein have been satisfied; (d) the Lender agrees to recognize the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will permit Lender to perform any obligations of the Transferor Company and Transferor Members hereunder and will agree to recognize Lender as the Transferor Company and the Transferor Members hereunder should Lender succeed to the interest of the Transferor Company and Transferor Members, provided, however, that, in such event, Lender's liability -50- under this Agreement shall be limited to its interest in the Transferor Company and the Property; and further provided that (f) the BRI Partnership will have no liability for payment of the Lender's loan or the performance of any obligations under any of the loan documents other than the Tri-Party Agreement; and (g) the amount to be paid to Lender shall be payable in cash only and not in BRI Partnership Units and shall be limited to the amount provided in clause (c). 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 Members, Transferor Company 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 hereto and their respective successors and permitted assigns. In no event shall the Transferor Members have the right to assign or transfer their 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 Members and the BRI Partnership. The delivery by the BRI Partnership to the Transferor Members 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. -51- 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 Members 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 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. SECTION 19 ---------- ADDITIONAL PROVISIONS RELATING TO --------------------------------- THE TRANSFEROR MEMBERS ---------------------- 19.01 Transferor Allocation Schedule. Each Transferor Member acknowledges and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I is true, correct and complete in all respects as it relates to such Transferor Member. 19.02 Time of Effectiveness. The Transferor Members acknowledge and agree that this Agreement and the agreements attached as Exhibits hereto will not be binding and effective -52- unless and until all of the parties hereto and thereto have executed counterparts to such agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their respective hands and seals as of the day and year first above written. WITNESS: - ------------------------------ ---------------------------- Stephen M. Gorn - ------------------------------ ---------------------------- John B. Colvin - ------------------------------ ---------------------------- Morton Gorn - Transferor Members - BRI OP LIMITED PARTNERSHIP By: Berkshire Apartments, Inc. General Partner ____________________________ By: _________________________ Name: Title: - the BRI Partnership - -53- Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in accordance with the provisions of Section 13.03. - ------------------------------ -------------------------------- Stephen M. Gorn - ------------------------------ -------------------------------- John B. Colvin - the Guarantors- RECEIPT BY ESCROW AGENT The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by certified check to be held as the Deposit pursuant to this Agreement. WITNESS: LAWYERS TITLE INSURANCE CORPORATION ________________________ By: _______________________ Name: Title: Date: -54- List of Schedules Schedule A - Description of Land Schedule B - Personal Property Schedule C - List of Plans and Specifications Schedule D - Form of Rent Roll Schedule E - Service Contracts Schedule F - Financial Statements Schedule G - Insurance Schedule J - Environmental Reports Schedule K - Related Agreements Schedule 3.03 - Pro Forma Rents Schedule 5.05 - Litigation Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants Schedule 5.27 - Shared Facilities/Utilities Schedule 5.33 - Liens on Membership Interests 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 - Kickout Agreement Exhibit 7 - BRI Management Agreement Transferor Exhibits ------------------- Exhibit I - List of Transferor Members (with address and membership interest of each member) Exhibit II - Transferor Operating Agreement Exhibit III - Assignment of Transferor Membership Interests Exhibit IV - Amended and Restated Operating Agreement of Transferor Company Exhibit V - Amended and Restated Articles of Organization of Transferor Company Exhibit VI - Gap Indemnity Exhibit VII - Non-Imputation Affidavit Exhibit VIII - Title Affidavit Exhibit IX - Right of First Offer Agreement Exhibit X - AIA Construction Warranty -55- Schedule A - Property Description (Liriope) All of those lots of land located in Harford County, Maryland and more fully described as follows: BEING KNOWN AND DESIGNATED AS LOTS 2,4,9,10,11 AND 12, AS SHOWN ON THAT PLAT ENTITLED "FINAL PLAT, SECTION III, PHASE II, RIVERSIDE VILLAGE OF CHURCH CREEK", WHICH PLAT IS RECORDED AMONG THE PLAT RECORDS OF HARFORD COUNTY AT PLAT BOOK 77, FOLIO 39; AND BEING KNOWN AND DESIGNATED AS LOT 6, AS SHOWN ON THAT PLAT ENTITLED "REVISED FINAL PLAT, SECTION III, PHASE II, RIVERSIDE VILLAGE OF CHURCH CREEK", WHICH PLAT IS RECORDED AMONG THE PLAT RECORDS OF HARFORD COUNTY AT PLAT BOOK 87, FOLIO 19. Schedule 5.05 - Litigation -------------------------- (Liriope) The Riverside Community Association may assert that the Riverside Community Association covenants apply to the Property and that the owner of the Property is obligated to pay assessments to the Riverside Community Association. The title insurance policy of the Transferor Company does not contain an exception to title for Riverside Community Association covenants and the title insurance company has confirmed that these covenants do not apply to the Property. To date, no action has been taken by the Riverside Community Association to collect any assessment. Schedule 5.27 - Shared Facilities/Utilities (Liriope) 1. Recreational Facilities Agreement dated July 30, 1996 by and between Arborview Associates Limited Partnership, the owner of Arborview Apartments ("Arborview"), and Foxglove Associates L.L.C. relating to the use, by tenants of Liriope Apartments, of recreational facilities on property owned by Arborview, and the sharing of costs associated with these facilities. 2. Cross Easement Declaration dated October 14, 1992 and recorded in the Land Records of Baltimore County, Maryland in Liber 1875, folio 345, by Church Creek II Limited Partnership, for private roads and parking between Liriope Apartments and Arborview Condominiums, and the sharing of costs associated with these facilities. EX-10.28 7 MATERIAL CONTRACTS DEVELOPMENT CONTRIBUTION AGREEMENT (Granite Run) THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as of the 25th day of August, 1997, by and between the individuals and entities listed on Exhibit I attached hereto with an address c/o Questar Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen M. Gorn, individually, John B. Colvin, individually, 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. BACKGROUND WHEREAS, the Transferor Members are the legal and beneficial owners of all of the membership interests, as set forth on Exhibit I, Granite Run Associates, L.L.C., a Maryland limited liability company (the "Transferor Company") pursuant to the Operating Agreement dated as of December 18, 1996, as amended (a copy of which, including all amendments, is attached hereto as Exhibit II and is referred to as the "Transferor Operating 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 Company is the owner of the following: a. that certain tract or parcel of land located in Baltimore County, Maryland, more particularly described in Schedule A attached hereto (the "Land"); b. the 264-unit apartment complex, commonly known as Granite Run Apartments, which contains related improvements, facilities, amenities, structures, driveways, walkways, plumbing and heating pipes, culverts, and mains, all of which have been constructed, are under construction or are to be constructed on the Land (collectively, the "Improvements") pursuant to certain plans and specifications that have been approved by the Transferor Members and BRI Partnership, as modified by certain change orders, a complete listing of which (including the latest revision date and change orders) is attached hereto as Schedule C (the "Plans and Specifications"); c. all right, title and interest of the Transferor Company 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 Company 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 Company 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 Company 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 Company's interest in any intangible property now or hereafter, owned by the Transferor Company 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 and other current assets relating to periods prior to Closing and (ii) amounts, if any, due to the Transferor Members 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 Members desire to contribute all of the membership interests in the Transferor Company (collectively referred to as the "Transferor Membership Interests") to the BRI Partnership, and the BRI Partnership desires to admit the Transferor Members as limited partners in the BRI Partnership and to accept such contribution from the Transferor Members; and WHEREAS, in exchange for such contribution, the Transferor Members desire to, at their election, either receive cash or BRI Partnership Units (as hereinafter defined) 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 Members and the BRI Partnership hereby covenant and agree as follows: -2- SECTION 1 --------- CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE ------------------------------------------------------ 1.01 The Transferor Members shall contribute to the BRI Partnership, and the BRI Partnership shall accept from the Transferor Members, in exchange for either cash or BRI Partnership Units, and upon the terms and conditions set forth in this Agreement, all of the Transferor Members' membership interests in the Transferor Company (the "Transferor Membership Interests"). The percentage of interest that each of the Transferor Members owns in the Transferor Company is listed on Exhibit I. At the Closing (as defined in Section 3.01), the Transferor Members shall, respectively, contribute, assign, transfer and deliver the Transferor Membership Interests to the BRI Partnership, or its designees as provided in Section 18.01 hereof, by an Assignment and Assumption of Membership Interest in the form of Exhibit III attached hereto (the "Transferor Assignment"). Immediately thereafter, the Transferor Members and the BRI Partnership, or its designees, shall execute and deliver an Amended and Restated Operating Agreement in the form of Exhibit IV attached hereto (the "Amended Transferor Operating Agreement") and an Amended and Restated Articles of Organization in the form of Exhibit V attached hereto (the "Amended Transferor Company Articles") pursuant to which the BRI Partnership, or its designees, shall be admitted and the Transferor Members shall withdraw, as the members of the Transferor Company and be released of all liability thereunder, and the terms of the Transferor Company shall be amended in accordance with the Amended Transferor Operating Agreement. 1.02 Property Title. On or before September 22, 1997, the Transferor Members shall deliver to the BRI Partnership a copy of the Transferor Company's existing title insurance commitment or policy (the "Commitment") 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"). 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 Company on or before October 1, 1997 if any such exceptions are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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". Any easements or other agreements reasonably required for the development and construction of the Property and the Improvements now or hereafter entered into by the Transferor Company which are consistent with the Plans and Specifications and, in the reasonable discretion of the BRI Partnership, do not materially interfere with the intended use of the Property nor materially affect the value of the Property, shall also constitute Permitted Exceptions. -3- Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the "Title Insurer"). The Updated Commitment shall insure fee simple title to the Property in the sole name of the Transferor Company and shall be in the amount of $25,508,709. The Updated 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 and are available under the law of the state in which the Property is located. If any new exceptions to title appear in the Updated Commitment that do not constitute Permitted Exceptions and that are unacceptable to the BRI Partnership, in its reasonable discretion, the BRI Partnership may notify the Transferor Company within thirty (30) days after the Completion Date Notice. If any exceptions in the Commitment or the Updated Commitment are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable exceptions, at the option of the Transferor Company, to remove or cure such exceptions, provided further, the Transferor Company 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 liens for real estate taxes and current water and sewer charges for the fiscal year in which Closing occurs, 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 Company at Closing. The Transferor Company shall be deemed to have refused to cure any unacceptable exceptions unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable exceptions. If the Transferor Company 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 Company 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 Company or (ii) waive such exceptions and accept title subject thereto, in which event there shall be a reduction in the Purchase Price (as defined in Section 2.01(a)) in an amount necessary to enable the BRI Partnership to remove all Monetary Liens. 1.03 Survey. On or before September 22, 1997, the Transferor Company shall provide to the BRI Partnership a copy of its existing survey (the "Survey") of the Land and any Improvements.] -4- 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 Company on or before October 1, 1997 if any such survey matters are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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." Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at its sole cost and expense, shall obtain an updated survey (the "Updated Survey") by a registered land surveyor (the "Surveyor") acceptable to the BRI Partnership, which Updated 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 Updated Survey and the recorded legal description. The BRI Partnership shall provide a copy of the Updated Survey to the Transferor Company promptly after its receipt thereof. If any new matters appear on the Updated Survey that do not constitute Permitted Exceptions, do not simply reflect the construction of the Improvements in locations that do not encroach upon property lines, setback lines or easements, and are unacceptable to the BRI Partnership in its reasonable discretion, the BRI Partnership may notify the Transferor Company within forty (40) days after the Substantial Completion Date Notice. If any survey matters are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable survey matters, at the option of the Transferor Company, to cure such unacceptable survey matters. The Transferor Company shall be deemed to have refused to cure any unacceptable survey matters unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable survey matters. If the Transferor Company 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 Company 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 -5- Transferor Company or (ii) waive such survey matters and accept title subject thereto, in which event there shall be no reduction in the Consideration Amount. 1.04 Construction and Inspection. (a) Plans and Specifications. Prior to the date of this Agreement, Transferor Company has delivered to BRI Partnership true, correct and complete copies of the Plans and Specifications for the construction of the Improvements as set forth on Schedule C attached hereto. (b) Transferor Company to Construct Improvements. Transferor Company shall, at Transferor Company's expense, obtain all permits and construct the Improvements on the Land in accordance with the Plans and Specifications, as the same may be modified by change order in accordance with this Agreement. All work shall be done in a good and workmanlike manner using new, good quality materials, free of all defects and in compliance with all Codes (as defined in Section 5.21), permits, approvals, title restrictions and insurance requirements. Transferor Company shall obtain builder's risk insurance on the Improvements in the amount of the construction cost of those buildings from time to time for which construction has commenced. Transferor Company shall deliver a certificate of such insurance to BRI Partnership. Transferor Company shall maintain such insurance in force and effect through the course of construction and until Closing hereunder. (c) Inspection of Construction; Correction of Defects. BRI Partnership and its engineers, consultants and agents may inspect the construction of the Improvements from time to time during the course of construction upon reasonable notice to the Transferor Company. After receipt from the Transferor Company of written notice that the requirements of Section 3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI Partnership and its engineers, consultants and agents shall inspect the construction of the Improvements upon reasonable notice to Transferor Company to determine whether such construction is completed in accordance with the Plans and Specifications. Within 30 days after the Inspection Notice, BRI Partnership will give written notice to Transferor Company of any nonconformities with the Plans and Specifications and defects or deficiencies in construction identified by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership, which disagreement shall be expressed by giving written notice to the BRI Partnership stating the basis for said disagreements, within 10 days after such BRI Partnership notice, Transferor Company, at Transferor Company's expense, shall commence to correct, repair or replace any such nonconformities, defects or deficiencies and shall diligently continue thereafter until completion of such corrections, repairs or replacements, and, if such deficiencies are of such a magnitude that Closing would not otherwise be required to occur under Section 3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies are corrected. Any dispute shall be resolved by arbitration in accordance with Section 3.02. -6- (d) Change Orders. The Transferor Company shall not change or modify the Plans and Specifications without prior written approval of the BRI Partnership, such approval not to be unreasonably withheld, provided, however that the following changes shall not require BRI Partnership's approval: (i) changes required by the construction lender or governmental authorities, and (ii) changes in the design of the Improvements resulting in a decrease or increase in construction cost by less than $100,000 for an individual change and less than $250,000 in the aggregate. The Transferor Company shall give written notice to BRI Partnership of all proposed changes to the Plans and Specifications by sending a complete copy of the change, together with copies of any plans or drawings related thereto. BRI Partnership shall give its written approval or disapproval within five (5) business days thereafter. If BRI Partnership disapproves any such change, the Transferor Company shall not implement same. (e) Completion. The Transferor Company shall diligently attempt to complete construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes (as defined in Section 5.21 hereof) by December 31, 2001 (the "Scheduled Completion Date"). For purposes of this Agreement, the "Completion Date" shall be the date upon which all of the Closing Conditions shall have been satisfied as set forth in Section 3.02. (f) Force Majeure. In the event that the Transferor Company is delayed in the commencement or completion of construction of the Improvements by acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, strikes, shortages of labor, materials or equipment, undue delay in action by governmental authorities, governmental or utility company refusal to issue building, construction, utility, occupancy or other permits or approvals, water, sewer or other utility moratorium (including enforcement of the requirements of any adequate public facilities ordinance) or other causes beyond the Transferor Company's reasonable control (a "Force Majeure Event"), the Scheduled Completion Date shall be extended for the period of delay, not to exceed 12 months. If a Force Majeure Event continues in effect for a period in excess of 12 months, during which construction is delayed, then the Transferor Company may, by notice to BRI Partnership terminate this Agreement, in which event the Deposit shall be returned to the BRI Partnership and neither party shall have any further liability to the other hereunder. In addition, simultaneously with closing under the Related Agreements, the Transferor Company shall execute and deliver to BRI Partnership the Right of First Offer Agreement attached hereto as Exhibit IX, which Right of First Offer Agreement shall contain, among other provisions a Right of First Refusal which provides: (a) that the BRI Partnership shall have a right of first refusal to purchase the Property following the termination of this Agreement pursuant to this Section 1.04(f), (b) BRI Partnership shall have a period of 15 business days, following receipt of a bona fide third party letter of intent to purchase the Property, to agree to purchase the Property on the same terms and conditions as set forth in the letter of intent, and (c) such Right of First Offer Agreement shall be subordinate to any mortgage or deed of trust securing construction financing on the Property. -7- 1.05 Environmental Due Diligence Inspection. (a) On or before September 22, 1997, the Transferor Company shall deliver to the BRI Partnership a copy of its environmental report for the Property (the "Initial Environmental Report"). Should the BRI Partnership decide, in its sole judgment, during the period up to and including October 1, 1997 (the "Due Diligence Period") that the Initial Environmental Report is unsatisfactory, the BRI Partnership shall have the right to terminate this Agreement by giving written notice of its election to do so 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. 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 the period expiring 30 days after the Substantial Completion Date Notice during regular business hours and on reasonable prior notice to the Transferor Company, inspect the Property to determine the presence of any Hazardous Materials (as defined in Section 5.20) and the compliance of the Property with Environmental Laws (as defined in Section 5.20) 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 Company 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 Company in this Agreement. Should the BRI Partnership decide, in its reasonable judgment, that there exists an environmental risk with respect to the Property (excluding such items as asbestos roof shingles, asbestos floor tile and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the presence of usual and customary cleaning and maintenance supplies and similar items that are typically handled through the adoption of appropriate operations policies), during the period expiring 30 days after the Substantial Completion Date Notice 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 Company on or before 30 days after the Substantial Completion Date, and upon the giving of such notice this Agreement shall be of no further force or effect. Notwithstanding the foregoing, the BRI Partnership may not disapprove or object to any matter disclosed by the Environmental Inspection that was disclosed in the Initial Environmental Report. If the BRI Partnership shall fail to exercise such termination right within any such 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 1.05. The BRI Partnership shall pay when due all fees and expenses incurred in the performance of the Environmental Inspection performed at its request. -8- (b) From and after the date of this Agreement, the Transferor Company shall permit the BRI Partnership's authorized agents and representatives (including its accountants) to examine (including, without limitation, the right to audit) the Transferor Company's books, financial records, Service Contracts, Leases and 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 Company's financial records relating to the Property have been audited, the Transferor Company agrees to deliver any reports relating to such audits to the BRI Partnership. The Transferor Company shall provide the BRI Partnership with such information as the Transferor Company 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 Company, all taxes and utility payments made 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 1.05(b) 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 Company if the Closing does not occur. (c) The BRI Partnership shall indemnify the Transferor Members 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 Members 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 Members 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 1.05(c) shall survive the Closing or any termination of this Agreement; provided, however, that no claim by the Transferor Members under this Section 1.05(c) 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 Members 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 Members hereunder. 1.06 Tax Treatment. The parties intend that, to the extent the Transferor Members receive BRI Partnership Units as the consideration for the contribution of the Transferor Membership Interests by the Transferor Members to the BRI Partnership in accordance with Section 1.01 of this Agreement, such contribution shall be treated for federal (and applicable -9- state) income 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 Members agree to report such transaction for federal and applicable state income tax purposes consistently with the intent set forth in this Section 1.06. SECTION 2 --------- CONSIDERATION ------------- The consideration for the Membership Interests (the "Consideration Amount"), subject to the adjustments contained in Section 12 of this Agreement, shall be determined pursuant to the provisions of Section 2.04, and shall be paid by the the BRI Partnership to the Transferor Members in the following manner: 2.01 Deposit. (a) Simultaneously with the execution of this Agreement, the the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the "Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check (subject to collection) as a Deposit to be held in an interest-bearing escrow account on account of the Consideration Amount. Said sum, together with any interest earned thereon, is hereinafter called the "Deposit." (b) At the Closing, the Deposit shall be returned by the Escrow Agent to BRI Partnership. 2.02 Balance. At the Closing, the BRI Partnership shall deliver to the Transferor Members the Base Consideration, plus, if then due, any Additional Consideration Installments, subject to the adjustments described in Section 12 of this Agreement by federal wired funds. Prior to any delivery to the Transferor Members of the Base Consideration, there shall be deducted from the Base Consideration an amount equal to the sum required to pay off the Construction Loan in full and to remove all other Monetary Liens and simultaneously with the Closing, the BRI Partnership shall pay off the Construction Loan. At the Transferor members' option, to be exercised irrevocably by written notice to the BRI Partnership given at least 15 days prior to the satisfaction of the Closing Conditions, all or a portion of the Consideration Amount shall be delivered to the Transferor Members in the form of BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise such option, then the number of BRI Partnership Units, the rights and limitations upon such units and the method by which the units are delivered to the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b) and (c) below. If the Transferor Members do not exercise the foregoing option in a timely manner, all consideration payable under this Agreement shall be paid in cash by federal wired funds and the following Sections of this Agreement shall be, without further action by any party, null and void and without any further force or effect upon the parties: 1.06, 2.02(a) through (c), -10- 5.34, 6.03, 6.05, 6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii) and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04. (a) The number of BRI Partnership Units to be issued to the Transferor Members at Closing shall be that number determined by dividing the portion of the Consideration Amount to be paid in BRI Partnership Units to each Transferor Member by the value of one BRI Partnership Unit. The parties agree that, for purposes of this Agreement, the value of each BRI Partnership Unit 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 ten (10) business days prior to the day which is five (5) business days before the Closing. If the calculation provided for above results in a fraction of a BRI Partnership Unit to be delivered to a Transferor Member, the number of BRI Partnership Units to be delivered shall be rounded up or down to the nearest whole number of BRI Partnership Units. Attached hereto as Exhibit I is a schedule (the "Transferor Allocation Schedule") prepared by the Transferor Members setting forth (i) the name of each Transferor Member, and (ii) the percentage interest of each Transferor Member, together with an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each Transferor Member. In the event that any Transferor Member 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 Members all of the BRI Partnership Confirmations evidencing the issuance of the BRI Partnership Units to the Transferor Members in accordance with the Transferor Allocation Schedule. In addition, if pursuant to Section 12, the BRI Partnership owes any amounts to the Transferor Members 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 Members in accordance with the election made by the Transferor Members pursuant to Section 2.02. The BRI Partnership shall have no obligation or liability with respect to the preparation or accuracy of the Transferor Allocation Schedule. (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. At the time that any Transferor Member 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 Member 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 Members and Berkshire 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 -11- Partnership shall deliver to the Transferor Members a certified copy of the Registration Rights Agreement. (c) The Transferor Members, 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, 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 Units have been established as provided in this Section, 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 Members in the event of a decrease or increase in the market value of the common stock of BRI. 2.03 Payment of Monies. Any monies payable under this Agreement, unless otherwise specified in this Agreement, shall be paid by wire transfer. 2.04 Calculation of Consideration Amount. The Consideration Amount for the Transferor Membership Interests shall consist of a base consideration amount ("Base Consideration") plus additional consideration installments ("Additional Consideration Installments"). (a) The Base Consideration for the Transferor Membership Interests shall be Nineteen Million, Eight Hundred Twenty-Eight Thousand, Eight Hundred Forty-Eight Dollars ($19,828,848). (b) In addition to the Base Consideration, the BRI Partnership shall pay one or more additional consideration installments (the "Additional Consideration Installments"), if any, on a quarterly basis with the first payment, if then due, on the date of Closing and on the first day of each quarter (defined as a period of three full calendar months, plus, for the first quarter, any partial calendar month after the date of Closing) thereafter for a total of 18 full calendar months after the Closing (the "Earn Out Period"). As of the Closing and as of the first day of each quarter thereafter, Stabilized NOI shall be determined as provided below, and each Additional Consideration Installment, if any, will be equal to the Stabilized NOI divided by 8.75% (the "Cap Rate") and then reduced by the Base Consideration and any prior Additional Consideration Installments. The maximum Consideration Amount, (i.e. the sum of the Base Consideration plus all Additional Consideration Installments) shall not exceed Twenty-Five Million, Five Hundred Eight Thousand, Seven Hundred Nine Dollars ($25,508,709). (c) Stabilized NOI shall be calculated for purposes of determining the Additional Consideration Installments as follows: 12 times the monthly actual income for the Property, (provided that if occupancy rates exceed 95%, then actual income shall be calculated as if the Property had an occupancy rate of 95%) for the month preceding the payment date less Eight Hundred Twenty-Eight Thousand, Nine Hundred Eighty-Eight Dollars ($828,988) (representing the agreed-upon annual Projected Operating Expenses for the Property), provided that, -12- on the first anniversary of the date of Closing under this Agreement, the Projected Operating Expenses shall be adjusted by the percentage change in the CPI-U, U.S. Cities Average for the period from the date of Closing under this Agreement until the anniversary date. SECTION 3 --------- THE CLOSING ----------- 3.01 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 in Washington, D.C., or such other place as the Transferor Company and the BRI Partnership shall mutually agree. The "Time of Closing" shall be on that date specified in Section 3.02 at which 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 Members 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 Members. It is agreed that time is of the essence of this Agreement. 3.02 Closing under this Agreement shall occur on the first business day of the month after the Transferor Members have given to the BRI Partnership 60 days prior notice (the "Substantial Completion Date Notice") of the occurrence of the last to occur of (a) the substantial completion of construction of the Property excluding punch-list items not affecting occupancy (provided Transferor Members shall thereafter complete all punch-list items at no expense to the BRI Partnership within 30 days after Closing or within such additional time as may be reasonably required) ("Completion Date") as evidenced by satisfaction of each of the following conditions (the "Closing Conditions"): (i) final certificates of occupancy issued by the appropriate governmental authority, and (ii) a certificate of substantial completion issued by Questar Builders, Inc. or such affiliate of Transferor Members as Transferor Members may designate to be the general contractor for construction of the Improvements ("Questar Builders") certifying that the Improvements have been substantially completed in accordance with the Plans and Specifications and all Codes, as such may be modified from time to time by the Transferor Company in accordance with this Agreement, or (b) the Stabilization Date. If a dispute shall exist as to whether substantial completion has occurred, the dispute shall be promptly submitted to binding arbitration by a qualified third party mutually acceptable to the parties or, if they are unable to agree upon a third party, then by arbitrators appointed pursuant to the applicable rules of the American Arbitration Association. 3.03 The Stabilization Date for the Property shall be as follows: -13- The first day of that month which first occurs after 90% of the apartment units in the Property have been leased for a period of 3 months to "Qualified Tenants" at average rents not less than 90% of the pro-forma rents shown on Schedule 3.03. 3.04 "Qualified Tenants" are those tenants with annual income equal to not less than 3 times the annual rent who are in occupancy and have commenced the payment of rent. SECTION 4 --------- TRANSFEROR'S PRE-CLOSING DELIVERIES ----------------------------------- At least thirty (30) days prior to the date of Closing, the Transferor Company shall deliver or otherwise make 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 Company shall provide the BRI Partnership with access on-site to the originals of all Leases and related lease files. 4.02 Certificates of Occupancy and Permits. Original, final certificates of occupancy for all buildings in the Property and 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. 4.03 Taxes. To the extent in the Transferor Company'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. A set of original Plans and Specifications, and a copy of all guaranties and warranties made by any person for the benefit of the Transferor Company 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 each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing, and detailed operating statements for each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing; provided that all such statements and records shall be provided only for periods after the Property was first leased and occupied by rent paying tenants. -14- 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). 4.07 Current Rent Roll. The "Rent Roll" which consists of 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, in the form attached hereto as Schedule D. 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). 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 Company 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 Company which shall be attached hereto as Schedule B. SECTION 5 --------- A. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR COMPANY ------------------------- The Transferor Company represents, warrants and covenants to the BRI Partnership, as of the date hereof, as follows: 5.01 Organization and Standing of the Transferor Company. The Transferor Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland. The Transferor Company 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 Company 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 Company's business (a "Material Adverse Effect"). -15- 5.02 Compliance with Other Instruments, etc. Except as set forth in Section 5.05 hereof, the Transferor Company is not in violation of any term contained in the Transferor Operating Agreement, or to the Transferor Company's knowledge in any other material instrument or contract to which the Transferor Company is a party relating to the Property, and to the Transferor Company's knowledge the Transferor Company 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 Members, nor the contribution of the Transferor Membership Interests by the Transferor Members hereunder, will result in any Material Adverse Effect or be in conflict with or constitute a default under the Transferor Operating Agreement or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Transferor Company, except for Permitted Exceptions. 5.03 Governmental Consent, etc. Except for filing the Amended Transferor Company Articles to reflect the transactions contemplated hereby, 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 Members or the Transferor Company in connection with the valid execution and delivery of this Agreement by the Transferor Members and the performance of the Transferor Members' obligations hereunder. 5.04 Company Capitalization. The Transferor Operating Agreement (i) is the only agreement among the members relating to the organization, operation, or management of the Transferor Company, (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 and residence addresses of all of the Transferor Members of the Transferor Company, and the Transferor Members' respective membership interests in the Transferor Company. Except as set forth on Exhibit I, no other person or party owns any membership interest in the Transferor Company. No Transferor Member is in default with respect to any capital contribution required to be paid by him or it pursuant to the Transferor Operating Agreement. A true, correct and complete copy of the Transferor Operating Agreement is attached hereto as Exhibit II. The Transferor Company has no commitment to issue any right to purchase or acquire or to issue or distribute to any of the Transferor Members, any evidences of indebtedness or assets; and the Transferor Company has no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire any interest in the Transferor Company 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 Company's knowledge, proceeding or investigation pending or, to the Transferor Company's knowledge, any threat thereof, against the Transferor Members, the Transferor Company or the Property or any part thereof which questions the validity of this Agreement or the right of the Transferor Members 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 Company as such is presently contemplated; or (ii) the rights represented by the Transferor Membership Interests. During the period commencing on the date hereof and ending -16- on the Closing Date, the Transferor Company will promptly inform the BRI Partnership in writing of any material action, suit, proceeding or investigation pending, or to the Transferor Company's knowledge, threat thereof against the Transferor Members, the Transferor Company 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 Company is a party or to which any agent of the Transferor Company is a party on behalf of the Transferor Company or has entered into on behalf of the Transferor Company, relating to the Transferor Company 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 (collectively "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 Company. Except as noted on Schedule E, each Service Contract is cancelable on thirty (30) days notice. Transferor Company has no knowledge of any material breach or material default under any Service Contract. As of Closing, the Transferor Company 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 financial statements of the Transferor Company, including balance sheets, statements of operations and statements of partners' capital (collectively, the "Financial Statements") for the fiscal year ended December 31, 1996 (the "Statement Date"). The Financial Statements fairly present the financial condition of the Transferor Company as of the Statement Date in accordance with generally accepted accounting principles consistently applied, and reflect all liabilities, fixed, contingent or otherwise, required to be disclosed in such Financial Statements in accordance with generally accepted accounting principles. 5.08 Title to Properties and Assets. The Transferor Company is the sole owner of the Property. Except as disclosed in Section 18.01, the Transferor Company 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 Company or to be obtained by the Transferor Company prior to Closing, no other material license, permit or authorization is necessary to own and operate the Transferor Company's business as such is presently conducted and neither the conduct of the Transferor Company'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 indebtedness for borrowed money incurred or to be incurred to acquire and construct the Property (collectively, the "Construction Loan"), the Transferor Company has no indebtedness for borrowed money and the Transferor Company has -17- not, directly or indirectly, created, incurred, assumed or guaranteed or otherwise become directly or indirectly liable for the payment of any borrowed money. No Transferor Member, nor any affiliate of any Transferor Member nor any employee of the Transferor Company is presently indebted to the Transferor Company for borrowed money and, except for the Construction Loan, the Transferor Company is not presently indebted for borrowed money to any of the foregoing persons. As of the Closing Date, the Transferor Company 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 Company's business which are either (i) in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership in writing; and (b) liabilities resulting from or incurred in the ordinary course of business arising under the Service Contracts. The Transferor Company has conducted its business only in the ordinary course and, except for the Construction Loan, the Transferor Company 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 Company (the "Insurance Policies") and a list of all presently outstanding claims thereunder. The Transferor Company has done nothing to reduce or impair the insurance afforded by the Insurance Policies. To the Transferor 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. 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 Company or for which the Transferor 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 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 Company. All taxes due with respect to completed and settled examinations or concluded litigation have been paid. (b) The Transferor 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) The Transferor Company does not know of (A) any audit or investigation of the Transferor Company with respect to any liability for taxes relating to the Transferor -18- Company for which any Transferor Member may be liable, or (B) any threatened claims or assessments for taxes against or relating to the Transferor Company. 5.13 Employees. The Transferor Company 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 Company 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 those given to the holder of the Construction Loan, as provided in the Construction Loan Documents, no person holds a power of attorney from or agency agreement with the Transferor Company. 5.16 Bank Accounts. On or before Closing, the Transferor Company shall have closed every bank account and safe deposit box of the Transferor Company for which the Transferor Members or their representatives are signatories, and no representative of the Transferor Members shall be a signatory on any other account or safe deposit box of the Transferor Company or shall have the power to borrow, discount debt obligations, cash or draw checks, or otherwise act on behalf of the Transferor Company in any dealings with any banks or other financial institutions. 5.17 Ownership. The Transferor Company has not received any written notice challenging the validity of the Transferor Company's title to the Property. The Transferor Company 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 Stabilization Date, there shall be 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, to be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and correct in all material respects as of the Stabilization Date. Except as otherwise specifically set forth in the Rent Roll or elsewhere in this Agreement: (a) to the Transferor Company's knowledge, the Leases are in full force and effect and none of them has been modified, amended or extended; -19- (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 Company; (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 Company, except as set forth on Schedule 5.18 hereof, no action or proceeding instituted against the Transferor Company 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, except as provided in (c) above. 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 Company, no apartment unit is subject to any rent control law, ordinance or regulation. 5.20 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 Company or any of the Transferor Members' affiliates, with respect to the Property (collectively, the "Environmental Reports"). The Transferor Company 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 1.05 hereof (the "BRI Environmental Reports"), the Transferor Company 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 Company has any material liability with respect thereto. To the Transferor -20- Company'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 Company's knowledge, except as disclosed in the Environmental Reports or in the BRI Environmental Reports, neither the Transferor Company 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. s. 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. s. 9601 et seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49 U.S.C. s. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. s. 2601 et seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the Clean Water Act (33 U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. s. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C. s. 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. 5.21 Permits and Compliance with Laws. Upon completion of construction of the Improvements, all approvals, consents, permits, licenses or certificates of occupancy (whether governmental or otherwise) required for the use, operation and occupancy of the Property shall have been granted to the Transferor Company and shall be in full force and effect, and any fees and charges shall have been fully paid. Upon completion of construction of the Improvements, the Property shall be in compliance in all material respects with all zoning, building, health, traffic, fire safety, flood control, handicap and other laws, regulations and ordinances of all governmental authorities having jurisdiction over the Property (collectively "Codes"). To the Transferor Members' knowledge, no 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 as would not have a Material Adverse Effect. The parties agree that all matters relating to compliance with Environmental Laws shall be covered by Section 5.20 and not by this Section 5.21. 5.22 Utilities. Upon completion of construction of the Improvements, 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) shall be installed, and shall comply in all material respects with the requirements of the Plans and Specifications and all applicable Codes, and all necessary easements, permits, licenses and -21- agreements in respect of any of the foregoing shall be installed and operating and all installation and connection charges, to the extent due and payable, shall have been paid for in full. 5.23 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 Company, 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. 5.24 Pre-Closing Deliveries Accurate. All of the materials to be delivered by the Transferor Company to the BRI Partnership pursuant to Section 4 or attached hereto as Schedules or Exhibits when delivered, will be true, accurate and complete in all material respects. 5.25 Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other similar proceedings are pending or, to the Transferor Company's knowledge, threatened against the Transferor Company, nor are any of such proceedings, against or by the Transferor Company, anticipated or contemplated by the Transferor Company. 5.26 Liens. The Transferor Company agrees to keep the Property free from mechanics and materialmen's liens or other liens or encumbrances occasioned by the actions of the Transferor Company or its contractors or subcontractors and agrees to indemnify and save BRI Partnership harmless from any such liens or encumbrances and all attorneys' fees and other costs and expenses incurred by reason thereof. 5.27 Essential Facilities. Except as set forth in Schedule 5.27, 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 5.27, no property not included in the Property relies for its operation, maintenance or legal compliance on any facilities located on the Property. 5.28 Legal Access. There is, or prior to Closing will be, direct legal access from a public way to the Property. Upon completion of construction of the Improvements, all necessary curb cuts, access permits and other governmental approvals required to provide such access shall have been issued and shall be in full force and effect. 5.29 Public Improvements. To the best knowledge of the Transferor Company and except as shown on the Plans and Specifications, 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 that would have a Material Adverse -22- Effect. To the best knowledge of the Transferor Company, there are no presently planned public improvements which would result in the creation of a special improvement or similar lien upon the Property. 5.30 Condition of Improvements. The Property, including, without limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical, HVAC systems and equipment, plumbing, drainage and heating systems and other mechanical systems, shall at the time of Closing be in good order and operating condition, subject to normal wear and tear, and will be constructed substantially in accordance with (i) the Plans and Specifications, (ii) all applicable Codes, permits, approvals, title encumbrances and insurance requirements and (iii) accepted standards of good materials and workmanship. As of the time of Closing, there will be no physical or mechanical defects having a Material Adverse Effect on the use or marketability of the Property and no condition which impairs or could impair, the structure of the Property or renders it in noncompliance with the requirements of this Agreement. No fire or other casualty shall have occurred on any of the Property, the damage related to which has not been repaired or restored to the condition the Property was in prior to such fire or other casualty. B. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR MEMBERS ------------------------- Each of the Transferor Members on behalf of itself, severally and not jointly, represents and warrants to the BRI Partnership, as of the date hereof, as follows: 5.31 Authorization. Such Transferor Member 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 Members Closing Documents (as defined in Section 10.01 hereof) required to be executed and delivered by such Transferor Member under this Agreement, each in accordance with their respective terms, and on the Closing Date the Transferor Members Closing Documents will constitute valid and binding obligations, enforceable against such Transferor Member in accordance with their respective terms. 5.32 Additional Authorization. No approval of any person not a party to this Agreement is necessary for the contribution by such Transferor Member of the Transferor Membership Interests held by such Transferor Member and the performance of such Transferor Member's obligations under this Agreement. 5.33 Membership Interest. Except as provided in this Agreement and the Transferor Operating Agreement, no right (contingent or otherwise) to purchase or acquire the Transferor Membership Interests held by such Transferor Member is authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor Member owns and holds the Transferor Membership Interests set forth opposite its name on Exhibit 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 5.33 will be paid in full. -23- Upon the Closing, good, valid, marketable, and indefeasible title to such Transferor Membership 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 5.33 shall survive the Closing indefinitely. 5.34 Investment Representations and Warranties. Each Transferor Member for itself, severally and not jointly, represents, warrants, acknowledges and agrees as follows: (a) Such Transferor Member 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 Member understands that the BRI Partnership Units to be issued to each Transferor Member 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 Member. (c) Such Transferor Member acknowledges and agrees that, for the reasons set forth in Sections 5.34(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 Member 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 Member 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 Member 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 matters -24- 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, 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 Member 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 Member is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Act. (e) Such Transferor Member understands that an investment in the BRI Partnership and BRI involves substantial risks. Such Transferor Member 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 Member 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 "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 -25- 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 Member's principal residence or principal place of business, and such Transferor Member 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 5.34 shall survive the Closing indefinitely. 5.35 Receipt of Documents. Such Transferor Member 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 Members 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 Members 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 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 -26- 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 Company 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 ended adjustments). 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 -27- 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 Members 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. (d) The BRI Partnership has previously delivered to the Transferor Company 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, 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 -28- 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 Members, 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 Company 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. 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. -29- 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. SECTION 7 --------- INSURANCE AND CASUALTY ---------------------- 7.01 Maintenance of Insurance. Until the Closing Date, the Transferor Company shall 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 Members 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 and are not restored by the Transferor Company prior to the Time of Closing, 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 Members 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 Membership Interests, and in such case, unless the Transferor Members shall have previously restored the Property to its condition prior to the occurrence of any such damage or destruction, the Transferor Members shall pay over or assign to the BRI Partnership, on behalf of the Transferor Company, all amounts received or due (plus an amount equal to any deductible under any -30- 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 such damage or destruction shall occur and be restored by the Transferor Company prior to the Time of Closing, 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 Membership Interests in accordance with the provisions of clause (b) above. 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 be removed or complied with by the Transferor Company, at the expense of the Transferor Company, prior to the Closing Date. SECTION 9 --------- OBLIGATIONS PRIOR TO CLOSING ---------------------------- The Transferor Company covenants that between the date of this Agreement and the Closing Date: 9.01 Condition of Units. Up to the Time of Closing, all apartment units on the Property which become vacant shall, if necessary, be repaired or otherwise maintained in accordance with the Transferor Company's usual and customary practice without regard to the Closing contemplated by this Agreement. 9.02 Service Contracts. The Transferor Company shall not 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. 9.03 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. 9.04 Tax Procedure. Except as to real property tax assessment appeal proceedings now or hereafter filed by the Transferor Company to reduce real property tax assessments, the -31- Transferor Company 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 Members 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 Members, in either case after deducting the expenses of collection thereof, which obligation shall survive the Closing. 9.05 Property Operating and Maintenance. The Transferor Company shall lease, manage, maintain and operate the Improvements in the ordinary course of business. Without limiting the generality of the foregoing, the Transferor Company shall perform all ordinary maintenance and repair of the mechanical, electrical and plumbing facilities and equipment within the Improvements so as to keep such facilities in good operating condition and repair, taking into account ordinary wear and tear; and to the extent any such facilities or equipment have heretofore been serviced under a Service Contract, the Transferor Company shall keep such Service Contracts in full force and effect up to Closing. For purposes hereof, the parties agree that the Transferor Company has retained or will retain the BRI Partnership or its affiliate (the "Management Company") as the manager for the Property pursuant to the Management Agreement attached hereto as Exhibit 7. The parties agree that the Management Agreement shall remain in effect until the expiration of the Earn Out Period and, until then, may not be modified, amended or terminated without the consent of both parties. Notwithstanding that the BRI Partnership is or will become the owner of the Management Company, until the expiration of the Earn Out Period, the Transferor Members shall have control over the activities of the Management Company and its personnel (including both on-site and managerial) with respect to the Property, including but not limited to, appointment, hiring, firing, supervision and compensation (both base and incentive, of personnel, operation, marketing, promotions and advertising, hours of operation and all other decisions as to the Property and its leasing and management; provided that such control shall be exercised in a commercially reasonable manner as compared with comparable properties in comparable locations. To facilitate this continued control, BRI Partnership agrees that Patrick Connelly, currently a vice president of The Questar Management Company, shall remain employed by the Management Company until the expiration of the Earn Out Period, his principal place of employment shall remain at the principal regional office of the Transferor Company and he shall devote such efforts to the Property as the Transferor Members shall require. Notwithstanding the foregoing, if the employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then the Transferor Members at their option, may elect (a) to terminate the management agreement with BRI Partnership and either manage, lease and operate the Property on their own behalf or retain such other persons or entities to do so as they deem appropriate on substantially the same terms (including, but not limited to, the same management fee) as are provided in the management agreement with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their full-time employee. -32- 9.06 Lease Amendments. The Transferor Company shall not amend, alter, modify or vary the terms and provisions of any of Leases except in the ordinary course of business, without first obtaining the written consent of the BRI Partnership, which consent shall not be unreasonably withheld or delayed. 9.07 New Leases. From and after the date hereof, the Transferor Company shall not make, execute nor permit any new Lease for any apartment in the Property without first obtaining the written consent of the BRI Partnership, unless such Lease (i) is on the form lease provided to the BRI Partnership, and (ii) is with a Qualified Tenant. 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 Company shall not cause, acquiesce in, or agree to: (a) a material amendment, modification, termination or cancellation of the Transferor Operating Agreement without the prior written consent of the BRI Partnership, which shall not be unreasonably withheld or delayed, provided that such amendment modification, termination or cancellation does not adversely affect the BRI Partnership's rights under this Agreement; (b) any willful action by the Transferor Company which would render any of 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; and, except with the prior written consent of the BRI Partnership, the Transferor Company shall not cause, acquiesce in or agree to any action allowing the Transferor Company taking or agreeing to take any of the following actions: (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, enter into any contract, transaction or agreement which shall survive the Closing (except as permitted by Section 9.02); or (e) enter into any agreement, transaction or arrangement with any affiliate that will survive the Closing; or (f) subject any portion of the Property to any option contract or sales contract. -33- 9.09 Conduct of Business. Except with the prior written consent of BRI Partnership, on and after the date hereof the Transferor Company shall conduct its business only in the ordinary course 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, 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 Company in connection with the use and ownership of the Property up to the date of Closing. 9.10 Access to Information. Upon reasonable notice and during regular business hours, the Transferor Company will give the BRI Partnership and their attorneys, accountants, and other representatives reasonable access to Transferor Company's personnel and all properties, documents, contracts, books, and records of the Transferor Company, relating to the consummation of the transactions contemplated hereunder and will furnish the BRI Partnership with copies of such documents (certified by the Transferor Company if so requested) and with such information with respect to the affairs of the Transferor Company as the BRI Partnership may from time to time reasonably request. -34- SECTION 10 ---------- TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND ------------------------------------------- POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY --------------------------------------------------- 10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the Transferor Members shall deliver the following to the BRI Partnership (the "Transferor Members Closing Documents"): (a) Assignment of Transferor Membership Interests. An assignment of the Transferor Membership Interests from each of the respective Transferor Members to the BRI Partnership in the form of the Transferor Assignment attached hereto as Exhibit III, duly executed and delivered by each of the Transferor Members, which shall transfer the Transferor Membership Interests to the BRI Partnership free and clear of any lien, pledge, restriction, encumbrance or other claim by any third party. (b) UCC Search - Transferor Members. A Uniform Commercial Code lien search for each of the Transferor Members, indicating that the membership interest of each Transferor Partner in the Transferor Company is unencumbered by any security interest therein and the cost of which shall be paid by BRI Partnership. (c) Amended Transferor Operating Agreement and Articles. The Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended and Restated Transferor Company Articles in the form of Exhibit V hereto duly executed and delivered by the Transferor Members, pursuant to which the Transferor Members shall withdraw as members from the Transferor Company. (d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to the effect that the Transferor Company has been duly formed in accordance with Maryland law and is validly existing and in good standing under such laws, that the Transferor Members are all of the members of the Transferor Company, 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 Members. (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 Members and a BRI Questionnaire, in the form of Exhibit 5 attached hereto, duly executed by each of the Transferor Members. -35- (f) Occupancy Permit. Final Certificates of Occupancy 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, 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 Company. 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 Company 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 and Licenses. An as-built set of original Plans and Specifications together with original copies (or photocopies if original copies are unavailable to the Transferor Company) of all current site plans, surveys, 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 Company shall also deliver: 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 Member 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 Company'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 Members, advising the tenants under the Leases of the transfer of ownership of the Transferor Company 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 Members to the effect that, to its knowledge, all of the representations and warranties of the Transferor Company set forth in this Agreement remain true and correct as of the Closing Date. -36- (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 Company. (n) Non-Foreign Affidavit. The Transferor Members 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 Members with the Foreign Investment and Real Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended. (o) Construction Contract Retentions. Final mechanics' lien waivers from the general contractor and subcontractors covering at least 95% of the construction cost, together with an amount equal to 125% of all unpaid retentions and disputed amounts under the Construction Contract, which amount shall be placed in an escrow account with the Escrow Agent to be released on a monthly basis to pay amounts coming due under the Construction Contract to the general contractor, all subcontractors and material suppliers; provided that any request for payment shall be accompanied by all documentation required as a prerequisite to payment under the Construction Contract, including lien waivers, and further provided that payment of any retention shall be subject to receipt of final lien waivers and acknowledgments of payment in full executed by the general contractors, all subcontractors and material suppliers. In any event, the Transferor Members shall remain liable for payment of all such unpaid retentions and disputed amounts to the extent not covered by the escrow, which obligation shall survive Closing. (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 Company 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 by the BRI Partnership. (q) Certificate of Completion. The original certificate of substantial completion required under Section 3.02. (r) Questar Builders Warranty. An original one year construction warranty for the Improvements to be provided by Questar Builders, Inc., which construction warranty shall be identical to that required under the standard AIA Construction Contract substantially in the form of Exhibit X hereto. (s) Warranties and Guarantees. Originals of all warranties and guarantees provided by subcontractors and material suppliers for the Improvements. -37- (t) Other Documents. Such other documents, instruments or agreements which the Transferor Members 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 Membership Interests. The provisions of this Section 10.01(t) shall survive the Closing indefinitely. 10.02 The Transferor Members' Expenses. The Transferor Members shall pay all of the fees and expenses of their own separate legal, tax or other advisors. 10.03 Accuracy of Representations and Warranties. Each Transferor Member agrees that such Transferor Member will notify the Transferor Company in writing on or prior to the Closing Date if any of the representations and warranties of such Transferor Member cease to be true and correct on and as of the Closing Date. Each Transferor Member further agrees that, subject to Section 10.05(g), if no such notice is given to the Transferor Company, the representations and warranties of such Transferor Member shall be deemed to be true and correct on and as of the Closing Date and that the BRI Partnership and the Transferor Company shall be entitled to rely on the agreements contained in this Section 10.03. 10.04 Post-Closing Restrictions on the Transferor Members. In order to induce the BRI Partnership to enter into this Agreement, each Transferor Member, hereby agrees that until the tenth (10th) day following the first anniversary of the Closing: (a) each Transferor Member 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 Member 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 given to the BRI Partnership pursuant to the Pledge Agreement (described on Schedule K), no Transferor Member 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 10.04 shall survive the Closing indefinitely. 10.05 Indemnification. (a) The Transferor Members' Indemnity. In the event the parties proceed to Closing, each Transferor Member agrees, severally and not jointly, to indemnify and hold the -38- 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 Company set forth in Section 5A or of such Transferor Member set forth in Section 5B or (B) resulting from any breach or default by the Transferor Company or such Transferor Member of any obligation of the Transferor Company or such Transferor Member under this Agreement or (ii) from liabilities for borrowed money incurred by the Transferor Company or the Property prior to the Closing; provided that no Transferor Member 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 Member as of the date such indemnification obligation is satisfied (except for indemnification obligations with respect to representations of each of the Transferor Members in Section 5.33, 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 Member) (collectively, the "Cap"); and provided further that to the extent any of the Transferor Members have any indemnification obligation to the BRI Partnership, the Transferor Members may elect to satisfy such indemnification obligation by directing the BRI Partnership to cancel such amount of BRI Partnership Units acquired by such Transferor Member pursuant to this Agreement having a fair market value (measured at the time such BRI Partnership Units are returned or canceled) equal to the indemnification obligation of such Transferor Member. (b) The BRI Partnership's Indemnity. In the event the parties proceed to Closing, the BRI Partnership agrees to indemnify and hold the Transferor Members harmless against and with respect to (i) any loss or damage (including reasonable attorney's fees) to the Transferor Members, 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 Company or the Property after the Closing (except for such liabilities resulting from a breach or default by the Transferor Members or the Transferor Company 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 Member under this 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 Member (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 Member). (c) The indemnification obligations of the Transfer Members 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. (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. -39- (e) Neither the BRI Partnership nor any of the Transferor Members 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 Members 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 Company or the Property. (g) Each of the Transferor Members, the Transferor Company 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 Company 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 Members 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 Company with respect to all tax years or periods ending on or prior to the Closing Date. The Transferor Members shall prepare and timely file the terminating tax returns for the Transferor Company 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 Members 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 Members in obtaining such data and information regarding the Transferor Company to permit the Transferor Members to prepare such returns or to respond to any audits or assessments for the periods covered by such returns. SECTION 11 ---------- BRI PARTNERSHIP'S CLOSING OBLIGATIONS ------------------------------------- AND POST-CLOSING AGREEMENTS --------------------------- 11.01 Closing Deliveries and Agreements. At the Closing, the BRI Partnership shall: -40- (a) Transfer of Consideration; Execution and Delivery of BRI Partnership Amendment, Confirmation and Registration Rights Agreement. Deliver to the Transferor Members (i) the Base Consideration and, if applicable, the Additional Consideration Installments, 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 Operating Agreement and Amended Transferor Company Articles. Deliver to the Transferor Members (i) the Transferor Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended Transferor Company Articles 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 Company. (c) Record Amended Transferor Company Articles. Cause the Amended Transferor Company Articles to be filed with all appropriate state and, if applicable, local filing offices. (d) Opinion. An opinion of counsel satisfactory to the Transferor Members 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 Members 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 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 Members 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. -41- (g) BRI Partnership Agreement. Deliver to the Transferor Members 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 Members pursuant to any other provisions of this Agreement or which the Transferor Members 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 Members title to the BRI Partnership Units. The provisions of this Section 11.01(h) shall survive the Closing indefinitely. 11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC search costs and (v) all other Closing costs. 11.03 Post-Closing Agreements of the BRI Partnership. (a) The BRI Partnership hereby grants the Transferor Members, in their capacity as a limited partner of the BRI Partnership and so long as the Transferor Company has not dissolved, terminated or liquidated, the right to receive the Transferor Membership Interests as a distribution in kind in satisfaction of the Transferor Members' distribution rights under Section 8.2 of the BRI Partnership Agreement. If the Transferor Membership 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 Members. (b) Until the expiration of the period (the "No Transfer Period") ending on the earlier of (I) such time as all of the Transferor Members have redeemed all of the BRI Partnership Units received by the Transferor Members 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 Membership 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 (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; and (iv) voluntary transfers arising in connection with any financing or refinancing of the Property, which shall include, without limitation, a mortgage, deed of trust, or any other related financing liens or security interests, the parties affirmatively acknowledging that there shall be no restriction on the financing or refinancing of the Property by the BRI Partnership. -42- (c) 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 paid in cash at Closing by the party owing such amount to the other party unless the Transferor Members have made an election to receive BRI Partnership Units, in which event such proration 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) charges or prepayments under transferable Service Contracts; and (d) 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 Members and the BRI Partnership shall prepare and exchange preliminary calculations of all adjustments and prorations to be made pursuant to this Section 12. The Transferor Members and the BRI Partnership shall cooperate in the furnishing of all information and documentation necessary to prepare such calculations. If the Transferor Members have elected to receive BRI Partnership Units pursuant to Section 2.02, then prior to Closing, the Transferor Members shall deliver to the -43- 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 Member, and (ii) the number of BRI Partnership Units to be received by each Transferor Member. 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 Members and the Transferor Members hereby release the BRI Partnership from any such obligation or liability. Subject to Section 12.04, all cash (including any escrow deposits) shall be used by the Transferor Company to pay amounts payable by the Transferor Company and/or distributed to the Transferor Members prior to Closing, and if any of such cash applicable to preclosing periods is not removed from the Transferor Company prior to Closing, the BRI Partnership shall hold such cash as agent for the Transferor Members and refund such cash to the Transferor Members subsequent to Closing. 12.02 Application of Rent Payments. If any tenant is in arrears in the payment of rent on the Closing Date, the Transferor Company shall distribute the right to receive such rent to the Transferor Members immediately prior to Closing. The BRI Partnership shall act as agent for the Transferor Members in collecting such rents. 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 Company 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 Members 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 Company 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 Members owe an amount to the BRI Partnership, the Transferor Members shall have the right to elect to adjust for such amounts owing by the Transferor Members to the BRI Partnership in the form of BRI Partnership Units rather than -44- 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 Members, such amount shall be paid in the form of BRI Partnership Units rather than cash, if the Transferor Members have elected under Section 2.02 to receive BRI Partnership Units. The Transferor Members shall notify the BRI Partnership at least seven (7) business days prior to the Closing Date of the manner in which the Transferor Members shall have elected to settle adjustments under this Section 12. SECTION 13 ---------- FAILURE TO PERFORM ------------------ 13.01 Defective Title or Condition. If the Transferor Members are unable to give title or to contribute and transfer the Transferor Membership 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 Membership Interests or the Property does not conform with the provisions hereof, the BRI Partnership may elect by written notice given to the Transferor Members 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 Members can deliver to the Transferor Membership Interests and the Property in its then condition and to deliver in exchange therefor the Consideration Amount then required to be paid subject to reduction of the Consideration Amount by the amounts required to remove all Monetary Liens. 13.03 Transferor Default. If the Transferor Company or any of the Transferor Members default in the performance of their obligations under this Agreement, or if any representation or warranty of the Transferor Company or the Transferor Members is false or misleading (a "Transferor Default"), the BRI Partnership shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. By their execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby guarantee the performance by the Transferor Company of all of its obligations hereunder and, as part of such guaranty, shall be jointly and severally liable with the Transferor Company of the payment of all damages to which BRI Partnership may be entitled. 13.04 The BRI Partnership's Default. If the BRI Partnership defaults in performing any of its obligations hereunder, then the Transferor Members shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. SECTION 14 ---------- -45- BROKERAGE FEES -------------- 14.01 Brokerage Fees. The Transferor Company 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 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 QPI and the Related Entities in accordance with the provisions of the Related Agreements. 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 Company have any obligation to pay any commission to APC. 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 to such address as the Transferor Members 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 Members c/o Questar Properties, Inc. 124 Slade Avenue, Suite 200 Baltimore, MD 21208 Attn: Mr. Stephen M. Gorn Telecopier No. 410-486-7692 -46- 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. SECTION 16 ---------- LIMITATIONS ON SURVIVAL ----------------------- 16.01 Survival. The representations, warranties, covenants and other obligations set forth in Sections 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05 and the covenant and agreements of the BRI Partnership contained in Sections 2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing indefinitely and an action based thereon may be brought at any time after the Closing Date. The representations, warranties, covenants and other obligations of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04, 10.05, 12 and 14 and the representations and warranties, covenants and other obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 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 Members or the BRI Partnership set forth in this Agreement shall survive the Closing, and no action based thereon shall be commenced after Closing. 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. 16.02 Merger. The delivery of the Transferor Assignments and Amended Transferor Operating Agreement by the Transferor Members (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 Members, shall be deemed the full performance and discharge of every obligation to be performed by the parties hereunder and the -47- 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 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 Members and the Transferor Company shall have performed or complied with, in all material respects, all of their respective covenants, agreements and obligations under this Agreement, (ii) the Transferor Members shall have delivered the Transferor Members Closing Documents and (iii) all of the representations and warranties of the Transferor Company and the Transferor Members set forth in this Agreement shall be true and correct, in all material respects, as of the Closing Date. (b) No Adverse Changes. After the date of notice of satisfaction of the Closing Conditions, there shall not have occurred any material adverse change in the financial condition, business, properties, assets or liabilities of the Transferor Company; (c) Consents. Any and all consents, authorizations and approvals necessary to be obtained before Closing shall have been obtained. (d) Title to Membership Interests. The Transferor Membership 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 Company 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) Construction. The Transferor Company shall have completed construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes all to the extent required under Sections 3.02 and 5.30, and, if such completion shall have occurred prior to the occurrence of the Stabilization Date, then, in addition to the foregoing, as of the Closing, the Improvements shall remain completed to the extent required under Sections 3.02 and 5.30 and shall be in -48- substantially the same condition (subject to the provisions of Section 7.02 and to any damage to the Improvements caused by tenants) as they were in at the time of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all identified construction deficiencies corrected. In the event that any condition set forth in Section 17.01(a) through Section 17.07(e) 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 Members 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. 17.02 Transferor Conditions. Without limiting any other conditions to Closing of the Transferor Members contained herein, the obligation of the Transferor Members 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 Members 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. After the date of any election by the Transferor Members to accept BRI Partnership Units, 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 Members 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 Members in writing, on or before the Closing Date, the Transferor Members 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. -49- 17.03 Related Agreements. Simultaneously herewith, the BRI Partnership has entered into with various parties (the "Related Entities") 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 Questar Investment Corporation 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, this Agreement shall terminate automatically simultaneously with the termination of any such Related Agreement 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 provisions of this Section 17.03 shall be of no further force or effect once closing occurs under any one or more of the Related Agreements. SECTION 18 ---------- MISCELLANEOUS PROVISIONS ------------------------ 18.01. Assignment. Except as hereinafter provided, this Agreement may not be assigned prior to Closing by either party hereto. The BRI Partnership shall have the right to designate an entity affiliated with the BRI Partnership to accept title to some of the Membership Interests, but the BRI Partnership shall remain fully liable for the performance of all of its obligations hereunder. The Transferor Members and the Transferor Company shall have the right to collaterally assign their interests under this Agreement to a construction lender providing construction financing for the Improvements (the "Lender"). This Agreement shall be automatically subject and subordinate to the mortgage, deed of trust and all other loan documents now or hereafter entered into evidencing the loan and security of the Lender. If the Transferor Members and Transferor Company so assign this Agreement, then the the BRI Partnership agrees to enter into an agreement with the Lender (the "Tri Party Agreement") providing that: (a) the BRI Partnership agrees to provide the Lender with reasonable notice and opportunity to cure any default by the Transferor Members or the Transferor Company hereunder; (b) the BRI Partnership agrees not to modify or amend this Agreement without the prior written consent of Lender, (c) the BRI Partnership, at the written request of Lender upon a default under the loan, will pay the Base Consideration or such lesser amount as is required to satisfy the loan directly to Lender provided that all of the conditions to Closing provided herein have been satisfied; (d) the Lender agrees to recognize the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will permit Lender to perform any obligations of the Transferor Company and Transferor Members hereunder and will agree to recognize Lender as the Transferor Company and the Transferor Members hereunder should Lender succeed to the interest of the Transferor Company and Transferor Members, provided, however, that, in such event, Lender's liability -50- under this Agreement shall be limited to its interest in the Transferor Company and the Property; and further provided that (f) the BRI Partnership will have no liability for payment of the Lender's loan or the performance of any obligations under any of the loan documents other than the Tri-Party Agreement; and (g) the amount to be paid to Lender shall be payable in cash only and not in BRI Partnership Units and shall be limited to the amount provided in clause (c). 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 Members, Transferor Company 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 hereto and their respective successors and permitted assigns. In no event shall the Transferor Members have the right to assign or transfer their 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 Members and the BRI Partnership. The delivery by the BRI Partnership to the Transferor Members 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. -51- 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 Members 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 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. SECTION 19 ---------- ADDITIONAL PROVISIONS RELATING TO --------------------------------- THE TRANSFEROR MEMBERS ---------------------- 19.01 Transferor Allocation Schedule. Each Transferor Member acknowledges and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I is true, correct and complete in all respects as it relates to such Transferor Member. 19.02 Time of Effectiveness. The Transferor Members acknowledge and agree that this Agreement and the agreements attached as Exhibits hereto will not be binding and effective -52- unless and until all of the parties hereto and thereto have executed counterparts to such agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their respective hands and seals as of the day and year first above written. WITNESS: - ------------------------------ ---------------------------- Stephen M. Gorn - ------------------------------ ---------------------------- John B. Colvin - ------------------------------ ---------------------------- Morton Gorn - Transferor Members - BRI OP LIMITED PARTNERSHIP By: Berkshire Apartments, Inc. General Partner ____________________________ By: _________________________ Name: Title: - the BRI Partnership - -53- Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in accordance with the provisions of Section 13.03. - ------------------------------ -------------------------------- Stephen M. Gorn - ------------------------------ -------------------------------- John B. Colvin - the Guarantors- RECEIPT BY ESCROW AGENT The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by certified check to be held as the Deposit pursuant to this Agreement. WITNESS: LAWYERS TITLE INSURANCE CORPORATION ________________________ By: _______________________ Name: Title: Date: -54- List of Schedules Schedule A - Description of Land Schedule B - Personal Property Schedule C - List of Plans and Specifications Schedule D - Form of Rent Roll Schedule E - Service Contracts Schedule F - Financial Statements Schedule G - Insurance Schedule J - Environmental Reports Schedule K - Related Agreements Schedule 3.03 - Pro Forma Rents Schedule 5.05 - Litigation Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants Schedule 5.27 - Shared Facilities/Utilities Schedule 5.33 - Liens on Membership Interests 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 - Kickout Agreement Exhibit 7 - BRI Management Agreement Transferor Exhibits ------------------- Exhibit I - List of Transferor Members (with address and membership interest of each member) Exhibit II - Transferor Operating Agreement Exhibit III - Assignment of Transferor Membership Interests Exhibit IV - Amended and Restated Operating Agreement of Transferor Company Exhibit V - Amended and Restated Articles of Organization of Transferor Company Exhibit VI - Gap Indemnity Exhibit VII - Non-Imputation Affidavit Exhibit VIII - Title Affidavit Exhibit IX - Right of First Offer Agreement Exhibit X - AIA Construction Warranty -55- Schedule A - Property Description (Granite Run) All of that land located in Baltimore County, Maryland and more particularly described as follows: BEING THE SAME PROPERTY AS SHOWN ON THAT PLAT ENTITLED "GRANITE RUN APARTMENTS AT ROLLING WIND, PHASE IV, SECTION ONE (FORMERLY ROLLING WIND PHASE IV)", WHICH PLAT IS RECORDED AMONG THE LAND RECORDS OF BALTIMORE COUNTY IN PLAT BOOK S.M. NO. 68, FOLIO 94, THEREON SHOWN TO CONTAIN 29.1219 ACRES OF GROUND, MORE OR LESS. Schedule 5.27 - Shared Facilities/Utilities (Granite Run) 1. Easement Agreement dated May 17, 1996 and recorded in the Land Records of Baltimore County as Liber 11603, folio 389, by and between Questar Homes, Inc. and Rolling Wind Associates Limited Partnership, relating to the pumping station and storm water management facilities servicing Granite Run Apartments, Putnam Green Townhomes Condominium and Devon Court Condominiums at Rolling Wind, and the sharing of costs associated with these facilities. 2. Recreational Facilities Agreement relating to the use of pool and fitness facilities at Granite Run Apartments by residents of Devon Court Condominiums and Putnam Green Townhomes Condominium. EX-10.29 8 MATERIAL CONTRACTS DEVELOPMENT CONTRIBUTION AGREEMENT (Avalon 2) THIS DEVELOPMENT CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as of the 25th day of August, 1997, by and between the individuals and entities listed on Exhibit I attached hereto with an address c/o Questar Properties, Inc., 124 Slade Avenue, Suite 200, Baltimore, Maryland 21208, Attention: Mr. Stephen M. Gorn (collectively, the "Transferor Members"), Stephen M. Gorn, individually, John B. Colvin, individually, 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. BACKGROUND WHEREAS, the Transferor Members are the legal and beneficial owners of all of the membership interests, as set forth on Exhibit I, of Ironhorse Associates, L.L.C., a Maryland limited liability company (the "Transferor Company") pursuant to the Operating Agreement dated as of June 26, 1996, as amended (a copy of which, including all amendments, is attached hereto as Exhibit II and is referred to as the "Transferor Operating 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 Company is the owner of the following: a. that certain tract or parcel of land located in Baltimore County, Maryland, more particularly described in Schedule A attached hereto (the "Land"); b. the approximately 152-unit apartment complex, commonly known as Avalon Apartments, which contains related improvements, facilities, amenities, structures, driveways, walkways, plumbing and heating pipes, culverts, and mains, all of which have been constructed, are under construction or are to be constructed on the Land (collectively, the "Improvements") pursuant to certain plans and specifications that are to be prepared in accordance with the provisions of Section 1.04 based upon certain engineering plans and schematic plans listed on Schedule C hereto (the "Preliminary Plans and Specifications"); c. all right, title and interest of the Transferor Company 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 Company 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 Company 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 Company 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 Company's interest in any intangible property now or hereafter, owned by the Transferor Company 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 and other current assets relating to periods prior to Closing and (ii) amounts, if any, due to the Transferor Members 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 Members desire to contribute all of the membership interests in the Transferor Company (collectively referred to as the "Transferor Membership Interests") to the BRI Partnership, and the BRI Partnership desires to admit the Transferor Members as limited partners in the BRI Partnership and to accept such contribution from the Transferor Members; and WHEREAS, in exchange for such contribution, the Transferor Members desire to, at their election, either receive cash or BRI Partnership Units (as hereinafter defined) 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 Members and the BRI Partnership hereby covenant and agree as follows: -2- SECTION 1 --------- CONTRIBUTION OF MEMBERSHIP INTERESTS AND DUE DILIGENCE ------------------------------------------------------ 1.01 The Transferor Members shall contribute to the BRI Partnership, and the BRI Partnership shall accept from the Transferor Members, in exchange for either cash or BRI Partnership Units, and upon the terms and conditions set forth in this Agreement, all of the Transferor Members' membership interests in the Transferor Company (the "Transferor Membership Interests"). The percentage of interest that each of the Transferor Members owns in the Transferor Company is listed on Exhibit I. At the Closing (as defined in Section 3.01), the Transferor Members shall, respectively, contribute, assign, transfer and deliver the Transferor Membership Interests to the BRI Partnership, or its designees as provided in Section 18.01 hereof, by an Assignment and Assumption of Membership Interest in the form of Exhibit III attached hereto (the "Transferor Assignment"). Immediately thereafter, the Transferor Members and the BRI Partnership, or its designees, shall execute and deliver an Amended and Restated Operating Agreement in the form of Exhibit IV attached hereto (the "Amended Transferor Operating Agreement") and an Amended and Restated Articles of Organization in the form of Exhibit V attached hereto (the "Amended Transferor Company Articles") pursuant to which the BRI Partnership, or its designees, shall be admitted and the Transferor Members shall withdraw, as the members of the Transferor Company and be released of all liability thereunder, and the terms of the Transferor Company shall be amended in accordance with the Amended Transferor Operating Agreement. 1.02 Property Title. On or before September 22, 1997, the Transferor Members shall deliver to the BRI Partnership a copy of the Transferor Company's existing title insurance commitment or policy (the "Commitment") 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"). 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 Company on or before October 1, 1997 if any such exceptions are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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". Any easements or other agreements reasonably required for the development and construction of the Property and the Improvements now or hereafter entered into by the Transferor Company; including an agreement for the shared use and the sharing of the operating expenses of the common recreational facilities located on the Property and an easement declaration creating cross-easements for the roads, storm water management ponds and the sewage pumping station on the Property, all of which are consistent with the Plans and Specifications and, in the reasonable discretion of the BRI Partnership, do not materially interfere with the intended use of -3- the Property nor materially affect the value of the Property, shall also constitute Permitted Exceptions. Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at the BRI Partnership's sole cost, shall obtain a new commitment (the "Updated Commitment") for Title Insurance for an ALTA Form B Owner's Title Insurance Policy from Lawyer's Title Insurance Corporation (the "Title Insurer"). The Updated Commitment shall insure fee simple title to the Property in the sole name of the Transferor Company and shall be in the amount of $15,419,635. The Updated 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 and are available under the law of the state in which the Property is located. If any new exceptions to title appear in the Updated Commitment that do not constitute Permitted Exceptions and that are unacceptable to the BRI Partnership, in its reasonable discretion, the BRI Partnership may notify the Transferor Company within thirty (30) days after the Completion Date Notice. If any exceptions in the Commitment or the Updated Commitment are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable exceptions, at the option of the Transferor Company, to remove or cure such exceptions, provided further, the Transferor Company 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 liens for real estate taxes and current water and sewer charges for the fiscal year in which Closing occurs, 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 Company at Closing. The Transferor Company shall be deemed to have refused to cure any unacceptable exceptions unless the Transferor Company, within ten (10) days after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable exceptions. If the Transferor Company 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 Company 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 Company or (ii) waive such exceptions and accept title subject thereto, in which event there shall be a reduction in the Purchase Price (as defined in Section 2.01(a)) in an amount necessary to enable the BRI Partnership to remove all Monetary Liens. -4- 1.03 Survey. On or before September 22, 1997, the Transferor Company shall provide to the BRI Partnership a copy of its existing survey (the "Survey") of the Land and any Improvements. 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 Company on or before October 1, 1997 if any such survey matters are unacceptable. If the BRI Partnership fails to so notify the Transferor Company 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." Within thirty (30) days after the Substantial Completion Date Notice, the BRI Partnership, at its sole cost and expense, shall obtain an updated survey (the "Updated Survey") by a registered land surveyor (the "Surveyor") acceptable to the BRI Partnership, which Updated 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 Updated Survey and the recorded legal description. The BRI Partnership shall provide a copy of the Updated Survey to the Transferor Company promptly after its receipt thereof. If any new matters appear on the Updated Survey that do not constitute Permitted Exceptions, do not simply reflect the construction of the Improvements in locations that do not encroach upon property lines, setback lines or easements, and are unacceptable to the BRI Partnership in its reasonable discretion, the BRI Partnership may notify the Transferor Company within forty (40) days after the Substantial Completion Date Notice. If any survey matters are unacceptable to the BRI Partnership in accordance with the foregoing provisions, and the BRI Partnership timely notifies the Transferor Company in writing of such fact as above provided, the Transferor Company shall have thirty (30) days from the date the Transferor Company receives notice of such unacceptable survey matters, at the option of the Transferor Company, to cure such unacceptable survey matters. The Transferor Company shall be deemed to have refused to cure any unacceptable survey matters unless the Transferor Company, within ten (10) days -5- after receipt of notice from the BRI Partnership, shall notify the BRI Partnership in writing that the Transferor Company will attempt to cure such unacceptable survey matters. If the Transferor Company 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 Company 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 Company or (ii) waive such survey matters and accept title subject thereto, in which event there shall be no reduction in the Consideration Amount. 1.04 Construction and Inspection. (a) Plans and Specifications. Prior to the date of this Agreement, Transferor Company has delivered to BRI Partnership true, correct and complete copies of the Preliminary Plans and Specifications for the construction of the Improvements as set forth on Schedule C attached hereto. After the date hereof, the Transferor Company, at its sole cost and expense, shall prepare complete construction plans and specifications for the Improvements and submit them to the BRI Partnership for approval, such approval not to be unreasonably withheld. The Transferor Company shall prepare the construction plans and specifications in good faith and so as to be in accordance with the Preliminary Plans and Specifications, and the BRI Partnership shall act in good faith when approving the construction plans and specifications and shall not disapprove any aspects of the construction plans and specifications that are in accordance with the Preliminary Plans and Specifications. BRI Partnership shall notify the Transferor Company in writing of its approval or disapproval of the construction plans and specifications within 30 days following receipt. If BRI Partnership does not approve the construction plans and specifications, then the parties shall work in good faith to resolve any differences, but, if within 30 days after submittal, the parties have not agreed upon the construction plans and specifications, then either party, by written notice to the other, may terminate this Agreement, and, upon the giving of such notice, the Deposit shall be returned to the BRI Partnership and neither party shall have any further rights or obligations hereunder. Once agreed upon, the construction plans and specifications shall be deemed the "Plans and Specifications" for all purposes of this Agreement. BRI Partnership and the Transferor Company, as part of, or prior to, the approval of the construction plans and specifications may mutually agree upon changes to the quality or level of Improvements to that shown in the Preliminary Plans and Specifications and, in such event, the parties shall also agree upon an appropriate upward or downward adjustment in the Consideration Amount. (b) Transferor Company to Construct Improvements. Transferor Company shall, at Transferor Company's expense, obtain all permits and construct the Improvements on the Land in accordance with the Plans and Specifications, as the same may be modified by change order in accordance with this Agreement. All work shall be done in a good and workmanlike manner using new, good quality materials, free of all defects and in compliance with all Codes (as defined in Section 5.21), permits, approvals, title restrictions and insurance requirements. Transferor Company shall obtain builder's risk insurance on the Improvements in the amount of the construction cost of those buildings from time to time for which construction has commenced. Transferor Company shall deliver a certificate of such insurance to BRI -6- Partnership. Transferor Company shall maintain such insurance in force and effect through the course of construction and until Closing hereunder. (c) Inspection of Construction; Correction of Defects. BRI Partnership and its engineers, consultants and agents may inspect the construction of the Improvements from time to time during the course of construction upon reasonable notice to the Transferor Company. After receipt from the Transferor Company of written notice that the requirements of Section 3.02(a)(i) and (ii) have been satisfied (the "Inspection Notice"), BRI Partnership and its engineers, consultants and agents shall inspect the construction of the Improvements upon reasonable notice to Transferor Company to determine whether such construction is completed in accordance with the Plans and Specifications. Within 30 days after the Inspection Notice, BRI Partnership will give written notice to Transferor Company of any nonconformities with the Plans and Specifications and defects or deficiencies in construction identified by BRI Partnership. Unless Transferor Company disagrees with BRI Partnership, which disagreement shall be expressed by giving written notice to the BRI Partnership stating the basis for said disagreements, within 10 days after such BRI Partnership notice, Transferor Company, at Transferor Company's expense, shall commence to correct, repair or replace any such nonconformities, defects or deficiencies and shall diligently continue thereafter until completion of such corrections, repairs or replacements, and, if such deficiencies are of such a magnitude that Closing would not otherwise be required to occur under Section 3.02 and Section 5.30, the Closing Date shall be extended until the deficiencies are corrected. Any dispute shall be resolved by arbitration in accordance with Section 3.02. (d) Change Orders. The Transferor Company shall not change or modify the Plans and Specifications without prior written approval of the BRI Partnership, such approval not to be unreasonably withheld, provided, however that the following changes shall not require BRI Partnership's approval: (i) changes required by the construction lender or governmental authorities, and (ii) changes in the design of the Improvements resulting in a decrease or increase in construction cost by less than $100,000 for an individual change and less than $250,000 in the aggregate. The Transferor Company shall give written notice to BRI Partnership of all proposed changes to the Plans and Specifications by sending a complete copy of the change, together with copies of any plans or drawings related thereto. BRI Partnership shall give its written approval or disapproval within five (5) business days thereafter. If BRI Partnership disapproves any such change, the Transferor Company shall not implement same. (e) Completion. The Transferor Company shall diligently attempt to complete construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes (as defined in Section 5.21 hereof) by December 31, 2003 (the "Scheduled Completion Date"). For purposes of this Agreement, the "Completion Date" shall be the date upon which all of the Closing Conditions shall have been satisfied as set forth in Section 3.02. -7- (f) Force Majeure. In the event that the Transferor Company is delayed in the commencement or completion of construction of the Improvements by acts of God, war, civil commotion, fire, flood or other casualty, labor difficulties, strikes, shortages of labor, materials or equipment, undue delay in action by governmental authorities, governmental or utility company refusal to issue building, construction, utility, occupancy or other permits or approvals, water, sewer or other utility moratorium (including enforcement of the requirements of any adequate public facilities ordinance) or other causes beyond the Transferor Company's reasonable control (a "Force Majeure Event"), the Scheduled Completion Date shall be extended for the period of delay, not to exceed 12 months. If a Force Majeure Event continues in effect for a period in excess of 12 months, during which construction is delayed, then the Transferor Company may, by notice to BRI Partnership terminate this Agreement, in which event the Deposit shall be returned to the BRI Partnership and neither party shall have any further liability to the other hereunder. In addition, simultaneously with closing under the Related Agreements, the Transferor Company shall execute and deliver to BRI Partnership the Right of First Offer Agreement attached hereto as Exhibit IX, which Right of First Offer Agreement shall contain, among other provisions a Right of First Refusal which provides: (a) that the BRI Partnership shall have a right of first refusal to purchase the Property following the termination of this Agreement pursuant to this Section 1.04(f), (b) BRI Partnership shall have a period of 15 business days, following receipt of a bona fide third party letter of intent to purchase the Property, to agree to purchase the Property on the same terms and conditions as set forth in the letter of intent, and (c) such Right of First Offer Agreement shall be subordinate to any mortgage or deed of trust securing construction financing on the Property. 1.05 Environmental Due Diligence Inspection. (a) On or before September 22, 1997, the Transferor Company shall deliver to the BRI Partnership a copy of its environmental report for the Property (the "Initial Environmental Report"). Should the BRI Partnership decide, in its sole judgment, during the period up to and including October 1, 1997 (the "Due Diligence Period") that the Initial Environmental Report is unsatisfactory, the BRI Partnership shall have the right to terminate this Agreement by giving written notice of its election to do so 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. 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 the period expiring 30 days after the Substantial Completion Date Notice during regular business hours and on reasonable prior notice to the Transferor Company, inspect the Property to determine the presence of any Hazardous Materials (as defined in Section 5.20) and the compliance of the Property with Environmental Laws (as defined in Section 5.20) 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 -8- Transferor Company 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 Company in this Agreement. Should the BRI Partnership decide, in its reasonable judgment, that there exists an environmental risk with respect to the Property (excluding such items as asbestos roof shingles, asbestos floor tile and mastic, PCBs in electric light ballasts, HCFCs or CFSs in HVAC units, the presence of usual and customary cleaning and maintenance supplies and similar items that are typically handled through the adoption of appropriate operations policies), during the period expiring 30 days after the Substantial Completion Date Notice 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 Company on or before 30 days after the Substantial Completion Date, and upon the giving of such notice this Agreement shall be of no further force or effect. Notwithstanding the foregoing, the BRI Partnership may not disapprove or object to any matter disclosed by the Environmental Inspection that was disclosed in the Initial Environmental Report. If the BRI Partnership shall fail to exercise such termination right within any such 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 1.05. The BRI Partnership shall pay when due all fees and expenses incurred in the performance of the Environmental Inspection performed at its request. (b) From and after the date of this Agreement, the Transferor Company shall permit the BRI Partnership's authorized agents and representatives (including its accountants) to examine (including, without limitation, the right to audit) the Transferor Company's books, financial records, Service Contracts, Leases and 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 Company's financial records relating to the Property have been audited, the Transferor Company agrees to deliver any reports relating to such audits to the BRI Partnership. The Transferor Company shall provide the BRI Partnership with such information as the Transferor Company 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 Company, all taxes and utility payments made 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 1.05(b) 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 Company if the Closing does not occur. (c) The BRI Partnership shall indemnify the Transferor Members 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 -9- Property by them, or any of them, together with all expenses incurred by the Transferor Members 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 Members 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 1.05(c) shall survive the Closing or any termination of this Agreement; provided, however, that no claim by the Transferor Members under this Section 1.05(c) 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 Members 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 Members hereunder. 1.06 Tax Treatment. The parties intend that, to the extent the Transferor Members receive BRI Partnership Units as the consideration for the contribution of the Transferor Membership Interests by the Transferor Members to the BRI Partnership in accordance with Section 1.01 of this Agreement, such contribution shall be treated for federal (and applicable state) income 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 Members agree to report such transaction for federal and applicable state income tax purposes consistently with the intent set forth in this Section 1.06. SECTION 2 --------- CONSIDERATION ------------- The consideration for the Membership Interests (the "Consideration Amount"), subject to the adjustments contained in Section 12 of this Agreement, shall be determined pursuant to the provisions of Section 2.04, and shall be paid by the the BRI Partnership to the Transferor Members in the following manner: 2.01 Deposit. (a) Simultaneously with the execution of this Agreement, the the BRI Partnership shall deliver to Lawyers Title Insurance Corporation (the "Escrow Agent") the sum of ONE DOLLAR ($1.00) (the "Initial Deposit") by check (subject to collection) as a Deposit to be held in an interest-bearing escrow account on account of the Consideration Amount. Said sum, together with any interest earned thereon, is hereinafter called the "Deposit." -10- (b) At the Closing, the Deposit shall be returned by the Escrow Agent to BRI Partnership. 2.02 Balance. At the Closing, the BRI Partnership shall deliver to the Transferor Members the Base Consideration, plus, if then due, any Additional Consideration Installments, subject to the adjustments described in Section 12 of this Agreement by federal wired funds. Prior to any delivery to the Transferor Members of the Base Consideration, there shall be deducted from the Base Consideration an amount equal to the sum required to pay off the Construction Loan in full and to remove all other Monetary Liens and simultaneously with the Closing, the BRI Partnership shall pay off the Construction Loan. At the Transferor members' option, to be exercised irrevocably by written notice to the BRI Partnership given at least 15 days prior to the satisfaction of the Closing Conditions, all or a portion of the Consideration Amount shall be delivered to the Transferor Members in the form of BRI Partnership Units in the BRI Partnership. If the Transferor Members exercise such option, then the number of BRI Partnership Units, the rights and limitations upon such units and the method by which the units are delivered to the Transferor Members at Closing shall be as provided in Sections 2.02 (a), (b) and (c) below. If the Transferor Members do not exercise the foregoing option in a timely manner, all consideration payable under this Agreement shall be paid in cash by federal wired funds and the following Sections of this Agreement shall be, without further action by any party, null and void and without any further force or effect upon the parties: 1.06, 2.02(a) through (c), 5.34, 6.03, 6.05, 6.06, 6.08, 6.09, 6.10, 6.12 through 6.16, 10.01(e), 10.04, 11.01(a) (ii), (iii) and (iv) and 11.01(d) (last sentence only), 11.03 and 12.04. (a) The number of BRI Partnership Units to be issued to the Transferor Members at Closing shall be that number determined by dividing the portion of the Consideration Amount to be paid in BRI Partnership Units to each Transferor Member by the value of one BRI Partnership Unit. The parties agree that, for purposes of this Agreement, the value of each BRI Partnership Unit 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 ten (10) business days prior to the day which is five (5) business days before the Closing. If the calculation provided for above results in a fraction of a BRI Partnership Unit to be delivered to a Transferor Member, the number of BRI Partnership Units to be delivered shall be rounded up or down to the nearest whole number of BRI Partnership Units. Attached hereto as Exhibit I is a schedule (the "Transferor Allocation Schedule") prepared by the Transferor Members setting forth (i) the name of each Transferor Member, and (ii) the percentage interest of each Transferor Member, together with an investor questionnaire in the form attached hereto as Exhibit 5 (the "BRI Questionnaire") for each Transferor Member. In the event that any Transferor Member 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 Members all of the BRI Partnership Confirmations evidencing the issuance of the BRI Partnership Units to the Transferor Members in accordance with the Transferor Allocation -11- Schedule. In addition, if pursuant to Section 12, the BRI Partnership owes any amounts to the Transferor Members 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 Members in accordance with the election made by the Transferor Members pursuant to Section 2.02. The BRI Partnership shall have no obligation or liability with respect to the preparation or accuracy of the Transferor Allocation Schedule. (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. At the time that any Transferor Member 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 Member 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 Members and Berkshire 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 Members a certified copy of the Registration Rights Agreement. (c) The Transferor Members, 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, 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 Units have been established as provided in this Section, 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 Members in the event of a decrease or increase in the market value of the common stock of BRI. 2.03 Payment of Monies. Any monies payable under this Agreement, unless otherwise specified in this Agreement, shall be paid by wire transfer. 2.04 Calculation of Consideration Amount. The Consideration Amount for the Transferor Membership Interests shall consist of a base consideration amount ("Base Consideration") plus additional consideration installments ("Additional Consideration Installments"). (a) The Base Consideration for the Transferor Membership Interests shall be Fifteen Million, Four Hundred Nineteen Thousand, Six Hundred Thirty-Five Dollars ($15,419,635). -12- (b) In addition to the Base Consideration, the BRI Partnership shall pay one or more additional consideration installments (the "Additional Consideration Installments"), if any, on a quarterly basis with the first payment, if then due, on the date of Closing and on the first day of each quarter (defined as a period of three full calendar months, plus, for the first quarter, any partial calendar month after the date of Closing) thereafter for a total of 18 full calendar months after the Closing (the "Earn Out Period). As of the Closing and as of the first day of each quarter thereafter, Stabilized NOI shall be determined as provided below, and each Additional Consideration Installment, if any, will be equal to the Stabilized NOI divided by 10% (the "Cap Rate") and then reduced by the Base Consideration and any prior Additional Consideration Installments. (c) Stabilized NOI shall be calculated for purposes of determining the Additional Consideration Installments as follows: 12 times the monthly actual income for the Property, (provided that if occupancy rates exceed 95%, then actual income shall be calculated as if the Property had an occupancy rate of 95%) for the month preceding the payment date less Three Hundred Ninety-Six Thousand, One Hundred Dollars ($396,100) (representing the agreed-upon annual Projected Operating Expenses for the Property), provided that, on the first anniversary of the date of Closing under this Agreement, the Projected Operating Expenses shall be adjusted by the percentage change in the CPI-U, U.S. Cities Average for the period from the date of Closing under this Agreement until the anniversary date. SECTION 3 --------- THE CLOSING ----------- 3.01 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 in Washington, D.C., or such other place as the Transferor Company and the BRI Partnership shall mutually agree. The "Time of Closing" shall be on that date specified in Section 3.02 at which 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 Members 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 Members. It is agreed that time is of the essence of this Agreement. 3.02 Closing under this Agreement shall occur on the first business day of the month after the Transferor Members have given to the BRI Partnership 60 days prior notice (the "Substantial Completion Date Notice") of the occurrence of the last to occur of (a) the substantial completion of construction of the Property excluding punch-list items not affecting occupancy (provided Transferor Members shall thereafter complete all punch-list items at no expense to the BRI Partnership within 30 days after Closing or within such additional time as may be -13- reasonably required) ("Completion Date") as evidenced by satisfaction of each of the following conditions (the "Closing Conditions"): (i) final certificates of occupancy issued by the appropriate governmental authority, and (ii) a certificate of substantial completion issued by Questar Builders, Inc. or such affiliate of Transferor Members as Transferor Members may designate to be the general contractor for construction of the Improvements ("Questar Builders") certifying that the Improvements have been substantially completed in accordance with the Plans and Specifications and all Codes, as such may be modified from time to time by the Transferor Company in accordance with this Agreement, or (b) the Stabilization Date. If a dispute shall exist as to whether substantial completion has occurred, the dispute shall be promptly submitted to binding arbitration by a qualified third party mutually acceptable to the parties or, if they are unable to agree upon a third party, then by arbitrators appointed pursuant to the applicable rules of the American Arbitration Association. 3.03 The Stabilization Date for the Property shall be as follows: The first day of that month which first occurs after 90% of the apartment units in the Property have been leased for a period of 3 months to Qualified Tenants. 3.04 "Qualified Tenants" are those tenants with annual income equal to not less than 3 times the annual rent who are in occupancy and have commenced the payment of rent. SECTION 4 --------- TRANSFEROR'S PRE-CLOSING DELIVERIES ----------------------------------- At least thirty (30) days prior to the date of Closing, the Transferor Company shall deliver or otherwise make 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 Company shall provide the BRI Partnership with access on-site to the originals of all Leases and related lease files. 4.02 Certificates of Occupancy and Permits. Original, final certificates of occupancy for all buildings in the Property and 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. 4.03 Taxes. To the extent in the Transferor Company'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. -14- 4.04 Plans and Specifications. A set of original Plans and Specifications, and a copy of all guaranties and warranties made by any person for the benefit of the Transferor Company 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 each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing, and detailed operating statements for each completed year occurring at least 120 days prior to Closing and each completed month of operation thereafter occurring at least 75 days prior to Closing; provided that all such statements and records shall be provided only for periods after the Property was first leased and occupied by rent paying tenants. 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). 4.07 Current Rent Roll. The "Rent Roll" which consists of 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, in the form attached hereto as Schedule D. 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). 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 Company 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 Company which shall be attached hereto as Schedule B. -15- SECTION 5 --------- A. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR COMPANY ------------------------- The Transferor Company represents, warrants and covenants to the BRI Partnership, as of the date hereof, as follows: 5.01 Organization and Standing of the Transferor Company. The Transferor Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Maryland. The Transferor Company 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 Company 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 Company's business (a "Material Adverse Effect"). 5.02 Compliance with Other Instruments, etc. Except as set forth in Section 5.05 hereof, the Transferor Company is not in violation of any term contained in the Transferor Operating Agreement, or to the Transferor Company's knowledge in any other material instrument or contract to which the Transferor Company is a party relating to the Property, and to the Transferor Company's knowledge the Transferor Company 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 Members, nor the contribution of the Transferor Membership Interests by the Transferor Members hereunder, will result in any Material Adverse Effect or be in conflict with or constitute a default under the Transferor Operating Agreement or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Transferor Company, except for Permitted Exceptions. 5.03 Governmental Consent, etc. Except for filing the Amended Transferor Company Articles to reflect the transactions contemplated hereby, 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 Members or the Transferor Company in connection with the valid execution and delivery of this Agreement by the Transferor Members and the performance of the Transferor Members' obligations hereunder. 5.04 Company Capitalization. The Transferor Operating Agreement (i) is the only agreement among the members relating to the organization, operation, or management of the Transferor Company, (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 and residence addresses of all of the Transferor Members of the Transferor Company, and the Transferor Members' respective membership interests in the Transferor Company. Except as set forth on Exhibit I, no other person or party owns any membership interest in the Transferor Company. No Transferor -16- Member is in default with respect to any capital contribution required to be paid by him or it pursuant to the Transferor Operating Agreement. A true, correct and complete copy of the Transferor Operating Agreement is attached hereto as Exhibit II. The Transferor Company has no commitment to issue any right to purchase or acquire or to issue or distribute to any of the Transferor Members, any evidences of indebtedness or assets; and the Transferor Company has no obligation, contingent or otherwise, to purchase, redeem or otherwise acquire any interest in the Transferor Company 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 Company's knowledge, proceeding or investigation pending or, to the Transferor Company's knowledge, any threat thereof, against the Transferor Members, the Transferor Company or the Property or any part thereof which questions the validity of this Agreement or the right of the Transferor Members 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 Company as such is presently contemplated; or (ii) the rights represented by the Transferor Membership Interests. During the period commencing on the date hereof and ending on the Closing Date, the Transferor Company will promptly inform the BRI Partnership in writing of any material action, suit, proceeding or investigation pending, or to the Transferor Company's knowledge, threat thereof against the Transferor Members, the Transferor Company 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 Company is a party or to which any agent of the Transferor Company is a party on behalf of the Transferor Company or has entered into on behalf of the Transferor Company, relating to the Transferor Company 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 (collectively "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 Company. Except as noted on Schedule E, each Service Contract is cancelable on thirty (30) days notice. Transferor Company has no knowledge of any material breach or material default under any Service Contract. As of Closing, the Transferor Company 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 financial statements of the Transferor Company, including balance sheets, statements of operations and statements of partners' capital (collectively, the "Financial Statements") for the fiscal year ended December 31, 1996 (the "Statement Date"). The Financial Statements fairly present the financial condition of the Transferor Company as of the Statement Date in accordance with generally accepted accounting principles consistently applied, and reflect all liabilities, fixed, contingent or -17- otherwise, required to be disclosed in such Financial Statements in accordance with generally accepted accounting principles. 5.08 Title to Properties and Assets. The Transferor Company is the sole owner of the Property. Except as disclosed in Section 18.01, the Transferor Company 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 Company or to be obtained by the Transferor Company prior to Closing, no other material license, permit or authorization is necessary to own and operate the Transferor Company's business as such is presently conducted and neither the conduct of the Transferor Company'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 indebtedness for borrowed money incurred or to be incurred to acquire and construct the Property (collectively, the "Construction Loan"), the Transferor Company has no indebtedness for borrowed money and the Transferor Company has not, directly or indirectly, created, incurred, assumed or guaranteed or otherwise become directly or indirectly liable for the payment of any borrowed money. No Transferor Member, nor any affiliate of any Transferor Member nor any employee of the Transferor Company is presently indebted to the Transferor Company for borrowed money and, except for the Construction Loan, the Transferor Company is not presently indebted for borrowed money to any of the foregoing persons. As of the Closing Date, the Transferor Company 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 Company's business which are either (i) in the aggregate, not in excess of $50,000, or (ii) approved by BRI Partnership in writing; and (b) liabilities resulting from or incurred in the ordinary course of business arising under the Service Contracts. The Transferor Company has conducted its business only in the ordinary course and, except for the Construction Loan, the Transferor Company 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 Company (the "Insurance Policies") and a list of all presently outstanding claims thereunder. The Transferor Company has done nothing to reduce or impair the insurance afforded by the Insurance Policies. To the Transferor 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. -18- 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 Company or for which the Transferor 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 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 Company. All taxes due with respect to completed and settled examinations or concluded litigation have been paid. (b) The Transferor 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) The Transferor Company does not know of (A) any audit or investigation of the Transferor Company with respect to any liability for taxes relating to the Transferor Company for which any Transferor Member may be liable, or (B) any threatened claims or assessments for taxes against or relating to the Transferor Company. 5.13 Employees. The Transferor Company 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 Company 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 those given to the holder of the Construction Loan, as provided in the Construction Loan Documents, no person holds a power of attorney from or agency agreement with the Transferor Company. 5.16 Bank Accounts. On or before Closing, the Transferor Company shall have closed every bank account and safe deposit box of the Transferor Company for which the Transferor Members or their representatives are signatories, and no representative of the Transferor Members shall be a signatory on any other account or safe deposit box of the Transferor Company or shall have the power to borrow, discount debt obligations, cash or draw checks, or otherwise act on behalf of the Transferor Company in any dealings with any banks or other financial institutions. 5.17 Ownership. The Transferor Company has not received any written notice challenging the validity of the Transferor Company's title to the Property. The Transferor Company has not granted any rights, options, rights of first refusal or entered into other -19- 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 Stabilization Date, there shall be 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, to be delivered pursuant to Section 4. The Rent Roll shall be true, accurate and correct in all material respects as of the Stabilization Date. Except as otherwise specifically set forth in the Rent Roll or elsewhere in this Agreement: (a) to the Transferor Company'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 Company; (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 Company, except as set forth on Schedule 5.18 hereof, no action or proceeding instituted against the Transferor Company 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, except as provided in (c) above. 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 Company, no apartment unit is subject to any rent control law, ordinance or regulation. -20- 5.20 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 Company or any of the Transferor Members' affiliates, with respect to the Property (collectively, the "Environmental Reports"). The Transferor Company 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 1.05 hereof (the "BRI Environmental Reports"), the Transferor Company 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 Company has any material liability with respect thereto. To the Transferor Company'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 Company's knowledge, except as disclosed in the Environmental Reports or in the BRI Environmental Reports, neither the Transferor Company 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. s. 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. s. 9601 et seq.), as amended by the Superfund Amendments and Reauthorization Act of 1986; the Hazardous Materials Transportation Act (49 U.S.C. s. 1801 et seq.); the Toxic Substance Control Act (15 U.S.C. s. 2601 et seq.; the Clean Air Act (42 U.S.C. s. 9402 et seq.); the Clean Water Act (33 U.S.C. s. 1251 et seq.); the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. s. 136 et seq.); the Occupational Safety and Health Act (29 U.S.C. s. 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. 5.21 Permits and Compliance with Laws. Upon completion of construction of the Improvements, all approvals, consents, permits, licenses or certificates of occupancy (whether governmental or otherwise) required for the use, operation and occupancy of the Property shall have been granted to the Transferor Company and shall be in full force and effect, and any fees and charges shall have been fully paid. Upon completion of construction of the Improvements, the Property shall be in compliance in all material respects with all zoning, building, health, -21- traffic, fire safety, flood control, handicap and other laws, regulations and ordinances of all governmental authorities having jurisdiction over the Property (collectively "Codes"). To the Transferor Members' knowledge, no 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 as would not have a Material Adverse Effect. The parties agree that all matters relating to compliance with Environmental Laws shall be covered by Section 5.20 and not by this Section 5.21. 5.22 Utilities. Upon completion of construction of the Improvements, 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) shall be installed, and shall comply in all material respects with the requirements of the Plans and Specifications and all applicable Codes, and all necessary easements, permits, licenses and agreements in respect of any of the foregoing shall be installed and operating and all installation and connection charges, to the extent due and payable, shall have been paid for in full. 5.23 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 Company, 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. 5.24 Pre-Closing Deliveries Accurate. All of the materials to be delivered by the Transferor Company to the BRI Partnership pursuant to Section 4 or attached hereto as Schedules or Exhibits when delivered, will be true, accurate and complete in all material respects. 5.25 Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other similar proceedings are pending or, to the Transferor Company's knowledge, threatened against the Transferor Company, nor are any of such proceedings, against or by the Transferor Company, anticipated or contemplated by the Transferor Company. 5.26 Liens. The Transferor Company agrees to keep the Property free from mechanics and materialmen's liens or other liens or encumbrances occasioned by the actions of the Transferor Company or its contractors or subcontractors and agrees to indemnify and save BRI Partnership harmless from any such liens or encumbrances and all attorneys' fees and other costs and expenses incurred by reason thereof. 5.27 Essential Facilities. Except as set forth in Schedule 5.27, 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 -22- 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 5.27, no property not included in the Property relies for its operation, maintenance or legal compliance on any facilities located on the Property. 5.28 Legal Access. There is, or prior to Closing will be, direct legal access from a public way to the Property. Upon completion of construction of the Improvements, all necessary curb cuts, access permits and other governmental approvals required to provide such access shall have been issued and shall be in full force and effect. 5.29 Public Improvements. To the best knowledge of the Transferor Company and except as shown on the Plans and Specifications, 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 that would have a Material Adverse Effect. To the best knowledge of the Transferor Company, there are no presently planned public improvements which would result in the creation of a special improvement or similar lien upon the Property. 5.30 Condition of Improvements. The Property, including, without limitation, curbs, sidewalks, air conditioning, roofs, mechanical, electrical, HVAC systems and equipment, plumbing, drainage and heating systems and other mechanical systems, shall at the time of Closing be in good order and operating condition, subject to normal wear and tear, and will be constructed substantially in accordance with (i) the Plans and Specifications, (ii) all applicable Codes, permits, approvals, title encumbrances and insurance requirements and (iii) accepted standards of good materials and workmanship. As of the time of Closing, there will be no physical or mechanical defects having a Material Adverse Effect on the use or marketability of the Property and no condition which impairs or could impair, the structure of the Property or renders it in noncompliance with the requirements of this Agreement. No fire or other casualty shall have occurred on any of the Property, the damage related to which has not been repaired or restored to the condition the Property was in prior to such fire or other casualty. B. REPRESENTATIONS AND WARRANTIES --------------------------------- OF THE TRANSFEROR MEMBERS ------------------------- Each of the Transferor Members on behalf of itself, severally and not jointly, represents and warrants to the BRI Partnership, as of the date hereof, as follows: 5.31 Authorization. Such Transferor Member 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 Members Closing Documents (as defined in Section 10.01 hereof) required to be executed and delivered by such Transferor Member under this Agreement, each in accordance with their respective terms, and on the Closing Date the Transferor Members Closing -23- Documents will constitute valid and binding obligations, enforceable against such Transferor Member in accordance with their respective terms. 5.32 Additional Authorization. No approval of any person not a party to this Agreement is necessary for the contribution by such Transferor Member of the Transferor Membership Interests held by such Transferor Member and the performance of such Transferor Member's obligations under this Agreement. 5.33 Membership Interest. Except as provided in this Agreement and the Transferor Operating Agreement, no right (contingent or otherwise) to purchase or acquire the Transferor Membership Interests held by such Transferor Member is authorized or outstanding. Except as disclosed on Schedule 5.33, such Transferor Member owns and holds the Transferor Membership Interests set forth opposite its name on Exhibit 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 5.33 will be paid in full. Upon the Closing, good, valid, marketable, and indefeasible title to such Transferor Membership 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 5.33 shall survive the Closing indefinitely. 5.34 Investment Representations and Warranties. Each Transferor Member for itself, severally and not jointly, represents, warrants, acknowledges and agrees as follows: (a) Such Transferor Member 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 Member understands that the BRI Partnership Units to be issued to each Transferor Member 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 Member. (c) Such Transferor Member acknowledges and agrees that, for the reasons set forth in Sections 5.34(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 Member except (i) pursuant to an effective registration statement under the Act and any applicable Blue Sky Laws, (ii) pursuant to a no- -24- 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 Member 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 Member 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 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, 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 Member 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 Member is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Act. (e) Such Transferor Member understands that an investment in the BRI Partnership and BRI involves substantial risks. Such Transferor Member 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 Member acknowledges and agrees that: -25- (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 "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 Member's principal residence or principal place of business, and such Transferor Member 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 5.34 shall survive the Closing indefinitely. 5.35 Receipt of Documents. Such Transferor Member has received all Exhibits and Schedules described herein as attached hereto. -26- SECTION 6 --------- REPRESENTATIONS AND WARRANTIES OF BRI PARTNERSHIP ------------------------------------------------- The BRI Partnership represents, and warrants and covenants to the Transferor Members 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 Members 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 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 Company 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 -27- 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 ended adjustments). 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 Members 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 -28- which any BRI Partner may be liable, or (B) any threatened claims or assessments for taxes against or relating to the BRI Partnership. (d) The BRI Partnership has previously delivered to the Transferor Company 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, 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 Members, 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 Company 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. 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 -29- 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. SECTION 7 --------- INSURANCE AND CASUALTY ---------------------- 7.01 Maintenance of Insurance. Until the Closing Date, the Transferor Company shall 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 -30- 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 Members 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 and are not restored by the Transferor Company prior to the Time of Closing, 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 Members 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 Membership Interests, and in such case, unless the Transferor Members shall have previously restored the Property to its condition prior to the occurrence of any such damage or destruction, the Transferor Members shall pay over or assign to the BRI Partnership, on behalf of the Transferor Company, 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 such damage or destruction shall occur and be restored by the Transferor Company prior to the Time of Closing, 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 Membership Interests in accordance with the provisions of clause (b) above. 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 be removed or complied with by the Transferor Company, at the expense of the Transferor Company, prior to the Closing Date. SECTION 9 --------- OBLIGATIONS PRIOR TO CLOSING ---------------------------- The Transferor Company covenants that between the date of this Agreement and the Closing Date: -31- 9.01 Condition of Units. Up to the Time of Closing, all apartment units on the Property which become vacant shall, if necessary, be repaired or otherwise maintained in accordance with the Transferor Company's usual and customary practice without regard to the Closing contemplated by this Agreement. 9.02 Service Contracts. The Transferor Company shall not 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. 9.03 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. 9.04 Tax Procedure. Except as to real property tax assessment appeal proceedings now or hereafter filed by the Transferor Company to reduce real property tax assessments, the Transferor Company 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 Members 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 Members, in either case after deducting the expenses of collection thereof, which obligation shall survive the Closing. 9.05 Property Operating and Maintenance. The Transferor Company shall lease, manage, maintain and operate the Improvements in the ordinary course of business. Without limiting the generality of the foregoing, the Transferor Company shall perform all ordinary maintenance and repair of the mechanical, electrical and plumbing facilities and equipment within the Improvements so as to keep such facilities in good operating condition and repair, taking into account ordinary wear and tear; and to the extent any such facilities or equipment have heretofore been serviced under a Service Contract, the Transferor Company shall keep such Service Contracts in full force and effect up to Closing. For purposes hereof, the parties agree that the Transferor Company has retained or will retain the BRI Partnership or its affiliate (the "Management Company") as the manager for the Property pursuant to the Management Agreement attached hereto as Exhibit 7. The parties agree that the Management Agreement shall remain in effect until the expiration of the Earn Out Period and, until then, may not be modified, amended or terminated without the consent of both parties. Notwithstanding that the BRI Partnership is or will become the owner of the Management Company, until the expiration of the Earn Out Period, the Transferor Members shall have control over the activities of the Management Company and its personnel (including both on-site and managerial) with respect to -32- the Property, including but not limited to, appointment, hiring, firing, supervision and compensation (both base and incentive, of personnel, operation, marketing, promotions and advertising, hours of operation and all other decisions as to the Property and its leasing and management; provided that such control shall be exercised in a commercially reasonable manner as compared with comparable properties in comparable locations. To facilitate this continued control, BRI Partnership agrees that Patrick Connelly, currently a vice president of The Questar Management Company, shall remain employed by the Management Company until the expiration of the Earn Out Period, his principal place of employment shall remain at the principal regional office of the Transferor Company and he shall devote such efforts to the Property as the Transferor Members shall require. Notwithstanding the foregoing, if the employment agreement of Stephen M. Gorn is terminated by BRI Partnership, then the Transferor Members at their option, may elect (a) to terminate the management agreement with BRI Partnership and either manage, lease and operate the Property on their own behalf or retain such other persons or entities to do so as they deem appropriate on substantially the same terms (including, but not limited to, the same management fee) as are provided in the management agreement with BRI Partnership, and (b) to attempt to recruit Patrick Connelly as their full-time employee. 9.06 Lease Amendments. The Transferor Company shall not amend, alter, modify or vary the terms and provisions of any of Leases except in the ordinary course of business, without first obtaining the written consent of the BRI Partnership, which consent shall not be unreasonably withheld or delayed. 9.07 New Leases. From and after the date hereof, the Transferor Company shall not make, execute nor permit any new Lease for any apartment in the Property without first obtaining the written consent of the BRI Partnership, unless such Lease (i) is on the form lease provided to the BRI Partnership, and (ii) is with a Qualified Tenant. 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 Company shall not cause, acquiesce in, or agree to: (a) a material amendment, modification, termination or cancellation of the Transferor Operating Agreement without the prior written consent of the BRI Partnership, which shall not be unreasonably withheld or delayed, provided that such amendment modification, termination or cancellation does not adversely affect the BRI Partnership's rights under this Agreement; (b) any willful action by the Transferor Company which would render any of 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; -33- and, except with the prior written consent of the BRI Partnership, the Transferor Company shall not cause, acquiesce in or agree to any action allowing the Transferor Company taking or agreeing to take any of the following actions: (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, enter into any contract, transaction or agreement which shall survive the Closing (except as permitted by Section 9.02); or (e) enter into any agreement, transaction or arrangement with any affiliate that will survive the Closing; or (f) subject any portion of the Property to any option contract or sales contract. 9.09 Conduct of Business. Except with the prior written consent of BRI Partnership, on and after the date hereof the Transferor Company shall conduct its business only in the ordinary course 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, including up to the Closing Date; and -34- (f) Pay or cause to be paid all material debts, and other material obligations incurred by the Transferor Company in connection with the use and ownership of the Property up to the date of Closing. 9.10 Access to Information. Upon reasonable notice and during regular business hours, the Transferor Company will give the BRI Partnership and their attorneys, accountants, and other representatives reasonable access to Transferor Company's personnel and all properties, documents, contracts, books, and records of the Transferor Company, relating to the consummation of the transactions contemplated hereunder and will furnish the BRI Partnership with copies of such documents (certified by the Transferor Company if so requested) and with such information with respect to the affairs of the Transferor Company as the BRI Partnership may from time to time reasonably request. SECTION 10 ---------- TRANSFEROR MEMBERS' CLOSING OBLIGATIONS AND ------------------------------------------- POST-CLOSING AGREEMENTS, RESTRICTIONS AND INDEMNITY --------------------------------------------------- 10.01 Closing, Deliveries and Obligations. At or prior to the Closing, the Transferor Members shall deliver the following to the BRI Partnership (the "Transferor Members Closing Documents"): (a) Assignment of Transferor Membership Interests. An assignment of the Transferor Membership Interests from each of the respective Transferor Members to the BRI Partnership in the form of the Transferor Assignment attached hereto as Exhibit III, duly executed and delivered by each of the Transferor Members, which shall transfer the Transferor Membership Interests to the BRI Partnership free and clear of any lien, pledge, restriction, encumbrance or other claim by any third party. (b) UCC Search - Transferor Members. A Uniform Commercial Code lien search for each of the Transferor Members, indicating that the membership interest of each Transferor Partner in the Transferor Company is unencumbered by any security interest therein and the cost of which shall be paid by BRI Partnership. (c) Amended Transferor Operating Agreement and Articles. The Amended Transferor Operating Agreement in the form of Exhibit IV and the Amended and Restated Transferor Company Articles in the form of Exhibit V hereto duly executed and delivered by the Transferor Members, pursuant to which the Transferor Members shall withdraw as members from the Transferor Company. (d) Opinion. An opinion of counsel satisfactory to the BRI Partnership to the effect that the Transferor Company has been duly formed in accordance with Maryland law and is validly existing and in good standing under such laws, that the Transferor Members are all of -35- the members of the Transferor Company, 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 Members. (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 Members and a BRI Questionnaire, in the form of Exhibit 5 attached hereto, duly executed by each of the Transferor Members. (f) Occupancy Permit. Final Certificates of Occupancy 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, 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 Company. 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 Company 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 and Licenses. An as-built set of original Plans and Specifications together with original copies (or photocopies if original copies are unavailable to the Transferor Company) of all current site plans, surveys, 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 Company shall also deliver: 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 Member 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 -36- same as or similar to the Transferor Company'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 Members, advising the tenants under the Leases of the transfer of ownership of the Transferor Company 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 Members to the effect that, to its knowledge, all of the representations and warranties of the Transferor Company 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 Company. (n) Non-Foreign Affidavit. The Transferor Members 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 Members with the Foreign Investment and Real Property Tax Act, Internal Revenue Code Section 1445(b)(2), as amended. (o) Construction Contract Retentions. Final mechanics' lien waivers from the general contractor and subcontractors covering at least 95% of the construction cost, together with an amount equal to 125% of all unpaid retentions and disputed amounts under the Construction Contract, which amount shall be placed in an escrow account with the Escrow Agent to be released on a monthly basis to pay amounts coming due under the Construction Contract to the general contractor, all subcontractors and material suppliers; provided that any request for payment shall be accompanied by all documentation required as a prerequisite to payment under the Construction Contract, including lien waivers, and further provided that payment of any retention shall be subject to receipt of final lien waivers and acknowledgments of payment in full executed by the general contractors, all subcontractors and material suppliers. In any event, the Transferor Members shall remain liable for payment of all such unpaid retentions and disputed amounts to the extent not covered by the escrow, which obligation shall survive Closing. (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 Company 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 by the BRI Partnership. -37- (q) Certificate of Completion. The original certificate of substantial completion required under Section 3.02. (r) Questar Builders Warranty. An original one year construction warranty for the Improvements to be provided by Questar Builders, Inc., which construction warranty shall be identical to that required under the standard AIA Construction Contract substantially in the form of Exhibit X hereto. (s) Warranties and Guarantees. Originals of all warranties and guarantees provided by subcontractors and material suppliers for the Improvements. (t) Other Documents. Such other documents, instruments or agreements which the Transferor Members 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 Membership Interests. The provisions of this Section 10.01(t) shall survive the Closing indefinitely. 10.02 The Transferor Members' Expenses. The Transferor Members shall pay all of the fees and expenses of their own separate legal, tax or other advisors. 10.03 Accuracy of Representations and Warranties. Each Transferor Member agrees that such Transferor Member will notify the Transferor Company in writing on or prior to the Closing Date if any of the representations and warranties of such Transferor Member cease to be true and correct on and as of the Closing Date. Each Transferor Member further agrees that, subject to Section 10.05(g), if no such notice is given to the Transferor Company, the representations and warranties of such Transferor Member shall be deemed to be true and correct on and as of the Closing Date and that the BRI Partnership and the Transferor Company shall be entitled to rely on the agreements contained in this Section 10.03. 10.04 Post-Closing Restrictions on the Transferor Members. In order to induce the BRI Partnership to enter into this Agreement, each Transferor Member, hereby agrees that until the tenth (10th) day following the first anniversary of the Closing: (a) each Transferor Member 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 Member shall transfer or exchange the BRI Partnership Units for shares of common stock of BRI; -38- (c) except for the pledge of BRI Partnership Units by Morton Gorn, Stephen M. Gorn and John B. Colvin given to the BRI Partnership pursuant to the Pledge Agreement (described on Schedule K), no Transferor Member 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 10.04 shall survive the Closing indefinitely. 10.05 Indemnification. (a) The Transferor Members' Indemnity. In the event the parties proceed to Closing, each Transferor Member 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 Company set forth in Section 5A or of such Transferor Member set forth in Section 5B or (B) resulting from any breach or default by the Transferor Company or such Transferor Member of any obligation of the Transferor Company or such Transferor Member under this Agreement or (ii) from liabilities for borrowed money incurred by the Transferor Company or the Property prior to the Closing; provided that no Transferor Member 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 Member as of the date such indemnification obligation is satisfied (except for indemnification obligations with respect to representations of each of the Transferor Members in Section 5.33, 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 Member) (collectively, the "Cap"); and provided further that to the extent any of the Transferor Members have any indemnification obligation to the BRI Partnership, the Transferor Members may elect to satisfy such indemnification obligation by directing the BRI Partnership to cancel such amount of BRI Partnership Units acquired by such Transferor Member pursuant to this Agreement having a fair market value (measured at the time such BRI Partnership Units are returned or canceled) equal to the indemnification obligation of such Transferor Member. (b) The BRI Partnership's Indemnity. In the event the parties proceed to Closing, the BRI Partnership agrees to indemnify and hold the Transferor Members harmless against and with respect to (i) any loss or damage (including reasonable attorney's fees) to the Transferor Members, 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 Company or the Property after the Closing (except for such liabilities resulting from a breach or default by the Transferor Members or the Transferor Company 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 Member under this Section 10.05(b)(i) for any amounts in excess of 50% of the fair market value as of the date such -39- indemnification obligation is satisfied of the BRI Partnership Units received by such Transferor Member (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 Member). (c) The indemnification obligations of the Transfer Members 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. (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 the BRI Partnership nor any of the Transferor Members 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 Members 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 Company or the Property. (g) Each of the Transferor Members, the Transferor Company 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 Company 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 Members 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 Company with respect to all tax years or periods ending on or prior to the Closing Date. The Transferor Members shall prepare and timely file the terminating tax returns for the Transferor Company 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 Members shall submit the -40- 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 Members in obtaining such data and information regarding the Transferor Company to permit the Transferor Members to prepare such returns or to respond to any audits or assessments for the periods covered by such returns. 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 Members (i) the Base Consideration and, if applicable, the Additional Consideration Installments, 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 Operating Agreement and Amended Transferor Company Articles. Deliver to the Transferor Members (i) the Transferor Assignments duly executed by the BRI Partnership and (ii) the Amended Transferor Operating Agreement and Amended Transferor Company Articles 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 Company. (c) Record Amended Transferor Company Articles. Cause the Amended Transferor Company Articles to be filed with all appropriate state and, if applicable, local filing offices. (d) Opinion. An opinion of counsel satisfactory to the Transferor Members 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 Members 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 -41- 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 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 Members 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 Members 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 Members pursuant to any other provisions of this Agreement or which the Transferor Members 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 Members title to the BRI Partnership Units. The provisions of this Section 11.01(h) shall survive the Closing indefinitely. 11.02 BRI Partnership's Expenses. The BRI Partnership shall pay its own counsel fees, and all (i) Title Insurance and Survey costs, (ii) escrow and recording costs, (iii) transfer taxes and documentary stamps, if any, (iv) UCC search costs and (v) all other Closing costs. 11.03 Post-Closing Agreements of the BRI Partnership. (a) The BRI Partnership hereby grants the Transferor Members, in their capacity as a limited partner of the BRI Partnership and so long as the Transferor Company has not dissolved, terminated or liquidated, the right to receive the Transferor Membership Interests as a distribution in kind in satisfaction of the Transferor Members' distribution rights under Section 8.2 of the BRI Partnership Agreement. If the Transferor Membership 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 Members. (b) Until the expiration of the period (the "No Transfer Period") ending on the earlier of (I) such time as all of the Transferor Members have redeemed all of the BRI Partnership Units received by the Transferor Members hereunder for cash or for shares of BRI -42- 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 Membership 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 (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; and (iv) voluntary transfers arising in connection with any financing or refinancing of the Property, which shall include, without limitation, a mortgage, deed of trust, or any other related financing liens or security interests, the parties affirmatively acknowledging that there shall be no restriction on the financing or refinancing of the Property by the BRI Partnership. (c) 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 paid in cash at Closing by the party owing such amount to the other party unless the Transferor Members have made an election to receive BRI Partnership Units, in which event such proration 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) charges or prepayments under transferable Service Contracts; and (d) 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 -43- 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 Members and the BRI Partnership shall prepare and exchange preliminary calculations of all adjustments and prorations to be made pursuant to this Section 12. The Transferor Members and the BRI Partnership shall cooperate in the furnishing of all information and documentation necessary to prepare such calculations. If the Transferor Members have elected to receive BRI Partnership Units pursuant to Section 2.02, then prior to Closing, the Transferor Members 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 Member, and (ii) the number of BRI Partnership Units to be received by each Transferor Member. 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 Members and the Transferor Members hereby release the BRI Partnership from any such obligation or liability. Subject to Section 12.04, all cash (including any escrow deposits) shall be used by the Transferor Company to pay amounts payable by the Transferor Company and/or distributed to the Transferor Members prior to Closing, and if any of such cash applicable to preclosing periods is not removed from the Transferor Company prior to Closing, the BRI Partnership shall hold such cash as agent for the Transferor Members and refund such cash to the Transferor Members subsequent to Closing. 12.02 Application of Rent Payments. If any tenant is in arrears in the payment of rent on the Closing Date, the Transferor Company shall distribute the right to receive such rent to the Transferor Members immediately prior to Closing. The BRI Partnership shall act as agent for the Transferor Members in collecting such rents. 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 Company 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 Members or the BRI Partnership after the Closing are payable to the other party by reason of this allocation or -44- 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 Company 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 Members owe an amount to the BRI Partnership, the Transferor Members shall have the right to elect to adjust for such amounts owing by the Transferor Members 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 Members, such amount shall be paid in the form of BRI Partnership Units rather than cash, if the Transferor Members have elected under Section 2.02 to receive BRI Partnership Units. The Transferor Members shall notify the BRI Partnership at least seven (7) business days prior to the Closing Date of the manner in which the Transferor Members shall have elected to settle adjustments under this Section 12. SECTION 13 ---------- FAILURE TO PERFORM ------------------ 13.01 Defective Title or Condition. If the Transferor Members are unable to give title or to contribute and transfer the Transferor Membership 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 Membership Interests or the Property does not conform with the provisions hereof, the BRI Partnership may elect by written notice given to the Transferor Members 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 Members can deliver to the Transferor Membership Interests and the Property in its then condition and to deliver in exchange therefor the Consideration Amount then required to be paid subject to reduction of the Consideration Amount by the amounts required to remove all Monetary Liens. 13.03 Transferor Default. If the Transferor Company or any of the Transferor Members default in the performance of their obligations under this Agreement, or if any representation or warranty of the Transferor Company or the Transferor Members is false or misleading (a -45- "Transferor Default"), the BRI Partnership shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. By their execution hereof, Stephen M. Gorn and John B. Colvin ("Guarantors") hereby guarantee the performance by the Transferor Company of all of its obligations hereunder and, as part of such guaranty, shall be jointly and severally liable with the Transferor Company of the payment of all damages to which BRI Partnership may be entitled. 13.04 The BRI Partnership's Default. If the BRI Partnership defaults in performing any of its obligations hereunder, then the Transferor Members shall be entitled to exercise any or all remedies as may be available at law or in equity on account thereof, including, but not limited to, an action for specific performance or an action for money damages. SECTION 14 ---------- BROKERAGE FEES -------------- 14.01 Brokerage Fees. The Transferor Company 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 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 QPI and the Related Entities in accordance with the provisions of the Related Agreements. 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 Company have any obligation to pay any commission to APC. 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 to such address as the Transferor Members 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 -46- 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 Members c/o Questar Properties, Inc. 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. SECTION 16 ---------- LIMITATIONS ON SURVIVAL ----------------------- 16.01 Survival. The representations, warranties, covenants and other obligations set forth in Sections 5.02, 5.33, 5.34, 10.01(t), 10.04 and 10.05 and the covenant and agreements of the BRI Partnership contained in Sections 2.04(b), 6.02, 6.05, 6.10, 10.05 and 11.03 shall survive the Closing indefinitely and an action based thereon may be brought at any time after the Closing Date. The representations, warranties, covenants and other obligations of the Transferor Members set forth in Sections 3.02, 4, 5.01 through and including 5.35 (except for 5.02, 5.12, 5.33 and 5.34), 9, 10.01(t), 10.04, 10.05, 12 and 14 and the representations and warranties, -47- covenants and other obligations of the BRI Partnership contained in Sections 1.05(c), 6 (except for 6.02, 6.05, 6.06, 6.09 and 6.10), 10.05, 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 Members or the BRI Partnership set forth in this Agreement shall survive the Closing, and no action based thereon shall be commenced after Closing. 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. 16.02 Merger. The delivery of the Transferor Assignments and Amended Transferor Operating Agreement by the Transferor Members (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 Members, 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 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 Members and the Transferor Company shall have performed or complied with, in all material respects, all of their respective covenants, agreements and obligations under this Agreement, (ii) the Transferor Members shall have delivered the Transferor Members Closing Documents and (iii) all of the representations and warranties of the Transferor Company and the Transferor Members set forth in this Agreement shall be true and correct, in all material respects, as of the Closing Date. (b) No Adverse Changes. After the date of notice of satisfaction of the Closing Conditions, there shall not have occurred any material adverse change in the financial condition, business, properties, assets or liabilities of the Transferor Company; (c) Consents. Any and all consents, authorizations and approvals necessary to be obtained before Closing shall have been obtained. -48- (d) Title to Membership Interests. The Transferor Membership 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 Company 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) Construction. The Transferor Company shall have completed construction of the Improvements in accordance with the Plans and Specifications, as modified in accordance with this Agreement, and in compliance with all Codes all to the extent required under Sections 3.02 and 5.30, and, if such completion shall have occurred prior to the occurrence of the Stabilization Date, then, in addition to the foregoing, as of the Closing, the Improvements shall remain completed to the extent required under Sections 3.02 and 5.30 and shall be in substantially the same condition (subject to the provisions of Section 7.02 and to any damage to the Improvements caused by tenants) as they were in at the time of the BRI Partnerships' inspection pursuant to Section 1.04(c) with all identified construction deficiencies corrected. In the event that any condition set forth in Section 17.01(a) through Section 17.07(e) 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 Members 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. 17.02 Transferor Conditions. Without limiting any other conditions to Closing of the Transferor Members contained herein, the obligation of the Transferor Members 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 Members 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. After the date of any election by the Transferor Members to accept BRI Partnership Units, there shall not have occurred any material adverse change in the financial condition, business, properties, assets or liabilities of the BRI Partnership or BRI. -49- (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 Members 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 Members in writing, on or before the Closing Date, the Transferor Members 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 Related Agreements. Simultaneously herewith, the BRI Partnership has entered into with various parties (the "Related Entities") 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 Questar Investment Corporation 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, this Agreement shall terminate automatically simultaneously with the termination of any such Related Agreement 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 provisions of this Section 17.03 shall be of no further force or effect once closing occurs under any one or more of the Related Agreements. SECTION 18 ---------- MISCELLANEOUS PROVISIONS ------------------------ 18.01. Assignment. Except as hereinafter provided, this Agreement may not be assigned prior to Closing by either party hereto. The BRI Partnership shall have the right to designate an entity affiliated with the BRI Partnership to accept title to some of the Membership Interests, but the BRI Partnership shall remain fully liable for the performance of all of its obligations hereunder. The Transferor Members and the Transferor Company shall have the right to collaterally assign their interests under this Agreement to a construction lender providing construction financing for the Improvements (the "Lender"). This Agreement shall be automatically subject and subordinate to the mortgage, deed of trust and all other loan documents -50- now or hereafter entered into evidencing the loan and security of the Lender. If the Transferor Members and Transferor Company so assign this Agreement, then the the BRI Partnership agrees to enter into an agreement with the Lender (the "Tri Party Agreement") providing that: (a) the BRI Partnership agrees to provide the Lender with reasonable notice and opportunity to cure any default by the Transferor Members or the Transferor Company hereunder; (b) the BRI Partnership agrees not to modify or amend this Agreement without the prior written consent of Lender, (c) the BRI Partnership, at the written request of Lender upon a default under the loan, will pay the Base Consideration or such lesser amount as is required to satisfy the loan directly to Lender provided that all of the conditions to Closing provided herein have been satisfied; (d) the Lender agrees to recognize the rights of BRI Partnership under this Agreement; (e) the BRI Partnership will permit Lender to perform any obligations of the Transferor Company and Transferor Members hereunder and will agree to recognize Lender as the Transferor Company and the Transferor Members hereunder should Lender succeed to the interest of the Transferor Company and Transferor Members, provided, however, that, in such event, Lender's liability under this Agreement shall be limited to its interest in the Transferor Company and the Property; and further provided that (f) the BRI Partnership will have no liability for payment of the Lender's loan or the performance of any obligations under any of the loan documents other than the Tri-Party Agreement; and (g) the amount to be paid to Lender shall be payable in cash only and not in BRI Partnership Units and shall be limited to the amount provided in clause (c). The parties acknowledge and agree that the Transferor Company is currently the owner of land in addition to the Land (the "Additional Avalon Land") which is the subject of a separate Development Contribution Agreement (the "Other Avalon Agreement") between the BRI Partnership and the Transferor Company and Transferor Members. To facilitate the transactions contemplated hereby and by the Other Avalon Agreement, prior to the commencement of construction, the Transferor Company will transfer either or both of the Land and the Additional Land to a newly-formed limited partnership(s) or limited liability company(s) such that the Land will be owned by one entity and the Additional Land will be owned by another entity. At said time, the newly-formed entity(s) and its owners will assume all of the obligations of either this Agreement or the Other Avalon Agreement (whichever is applicable to the land it then owns) and the original Transferor Company and Transferor Members shall be released from all liability thereunder, and pursuant to instruments in form reasonably satisfactory to all parties. 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 Members, Transferor Company and the BRI Partnership consent to the personal jurisdiction of the federal and state -51- 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 hereto and their respective successors and permitted assigns. In no event shall the Transferor Members have the right to assign or transfer their 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 Members and the BRI Partnership. The delivery by the BRI Partnership to the Transferor Members 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 Members 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 -52- 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 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. SECTION 19 ---------- ADDITIONAL PROVISIONS RELATING TO --------------------------------- THE TRANSFEROR MEMBERS ---------------------- 19.01 Transferor Allocation Schedule. Each Transferor Member acknowledges and agrees that the Transferor Allocation Schedule attached hereto as Exhibit I is true, correct and complete in all respects as it relates to such Transferor Member. 19.02 Time of Effectiveness. The Transferor Members 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 counterparts to such agreements. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their respective hands and seals as of the day and year first above written. WITNESS: - ------------------------------ ---------------------------- Stephen M. Gorn - ------------------------------ ---------------------------- John B. Colvin -53- - ------------------------------ ---------------------------- Morton Gorn - Transferor Members - BRI OP LIMITED PARTNERSHIP By: Berkshire Apartments, Inc. General Partner ____________________________ By: _________________________ Name: Title: - the BRI Partnership - Stephen M. Gorn, individually, and John B. Colvin, individually, join herein in accordance with the provisions of Section 13.03. - ------------------------------ -------------------------------- Stephen M. Gorn - ------------------------------ -------------------------------- John B. Colvin - the Guarantors- RECEIPT BY ESCROW AGENT The undersigned Escrow Agent hereby acknowledges receipt of $1.00, by certified check to be held as the Deposit pursuant to this Agreement. WITNESS: LAWYERS TITLE INSURANCE CORPORATION ________________________ By: _______________________ Name: Title: Date: -54- List of Schedules Schedule A - Description of Land Schedule B - Personal Property Schedule C - List of Preliminary Plans and Specifications Schedule D - Form of Rent Roll Schedule E - Service Contracts Schedule F - Financial Statements Schedule G - Insurance Schedule J - Environmental Reports Schedule K - Related Agreements Schedule 3.03 - Pro Forma Rents Schedule 5.05 - Litigation Schedule 5.18 - Litigation Pending Against Transferor Company by Tenants Schedule 5.27 - Shared Facilities/Utilities Schedule 5.33 - Liens on Membership Interests 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 - Kickout Agreement Exhibit 7 - BRI Management Agreement Transferor Exhibits ------------------- Exhibit I - List of Transferor Members (with address and membership interest of each member) Exhibit II - Transferor Operating Agreement Exhibit III - Assignment of Transferor Membership Interests Exhibit IV - Amended and Restated Operating Agreement of Transferor Company Exhibit V - Amended and Restated Articles of Organization of Transferor Company Exhibit VI - Gap Indemnity Exhibit VII - Non-Imputation Affidavit Exhibit VIII - Title Affidavit Exhibit IX - Right of First Offer Agreement Exhibit X - AIA Construction Warranty -55- Schedule 5.27 - Shared Facilities/Utilities (Avalon 2) 1. Recreational Facilities Agreement relating to the use of pool and clubhouse facilities on Avalon 1, 3, 4, by tenants of Avalon 2, and the sharing of costs associated with these facilities. 2. Easement Agreement relating to the sewage pumping station and storm water basin #2 servicing Avalon 1, 3, 4 and Avalon 2, and the sharing of costs associated with these facilities. EX-10.31 9 MATERIAL CONTRACTS LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made as of the 25th day of August, 1997 by and between BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership ("Lender") and GGC, L.L.C., a Maryland limited liability company ("Borrower"). RECITALS WHEREAS, Borrower has requested that Lender make a loan (the "Loan") to be secured by a pledge of certain partnership interests of Borrower; and WHEREAS, Lender has agreed to make the Loan to Borrower subject to an in accordance with the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, for and in consideration of the mutual promises herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree as follows: ARTICLE I DEFINITIONS 1.01 Definitions. As used herein, the following definitions shall apply: "Berkshire Offering Cost Percentage" shall have the meaning given to that term in Section 2.02. "BRI" shall mean Berkshire Realty Company, Inc., a Delaware corporation. "BRI OP Cost of Equity" shall have the meaning given to that term in Section 2.02. "Closing Date" shall mean the date of closing under the Related Agreements. "Collateral" shall mean the Partnership Units and other security to be pledged to Lender under the Pledge Agreement as security for the Loan pursuant to Section 2.05 hereof. "Common Stock" shall have the meaning given to such term in Section 3.01(c). "Financing Statements" shall mean UCC-1 Financing Statements with respect to Lender's security interests under the Pledge Agreement. "Guarantors" shall mean Morton Gorn, Stephen M. Gorn and John B. Colvin. "Guaranty" shall mean a Guaranty in the form attached hereto as Schedule 5 to be made by the Guarantors to secure the Loan. "Loan" shall have the meaning given to such term in the Recitals. "Loan to Value Ratio" shall have the meaning given to such term in Section 2.05 hereof. "Note" shall mean a Promissory Note in the original principal amount of the Loan, in the form attached hereto as Schedule 2. "Offering Price" shall have the meaning given to such term in Section 2.07 hereof. "Partnership Agreement" shall mean that certain Amended and Restated Agreement of Limited Partnership of Lender dated May 1, 1995, as it may be amended from time to time. "Partnership Unit" shall mean a unit of limited partnership interests in Lender under the Partnership Agreement. "Pledge Agreement" shall mean a Pledge Agreement of the Guarantors' interests in certain Partnership Units and other security, in the form attached hereto as Schedule 3. "Private Placement" shall have the meaning given to such term in Section 3.01(b) hereof. "Projected 1998 Funds from Operation Per Share of Berkshire Common Stock" shall mean $1.17/per share. "Public Offering" shall have the meaning given to such term in Section 3.01(6) hereof. -2- "Related Agreements" shall have the meaning given to such term in Section 3.01(c). "Related Transactions" shall have the meaning given to such term in Section 3.01(c). "Semi-Annual Loan Review Date" shall have the meaning given to that term in Section 2.06 hereof. ARTICLE II LOAN 2.01 Loan. By and subject to the terms of this Agreement, Lender agrees to lend and Borrower agrees to borrow on the Closing Date the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($7,500,000.00) or such lesser amount as Borrower, in its sole discretion may elect at Closing (but once a lesser amount is elected, no subsequent increase will be allowed), subject to the limitation described in Section 2.06 below. 2.02 Interest Rate. The Interest Rate shall be equal to the BRI OP Cost of Equity. The BRI OP Cost of Equity shall be computed as follows: (i) Projected 1998 Funds From Operation Per Share of Berkshire Common Stock divided by (ii) the initial offering price per Share of Berkshire Common Stock pursuant to the Public Offering divided by (iii) a decimal equal to one (1) minus the Berkshire Offering Cost Percentage, where the Berkshire Offering Cost Percentage is the quotient of the total offering cost incurred by Berkshire divided by the total dollars raised by Berkshire in connection with the Public Offering. An example of the computation of the BRI OP Cost of Equity is attached hereto as Schedule 1. 2.03 Payment. Interest only on the outstanding principal balance of the Loan shall be payable monthly in arrears. Principal may be paid at any time in whole or in part without penalty. A mandatory payment of one half of the original principal balance of the Loan shall be due thirty-six (36) months from the date of Closing. 2.04 Maturity. All principal and any unpaid interest shall be due on the fifth anniversary of the date of Closing. 2.05 Security. The Loan shall be secured by the Guaranty and a pledge by the Guarantors of a sufficient amount of the Partnership Units or Common Stock such that the amount of the Loan does not exceed eighty percent (80%) of the value of Partnership Units or Common Stock pledged as security for the Loan on either (a) the Closing Date or (b) to the extent provided in Section 2.06, any Semi-Annual Loan Review Date. The value of the Partnership -3- Units and Common Stock shall be determined in accordance with the provisions of Section 2.07 hereof. 2.06 Release of Security. On a semi-annual basis, commencing on the date which is six months after the Closing (each such date being referred to herein as a "Semi-Annual Loan Review Date"), the number of pledged Partnership Units or shares of Common Stock or other collateral held by Lender pursuant to Section 5(a) or 5(c) of the Pledge Agreement shall be reduced to reflect the decrease, if any, in the outstanding principal balance of the Loan, provided that no such reduction shall be made to the extent that it would cause the outstanding principal balance of the Loan on any such Semi-Annual Review Date to be less than eighty percent (80%) of the value of the Partnership Units or Common Stock or other collateral held by Lender pursuant to Section 5(a) or 5(c) of the Pledge Agreement which would remain pledged as security for the Loan on such date (as such value is determined in accordance with the provisions of Section 2.07(b) hereof). 2.07 Calculation of Loan to Value Ratio. (a) For purposes of establishing the value of Partnership Units on the Closing Date, the value of each Partnership Unit shall be the offering price per share ("Offering Price"), rounded to the nearest one-thousandth, of one share of Common Stock of BRI as such price is established at the closing of the Public Offering. If such calculation provided would result in the pledge of a fractional Partnership Unit under Section 2.05 hereof, the required number of Partnership Units to be pledged shall be rounded up or down, as the case may be, to the nearest whole number of Partnership Units. (b) For purposes of establishing the value of Partnership Units and Common Stock on each Semi-Annual Loan Review Date, the value of each Partnership Unit or share of Common Stock shall be the average price per share during the ten (10) day period immediately preceding the applicable Semi-Annual Loan Review Date, rounded to the nearest one-thousandth, of one share of Common Stock of BRI. If such calculation would result in the release of a fractional Partnership Unit under Section 2.06 hereof, the required number of Partnership Units or shares of Common Stock (if any) to be released shall be rounded up or down, as the case may be, to the nearest whole number of Partnership Units or shares of Common Stock. -4- ARTICLE III CONDITIONS PRECEDENT 3.01 Lender's Conditions Precedent. Lender shall not be obligated to make any disbursement hereunder or to take any other action under the Loan Documents unless all of the following conditions precedent are satisfied at the time of such action: (a) Delivery of Loan Documents. Borrower and the Guarantors have delivered to Lender each of the following loan documents (the "Loan Documents"): (i) The Promissory Note; (ii) The Pledge Agreement; (iii) The Financing Statements for each filing office required to perfect Lender's security interest in the Collateral; (iv) The Guaranty; and (v) Such other documents, certificates and instruments as Lender may reasonably require in connection with the Loan. (b) Public Offering. Lender has informed Borrower that in connection with the consummation of the various Related Transactions, Lender intends to undertake either or both of (i) a public offering (the "Public Offering") of common stock or other equity securities of Lender (the "Common Stock"), or (ii) a private placement of Common Stock (the "Private Placement"). Borrower shall supply any documentation and additional information reasonably required by Lender in order to complete the offering materials in connection with the Public Offering or the Private Placement. The obligation of Lender 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 dollars. If the Public Offering and Private Placement do not in the aggregate complete offerings which raise a minimum of $75,000,000.00 as aforesaid prior to the Closing Date hereunder, Lender shall have the right to terminate this Agreement effective -5- as of the Closing Date hereunder, 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. (c) Related Agreements. Simultaneously herewith, Lender has entered into certain agreements, more particularly described on Schedule 4 attached hereto (collectively the "Related Agreements"). (The transactions described in the Related Agreements, including this Agreement, are collectively referred to herein as the "Related Transactions"). Except to the extent the parties expressly agree otherwise in writing, in the event that any of the Related Agreements is terminated pursuant to any termination provision of any other Related Agreement, this Agreement shall terminate automatically simultaneously with the termination of any such Related Agreement, 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 (as such term is defined in the Related Agreements), 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. (d) Opinion of Borrower's and Guarantors' Counsel. Lender shall have received the favorable opinion of counsel to Borrower and the Guarantors, or such other evidence as Lender may reasonably require (i) that Borrower has been duly formed in accordance with Maryland law and is validly existing and in good standing under such laws, (ii) that the Loan Documents executed by Borrower have been duly executed and delivered and constitute the valid, legal and binding obligation of Borrower, enforceable in accordance with their terms, subject only to bankruptcy laws and matters of equitable jurisdiction, (iii) that the Guaranty, the Pledge Agreement and any other Loan Documents executed by the Guarantors have been duly executed and delivered and constitute the valid, legal and binding obligation of the Guarantors, enforceable in accordance with their terms, subject only to bankruptcy laws and matters of equitable jurisdiction, (iv) that the Guarantors are all of the members of Borrower, (v) that Lender has a valid, enforceable and perfected security interest in the Collateral, (vi) that, to the best of such counsel's knowledge, the execution, delivery and performance by the Borrower and the Guarantors of the Loan Documents to which each is a party do not conflict with, violate or breach any provision of the organizational documents of Borrower or any agreement or indenture by which either the Borrower or any of the Guarantors may be bound, or any judgments or awards -6- specifically naming the Borrower or any of the Guarantors or specifically applicable to their respective property, (vii) that, to the best of such counsel's knowledge, there is no action, suit or proceeding, pending or threatened against the Borrower or any of the Guarantors, which, if adversely determined, would impair the validity or enforceability of the Loan Documents, and (viii) that except for the filing of the Financing Statements with the applicable filing offices, (and except as may be required in connection with any Blue Sky or other securities laws, codes, rules or regulations applicable to the issuance of the Collateral to the Guarantors by Lender) no approval, consent, order or authorization of or filing with any governmental authorities is required in connection with the valid execution and delivery of the Loan Documents by Borrower or the Guarantors. (e) Reaffirmation. Borrower shall have delivered a certificate to Lender reaffirming the representations and warranties of Borrower set forth herein as of the Closing Date. (f) BankBoston, N.A. and Mellon Bank, N.A. Approvals. If BankBoston, N.A. and Mellon Bank, N.A. shall fail to deliver written approval of the Loan prior to September 15, 1997, Lender and Borrower shall each have the right to terminate this Agreement effective as of the Closing Date hereunder, 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. 3.02 Borrower's Right To Termination. In the event that Lender shall fail to make the Loan on or before the Closing Date for any reason other than a default by Borrower hereunder or under any Related Agreement, Borrower shall have the right to terminate this Agreement effective as of the Closing Date hereunder, 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. ARTICLE IV BORROWER'S REPRESENTATIONS AND WARRANTIES 4.01 Representations and Warranties of Borrower. Borrower hereby represents and warrants to Lender that as of the date of this Agreement: -7- (a) This Loan Agreement has been validly executed, is now binding on Borrower and is in full force and effect, and that Borrower has faithfully performed all of its obligations hereunder to the extent accrued as of the date hereof; (b) Borrower has been duly formed and is validly existing and in good standing as a limited liability company under the laws of the State of Maryland and has the right, power and lawful authority to enter into this Agreement and the Loan Documents and to consummate the transactions contemplated hereby; (c) Borrower has duly executed and delivered this Agreement, and all necessary action has been taken by Borrower to authorize the execution and delivery thereof, and of the other Loan Documents; (d) The execution and performance of this Agreement and the consummation of the transactions hereby contemplated will not result in any breach of, or constitute a default under, any mortgage, lease, bank loan or credit agreement, trust indenture, or other instrument to which Borrower is a party or by which Borrower may be bound or affected; and (e) There are no actions, suits or proceedings pending or threatened against or affecting Borrower which may involve or affect the validity or enforceability of this Agreement or any of the Loan Documents, at law or in equity, and Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority which may involve or affect the validity or enforceability of this Agreement or any of the Loan Documents. 4.02 Representations and Warranties of Lender. Lender hereby represents and warrants to Borrower as of the date of this Agreement: (a) This Loan Agreement has been validly executed, is now binding on Lender and is in full force and effect, and that Lender has faithfully performed all of its obligations hereunder to the extent accrued as of the date hereof; (b) Lender has been duly formed and is validly existing and in good standing as a limited partnership under the laws of the State of Delaware and has the right, power and lawful authority to enter into this Agreement and the Loan Documents and to consummate the transactions contemplated hereby; (c) Lender has duly executed and delivered this Agreement, and all necessary action has been taken by Lender to authorize the execution and delivery hereof and of the other Loan Documents, subject to satisfaction of the condition precedent set forth in Section 3.01(f) hereof; -8- (d) The execution and performance of this Agreement and the consummation of the transactions hereby contemplated will not result in any breach of, or constitute a default under, any mortgage, lease, bank loan or credit agreement, trust, indenture or other instrument to which Lender is a party or by which Lender may be bound or affected, subject to satisfaction of the condition precedent set forth in Section 3.01(f) hereof; and (e) There are no actions, suits or proceedings pending or threatened against or affecting Lender which may involve or affect the validity or enforceability of this Agreement or any of the Loan Documents, at law or in equity, and Lender is not in default with respect to any order, writ, injunction, decree or demand of any court or any governmental authority which may involve or affect the validity or enforceability of this Agreement or any of the Loan Documents. ARTICLE V COVENANTS OF BORROWER 5.01 Priority of Pledge. Borrower hereby covenants and agrees at all times to keep the Collateral free from any attachments, encumbrances or other liens of any kind or nature, whether any such liens or encumbrances be prior to or subject and subordinate to the Pledge. 5.02 Restrictions on Transfers, Distributions and Borrowings. Borrower hereby covenants and agrees not without the prior written approval of Lender in each instance obtained to convey, assign, transfer, dispose of or encumber, or permit the conveyance, assignment, transfer, disposal or encumbrance of, any part or all of any legal or beneficial interest in the Collateral (subject to the provisions of the Pledge Agreement) or in Borrower (provided, however, that any member of Borrower may, without the prior approval of Lender, transfer any of its membership interest in Borrower to any member of its immediate family). ARTICLE VI EVENTS OF DEFAULT 6.01 Events of Default. The occurrence of any of the following shall constitute an Event of Default hereunder: (a) Borrower shall fail to make any payment due to Lender under this Agreement, the Note or any other Loan Document, and such failure remains uncured ten (10) days after written notice from Lender, or Borrower shall fail to perform any other obligation of Borrower under this Agreement, the Note or any -9- other Loan Document, and such failure remains uncured thirty (30) days after written notice from Lender; (b) Any Guarantor shall fail to make any payment due to Lender under the Guaranty or the Pledge Agreement, and such failure remains uncured ten (10) days after written notice from Lender; or any Guarantor shall fail to perform any other obligation of Guarantor under the Guaranty or the Pledge Agreement, and such failure remains uncured thirty (30) days after written notice from Lender; or (c) any statement, representation or warranty made in this Agreement or any other Loan Document or in any other instrument securing the Loan, shall prove to be false, misleading or erroneous in any material respect. ARTICLE VII LENDER'S REMEDIES IN EVENT OF DEFAULT 7.01 Remedies. Upon the occurrence of any Event of Default, Lender may at any time or times thereafter declare the unpaid principal of and accrued interest and other charges on the Note to be immediately due and payable, whereupon the same shall become due and payable without any notice or demand. ARTICLE VIII MISCELLANEOUS 8.01 Time of Essence. Time is of the essence of this Agreement and each of the Loan Documents. 8.02 Further Assurances. At Lender's request and at Borrower's expense, Borrower shall execute, acknowledge and deliver any other instruments and perform any other acts necessary, desirable or proper (as reasonably determined by Lender) to carry out the purposes of the Loan Documents or to perfect or preserve any liens or security interests created by the Loan Documents. 8.03 No Third Parties Benefited. No person other than Lender and Borrower and their permitted successors and assigns shall have any right of action under any of the Loan Documents. 8.04 Authority to File Notices. Borrower irrevocably appoints and authorizes Lender, as Borrower's attorney in fact which agency is coupled with an interest, to execute and/or record in Lender's or Borrower's name any notices, instruments or documents that Lender deems appropriate to protect or perfect Lender's interest under any of the Loan Documents. -10- 8.05 Relationship of Parties. The relationship of Borrower and Lender under the Loan Documents is, and shall at all times remain, solely that of Borrower and Lender. Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any third party with respect to the Collateral, except as expressly provided in the Loan Documents. 8.06 Attorneys' Fees; Enforcement. If any attorney is engaged by Lender to enforce or defend any provision of this Agreement or any of the other Loan Documents, or as a consequence of any Event of Default under the Loan Documents, with or without the filing of any legal action or proceeding, Borrower shall pay to Lender, immediately upon demand, the amount of all reasonable attorneys' fees and costs incurred by Lender in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein. 8.07 Assignment. Borrower shall not assign Borrower's interest under any of the Loan Documents, or in any monies due or to become due thereunder, without Lender's prior written consent. Any assignment made without Lender's prior written consent shall be void. 8.08 Integration; Interpretation. The Loan Documents contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated herein and supersede all prior negotiations. Any reference to the Loan Documents in any of the Loan Documents includes any amendments, renewals or extensions approved by Lender. Any reference in this Agreement to the Loan Documents shall include all or any of the provisions of the Agreement and the Loan Documents unless otherwise specified. 8.09 Joint and Several Liability. The liability of all persons or entities who are in any manner obligated under the Note or any other Loan Document shall be joint and several. 8.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8.11 Paragraph Headings. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.12 No Waiver; Cumulative Remedies. Lender shall not by any act (except by a written instrument pursuant to Section 8.13 hereof), delay, indulgence, omission -11- or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 8.13 Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Lender and Borrower, provided that any provision of this Agreement may be waived by Lender in a letter or agreement executed by Lender or by facsimile transmission from Lender. This Agreement shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of Lender and its successors and assigns. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland; provided, however, that any suit in connection with any dispute arising out of or relating to this Agreement shall be brought only in the federal and state courts of the Commonwealth of Massachusetts. Borrower and Lender consent to the personal jurisdiction of the federal and state courts of the Commonwealth of Massachusetts 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. 8.14 Notices. Whenever notice, demand or a request under this Agreement may properly be given to Lender or Borrower, the same shall be in writing and shall be (a) hand delivered to the party intended to receive the same, or (b) sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the parties at their respective addresses as set forth below: If to Borrower: GGC, L.L.C. c/o Questar Properties, Inc. 124 Slade Avenue; Suite 200 Baltimore, Maryland 21208 Attention: Stephen M. Gorn With a copy to: -12- James C. Oliver, Esq. Lenrow, Kohn, Howard & Oliver Signet Tower, 9th Floor Seven St. Paul Street Baltimore, MD 21202-1626 If to Lender: BRI OP Limited Partnership c/o Berkshire Realty Company, Inc. 470 Atlantic Avenue Boston, Massachusetts 02110 Any party hereto may change its address for purposes of this Agreement by notice to the other party given in accordance with the provisions of this Section. Any notice, demand or request given in accordance with this Section shall be treated as having been given when so delivered, or if mailed, when deposited with the U.S. Postal Service. 8.15 Non-Recourse. Notwithstanding anything to the contrary contained herein, in any action brought to enforce the obligation of any Borrower to pay the indebtedness secured hereby, the judgment or decree shall be enforceable against such Borrower only to the extent of its interest in the Collateral, and any such judgment shall not be subject to execution on, nor be a lien on, any assets of such Borrower other than Borrower's interest in the Collateral; [This Space Intentionally Left Blank] -13- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as a sealed instrument by their respective authorized officers as of the day and year first above written. GGC, L.L.C. By: ________________________________________ Name: Title: Authorized Member LENDER: BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership By: Berkshire Apartments, Inc., its general partner By: _______________________________ Name: Title: -14- SCHEDULES Schedule Description -------- ----------- 1 Sample Calculation of BRI OP Cost of Equity 2 Form of Promissory Note 3 Form of Pledge Agreement 4 Related Transactions 5 Form of Guaranty -15- EX-10.32 10 MATERIAL CONTRACTS =============================================================================== STOCK PURCHASE AGREEMENT by and among BERKSHIRE REALTY COMPANY, INC. WESTBROOK REAL ESTATE FUND II, L.P. and WESTBROOK BERKSHIRE HOLDINGS, L.L.C. dated as of September 19, 1997 =============================================================================== TABLE OF CONTENTS
Page ARTICLE 1 Definitions Section 1.1 "Action"..................................................................... 1 Section 1.2 "ADA"........................................................................ 1 Section 1.3 "Advancing Party"............................................................ 1 Section 1.4 "Affiliate".................................................................. 1 Section 1.5 "Agreement".................................................................. 1 Section 1.6 "Amended Company By-laws".................................................... 1 Section 1.7 "Benefit Arrangements"....................................................... 1 Section 1.8 "Blue Sky Laws".............................................................. 1 Section 1.9 "Board of Directors"......................................................... 2 Section 1.10 "Business Day"............................................................... 2 Section 1.11 "Buyer"...................................................................... 2 Section 1.12 "Buyer Counsel".............................................................. 2 Section 1.13 "Capital Expenditure Budget and Schedule".................................... 2 Section 1.14 "CERCLA"..................................................................... 2 Section 1.15 "Certificate of Designation"................................................. 2 Section 1.16 "Claim"...................................................................... 2 Section 1.17 "Closing".................................................................... 2 Section 1.18 "Closing Date"............................................................... 2 Section 1.19 "Code"....................................................................... 2 Section 1.20 "Commitment"................................................................. 2 Section 1.21 "Company".................................................................... 2 Section 1.22 "Company Charter"............................................................ 2 Section 1.23 "Company Common Stock"....................................................... 2 Section 1.24 "Company Environmental Reports".............................................. 2 Section 1.25 "Company Leases"............................................................. 2 Section 1.26 "Company Plans".............................................................. 2 Section 1.27 "Company Preferred Stock".................................................... 2 Section 1.28 "Company Properties"......................................................... 2 Section 1.29 "Company Registration Statement"............................................. 2 Section 1.30 "Company Reports"............................................................ 3 Section 1.31 "Company Stock".............................................................. 3 Section 1.32 "Company Units".............................................................. 3 Section 1.33 "Controlled Group Liability"................................................. 3 Section 1.34 "Debt Instruments"........................................................... 3 Section 1.35 "Development Properties"..................................................... 3 Section 1.36 "Development Budget and Schedule"............................................ 3 Section 1.37 "Employee Benefit Plans"..................................................... 3 Section 1.38 "Employees".................................................................. 3 Section 1.39 "Environmental Claim"........................................................ 3 Section 1.40 "Environmental Laws"......................................................... 3 Section 1.41 "Environmental Permits"...................................................... 3 Section 1.42 "ERISA"...................................................................... 3 Section 1.43 "ERISA Affiliates"........................................................... 3 Section 1.44 "Exchange Act"............................................................... 3 Section 1.45 "Execution Closing".......................................................... 3 Section 1.46 "Executive Summaries of the Company Environmental Reports"................... 3
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Page Section 1.47 "GAAP"....................................................................... 3 Section 1.48 "General Partner"............................................................ 3 Section 1.49 "Government Authority"....................................................... 3 Section 1.50 "HQ Space"................................................................... 3 Section 1.51 "HSR Act".................................................................... 3 Section 1.52 "Indemnified Party".......................................................... 4 Section 1.53 "Initial Closing"............................................................ 4 Section 1.54 "Initial Purchase Price"..................................................... 4 Section 1.55 "Insurance Policies"......................................................... 4 Section 1.56 "IRS"........................................................................ 4 Section 1.57 "Knowledge".................................................................. 4 Section 1.58 "Liabilities"................................................................ 4 Section 1.59 "Liens"...................................................................... 4 Section 1.60 "Loss and Expenses".......................................................... 4 Section 1.61 "Material Adverse Effect".................................................... 4 Section 1.62 "NYSE"....................................................................... 4 Section 1.63 "Operating Partnership"...................................................... 4 Section 1.64 "Operating Partnership Units"................................................ 4 Section 1.65 "Partnership Affiliate"...................................................... 5 Section 1.66 "Partnership Agreement"...................................................... 5 Section 1.67 "Pension Plans".............................................................. 5 Section 1.68 "Per Share Purchase Price"................................................... 5 Section 1.69 "Permitted Liens"............................................................ 5 Section 1.70 "Person"..................................................................... 5 Section 1.71 "Project".................................................................... 5 Section 1.72 "Property Restrictions"...................................................... 5 Section 1.73 "Purchase Price"............................................................. 5 Section 1.74 "Purchased Shares"........................................................... 5 Section 1.75 "Registration Rights Agreement".............................................. 5 Section 1.76 "Regulatory Filings"......................................................... 5 Section 1.77 "REIT"....................................................................... 5 Section 1.78 "Release".................................................................... 5 Section 1.79 "Remaining Equity Commitment"................................................ 5 Section 1.80 "Rent Roll".................................................................. 6 Section 1.81 "SEC"........................................................................ 6 Section 1.82 "Securities Act"............................................................. 6 Section 1.83 "Securities Laws"............................................................ 6 Section 1.84 "Stock Purchase"............................................................. 6 Section 1.85 "Subsequent Funding Minimum"................................................. 6 Section 1.86 "Subsequent Purchase Price".................................................. 6 Section 1.87 "Subsequent Purchase"........................................................ 6 Section 1.88 "Subsidiaries"............................................................... 6 Section 1.89 "Tax"........................................................................ 6 Section 1.90 "Tax Return"................................................................. 6 Section 1.91 "Tenancy Leases"............................................................. 6 Section 1.92 "The Berkshire Group"........................................................ 6 Section 1.93 "Total Equity Commitment".................................................... 6 Section 1.94 "Warrants"................................................................... 7 Section 1.95 "Welfare Plans".............................................................. 7 ARTICLE 2
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Page Purchase and Sale of Shares; Closing Section 2.1 "Purchase and Sale."......................................................... 7 Section 2.2 "Consideration."............................................................. 7 Section 2.3 "Initial Closing."........................................................... 7 Section 2.4 "Subsequent Purchase and Sale.".............................................. 7 Section 2.5 "Additional Agreements and Closing Deliveries.".............................. 8 Section 2.6 "Time and Place of Closing."................................................. 8 Section 2.7 "Right to Assign."........................................................... 8 Section 2.8 "Advances to Buyer."......................................................... 8 ARTICLE 3 Representations and Warranties of the Company Section 3.1 "Organization and Qualification, Subsidiaries.".............................. 8 Section 3.2 "Authority Relative to Agreements; Board Approval.".......................... 9 Section 3.3 "Capital Stock and Units."................................................... 10 Section 3.4 "No Conflicts; No Defaults, Required Filings and Consents.".................. 11 Section 3.5 "SEC and Other Documents, Financial Statements; Undisclosed Liabilities." ... 11 Section 3.6 "Litigation, Compliance With Law."........................................... 12 Section 3.7 "Absence of Certain Changes or Events."...................................... 12 Section 3.8 "Tax Matters; REIT and Partnership Status.".................................. 12 Section 3.9 "Compliance with Agreements."................................................ 13 Section 3.10 "Financial Records; Company Charter and By-laws; Corporate Records."......... 15 Section 3.11 "Properties."................................................................ 15 Section 3.12 "Environmental Matters."..................................................... 18 Section 3.13 "Employees and Employee Benefit Plans."...................................... 20 Section 3.14 "Labor Matters."............................................................. 22 Section 3.15 "Affiliate Transactions.".................................................... 22 Section 3.16 "Insurance."................................................................. 22 Section 3.17 "Delaware Takeover Law."..................................................... 22 Section 3.18 "Brokers or Finders."........................................................ 22 Section 3.19 "Disclosure of Facts."....................................................... 22 Section 3.20 "REOC Status."............................................................... 22 Section 3.21 "Knowledge Defined."......................................................... 23 Section 3.22 "Construction of Material Adverse Effect."................................... 23 ARTICLE 4 Representations and Warranties of Buyer Section 4.1 "Organization.".............................................................. 24 Section 4.2 "Due Authorization."......................................................... 24 Section 4.3 "Conflicting Agreements and Other Matters.".................................. 24 Section 4.4 "Acquisition for Investment, Sophistication, Source of Funds."............... 24 Section 4.5 "Brokers or Finders."........................................................ 24 Section 4.6 "REIT Qualification Matters."................................................ 24 Section 4.7 "Investment Company Matters."................................................ 25 ARTICLE 5
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Page Representations and Covenants Relating to Closings Section 5.1 "Taking of Necessary Action."................................................ 25 Section 5.2 "Company Preferred Stock, Certificate of Designation; By-laws.".............. 25 Section 5.3 "Public Announcements; Confidentiality."..................................... 25 Section 5.4 "Conduct of the Business."................................................... 25 Section 5.5 "No Solicitation of Transactions."........................................... 26 Section 5.6 "Information and Access.".................................................... 26 Section 5.7 "Notification of Certain Matters."........................................... 26 ARTICLE 6 Certain Additional Covenants Section 6.1 "Resale.".................................................................... 26 Section 6.2 "Use of Funds.".............................................................. 26 Section 6.3 "REIT Status."............................................................... 26 Section 6.4 "Payments.".................................................................. 27 Section 6.5 "Preemptive Rights."......................................................... 27 Section 6.6 "Board of Directors"......................................................... 29 Section 6.7 "Transactions with Affiliates.".............................................. 29 Section 6.8 "Company Stock Authorized, Issued and Outstanding............................ 29 ARTICLE 7 Conditions to Closings Section 7.1 "Conditions of Purchase at Initial Closing."................................. 29 Section 7.2 "Conditions of Purchase at All Closings.".................................... 30 Section 7.3 "Conditions of Sale."........................................................ 31 ARTICLE 8 Survival; Indemnification Section 8.1 "Survival.".................................................................. 32 Section 8.2 "Indemnification by Buyer or the Company."................................... 32 Section 8.3 "Third-Party Claims."........................................................ 33 ARTICLE 9 Termination Section 9.1 "Termination."............................................................... 33 Section 9.2 "Procedure and Effect of Termination."....................................... 34 Section 9.3 "Expenses.".................................................................. 34 ARTICLE 10 Miscellaneous
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Page Section 10.1 "Counterparts.".............................................................. 34 Section 10.2 "Governing Law."............................................................. 34 Section 10.3 "Entire Agreement.".......................................................... 34 Section 10.4 "Notices."................................................................... 34 Section 10.5 "Successors and Assigns.".................................................... 35 Section 10.6 "Headings.".................................................................. 36 Section 10.7 "Amendments and Waivers.".................................................... 36 Section 10.8 "Interpretation; Absence of Presumption.".................................... 36 Section 10.9 "Severability.".............................................................. 36 Section 10.10 "Further Assurances."........................................................ 36 Section 10.11 "Specific Performance."...................................................... 36 Section 10.12 "Schedules."................................................................. 36
v SCHEDULES
Schedule 3.1(e) Jurisdictions Not Qualified To Do Business Schedule 3.1(f) Subsidiaries Schedule 3.3(a) Capital Stock Schedule 3.3(b) Operating Partnership Unit Options, Warrants, Etc. Schedule 3.3(d) Individual Ownership Schedule 3.4(b) Company Plans Schedule 3.4(d) Statutory; Regulatory Compliance Schedule 3.4(e) Contract Compliance Schedule 3.4(f) Company Filings; Consent Schedule 3.5(a) Company Registration Statements and Company Reports Schedule 3.5(b) Company Financials Schedule 3.6(a) Pending Litigation Schedule 3.6(b) Company Compliance Schedule 3.7 Absence of Certain Changes or Events Schedule 3.8(a) Tax Matters Schedule 3.9(a) Company Defaults; Charter or By-Laws Compliance Schedule 3.9(b) Company Filings; Fees Schedule 3.9(c) Indebtedness; Joint Venture and Partnership Agreements Schedule 3.9(d) Development, Construction, Management and Leasing Arrangements Schedule 3.9(e) Other Material Agreements Schedule 3.9(f) Conflict Policies & Agreements; Waivers Schedule 3.10(a) Financial Records; Company Charter and By-Laws; Corporate Records Schedule 3.10(b) Corporate Records Schedule 3.10(c) Corporate Proceedings Schedule 3.11(a) Property Addresses; Title Summary Schedule 3.11(b) Permits; Licenses; Zoning Schedule 3.11(c) Road Changes; Condemnation Proceedings Schedule 3.11(e) ADA Status Schedule 3.11(g) Letters of Intent or Similar Understandings Schedule 3.11(h) Property Rights; Rights of First Refusal Schedule 3.11(i) Non-Compliance and Capital Expenditure Budget and Schedule; Insurance Schedule 3.11(j) Developed, Undeveloped, or Rehabilitated Land of Company Property Schedule 3.11(k) Company Properties; HQ Space Schedule 3.11(l) Tenancy Leases Schedule 3.11(m) Permitted Liens Schedule 3.12(a) Environmental Permits Schedule 3.12(e) Environmental Concerns Schedule 3.12(f) Environmental Reports Schedule 3.13(a) Employment Agreements Schedule 3.13(b) Employee Benefit Plans Schedule 3.13(c) Company Plans Compliance Schedule 3.13(g) COBRA Participants Schedule 3.13(k) Vesting; Acceleration of Payments Schedule 3.14 Collective Bargaining; Labor Union Agreements Schedule 3.15 Affiliate Transactions Schedule 3.20 Individuals for Knowledge Test Schedule 6.4 Form of Detailed Statement
vi EXHIBITS
Exhibit A Form of Certificate of Designation Exhibit B Form of Registration Rights Agreement Exhibit C Form of Amended Company Bylaws Exhibit D Form of Amendment to the Operating Partnership Agreement
vii THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September 19, 1997, is made by and among Berkshire Realty Company, Inc., a Delaware corporation (the "Company"), Westbrook Real Estate Fund II, L.P., a Delaware limited partnership (the "Advancing Party"), and Westbrook Berkshire Holdings, L.L.C., a Delaware limited liability company and an affiliate of the Advancing Party ("Buyer"). RECITALS: WHEREAS, Buyer wishes to purchase from the Company, and the Company wishes to sell to Buyer, an aggregate of 2,737,000 shares of a newly designated and authorized series of convertible preferred stock of the Company, convertible into shares of the Company's common stock, par value $0.01 per share (respectively, the "Company Preferred Stock" and the "Company Common Stock", and such stock of such series and class, and all other series of preferred stock of the Company outstanding from time to time, collectively, the "Company Stock"), having the terms set forth in the form of Certificate of Designation, Preferences and Rights attached as Exhibit A (the "Certificate of Designation"), which designates the Company Preferred Stock pursuant to the Company's Restated Certificate of Incorporation dated November 1, 1990, as amended by the Certificate of Amendment dated December 7, 1990 (as so amended to the date hereof, the "Company Charter"), in each case at a price of $25.00 per share; WHEREAS, Buyer and the Company are entering into this Agreement to provide for such purchase and sale and to establish various rights and obligations in connection therewith; WHEREAS, in consideration for the rights to be granted to it, the Advancing Party has agreed to advance to Buyer all funds for any and all purchases of Company Preferred Stock pursuant hereto; and NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: ARTICLE 1 Definitions As used in this Agreement, the following terms shall have the following respective meanings: Section 1.1 "Action" shall mean any actual or threatened action, suit, arbitration, inquiry, proceeding or investigation by or before any Government Authority. Section 1.2 "ADA" shall have the meaning set forth in Section 3.11(e). Section 1.3 "Advancing Party" shall have the meaning set forth in the first paragraph hereof. Section 1.4 "Affiliate" shall have the meaning ascribed thereto in Rule 12b-2 promulgated under the Exchange Act, and as in effect on the date hereof, and including, with respect to Buyer, Westbrook Real Estate Fund II, L.P., Westbrook Real Estate Co-Investment Partnership II, L.P., and their Affiliates and investors. Section 1.5 "Agreement" shall have the meaning set forth in the first paragraph hereof. Section 1.6 "Amended Company By-laws" shall have the meaning set forth in Section 7.1(c). Section 1.7 "Benefit Arrangements" shall have the meaning set forth in Section 3.13(h). Section 1.8 "Blue Sky Laws" have the meaning set forth in Section 3.4(f). Section 1.9 "Board of Directors" shall mean the board of directors of the Company. Section 1.10 "Business Day" shall mean any day other than a Saturday, a Sunday or a bank holiday in New York, New York. Section 1.11 "Buyer" shall have the meaning set forth in the first paragraph hereof. Section 1.12 "Buyer Counsel" shall mean the General Counsel of Westbrook Partners, L.L.C., or such counsel to Buyer and the Advancing Party as such General Counsel shall have determined shall render any opinion to the Company in connection with this Agreement. Section 1.13 "Capital Expenditure Budget and Schedule" shall have the meaning set forth in Section 3.11(i). Section 1.14 "CERCLA" shall have the meaning set forth in Section 3.12(e). Section 1.15 "Certificate of Designation" shall have the meaning set forth in the second paragraph hereof. Section 1.16 "Claim" shall have the meaning set forth in Section 3.12(g)(i). Section 1.17 "Closing" shall mean the Execution Closing or the consummation of the Subsequent Stock Purchase. Section 1.18 "Closing Date" shall mean, with respect to the consummation of any Stock Purchase, three (3) Business Days after the date on which the conditions set forth herein with respect thereto shall be satisfied or duly waived, or if the Company and Buyer mutually agree on a different date, the date upon which they have mutually agreed. Section 1.19 "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor thereto, including all of the rules and regulations promulgated thereunder. Section 1.20 "Commitment" shall have the meaning set forth in Section 3.7. Section 1.21 "Company" shall have the meaning set forth in the first paragraph hereof. Section 1.22 "Company Charter" shall have the meaning set forth in the second paragraph hereof. Section 1.23 "Company Common Stock" shall have the meaning set forth in the second paragraph hereof. Section 1.24 "Company Environmental Reports" shall have the meaning set forth in Section 3.12(f). Section 1.25 "Company Leases" shall have the meaning set forth in Section 3.11(f). Section 1.26 "Company Plans" shall have the meaning set forth in Section 3.13(b). Section 1.27 "Company Preferred Stock" shall have the meaning set forth in the second paragraph hereof. Section 1.28 "Company Properties" shall have the meaning set forth in Section 3.11(a). Section 1.29 "Company Registration Statement" shall have the meaning set forth in Section 3.5(a). 2 Section 1.30 "Company Reports" shall have the meaning set forth in Section 3.5(a). Section 1.31 "Company Stock" shall have the meaning set forth in the second paragraph hereof. Section 1.32 "Company Units" shall have the meaning set forth in Section 3.3(b). Section 1.33 "Controlled Group Liability" shall have the meaning set forth in Section 3.13(h). Section 1.34 "Debt Instruments" shall mean all notes, mortgages, deeds of trust or similar instruments which evidence or secure any indebtedness owing to the Company or any Subsidiary. Section 1.35 "Development Properties" shall have the meaning set forth in Section 3.11(j). Section 1.36 "Development Budget and Schedule" shall have the meaning set forth in Section 3.11(j). Section 1.37 "Employee Benefit Plans" shall have the meaning set forth in Section 3.13(h). Section 1.38 "Employees" shall have the meaning set forth in Section 3.13(h). Section 1.39 "Environmental Claim" shall have the meaning set forth in Section 3.12(g)(ii). Section 1.40 "Environmental Laws" shall have the meaning set forth in Section 3.12(g)(iii). Section 1.41 "Environmental Permits" shall have the meaning set forth in Section 3.12(a). Section 1.42 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor thereto. Section 1.43 "ERISA Affiliates" shall mean, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same "controlled group" as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA. Section 1.44 "Exchange Act" shall have the meaning set forth in Section 3.4(f). Section 1.45 "Execution Closing" shall mean the date of execution and delivery of this Agreement. Section 1.46 "Executive Summaries of the Company Environmental Reports" shall have the meaning set forth in Section 3.12(f). Section 1.47 "GAAP" shall have the meaning set forth in Section 3.5(b). Section 1.48 "General Partner" shall mean Berkshire Apartments, Inc., a Delaware corporation, a wholly-owned subsidiary of the Company and the general partner of the Operating Partnership, or any successor thereto or any successor general partner of the Operating Partnership. Section 1.49 "Government Authority" shall mean any government or state (or any subdivision thereof) of or in the United States, or any agency, authority, bureau, commission, department or similar body or instrumentality thereof, or any governmental court or tribunal. Section 1.50 "HQ Space" shall have the meaning set forth in Section 3.11(a). Section 1.51 "HSR Act" shall have the meaning set forth in Section 3.4(f). 3 Section 1.52 "Indemnified Party" shall mean Buyer or the Company, as the context may require. Section 1.53 "Initial Closing" shall mean that date on which the first Stock Purchase occurs. Section 1.54 "Initial Purchase Price" shall mean the Purchase Price to be paid at the Initial Closing, and shall be either an amount not in excess of $15,000,000 or an amount not less than the Total Equity Commitment. Section 1.55 "Insurance Policies" shall have the meaning set forth in Section 3.16. Section 1.56 "IRS" shall mean the Internal Revenue Service. Section 1.57 "Knowledge" shall have the meaning set forth in Section 3.20. Section 1.58 "Liabilities" shall mean, as to any person, all debts, adverse claims, liabilities and obligations, direct, indirect, absolute or contingent of such person, whether accrued, vested or otherwise, whether in contract, tort, strict liability or otherwise and whether or not actually reflected or required by GAAP to be reflected and any off-balance sheet actual or contingent claims which exceed in the aggregate $2,000,000 in such person's or entity's balance sheets or other books and records, including (i) obligations arising from non-compliance with any law, rule or regulation of any Government Authority or imposed by any court or any arbitrator of any kind, (ii) all indebtedness or liability of such person for borrowed money, or for the purchase price of property or services (including trade obligations), (iii) all obligations of such person as lessee under leases, capital or other, (iv) liabilities of such person in respect of plans covered by Title IV of ERISA, or otherwise arising in respect of plans for employees or former employees or their respective families or beneficiaries, (v) reimbursement obligations of such person in respect of letters of credit, (vi) all obligations of such person arising under acceptance facilities, (vii) all liabilities of other persons or entities, directly or indirectly, guaranteed, endorsed (other than for collection or deposit in the ordinary course of business) or discounted with recourse by such person or with respect to which the person in question is otherwise directly or indirectly liable, (viii) all obligations secured by any Lien on property of such person, whether or not the obligations have been assumed, and (ix) all other items which have been, or in accordance with GAAP would be, included in determining total liabilities on the liability side of the balance sheet, and in all events excluding litigation matters involving tenants that arise and are dealt with in the ordinary course of business and operating equipment leases. Section 1.59 "Liens" shall mean all liens, mortgages, deeds of trust, deeds to secure debt, security interests, pledges, claims, charges, easements and other encumbrances of any nature whatsoever. Section 1.60 "Loss and Expenses" shall have the meaning set forth in Section 8.2(a). Section 1.61 "Material Adverse Effect" shall mean a material adverse effect, or more than one effect if more than one shall be in existence at the same time or times, on the financial condition, results of operations or business of the Company and its Subsidiaries (to the extent of the Company's interests therein) taken as a whole. For the purposes hereof, an effect shall be material (a) if the aggregate dollar amount of any loss or Liability of, or, diminution in value or other cost or expense to the Company, is in excess of $2,000,000, or (b) if the aggregate dollar amount of revenue lost, not received, or reduced, or any charge to earnings, is in excess of $200,000, or in the event that the thresholds established in both clause (a) and (b) are met, then both. Section 1.62 "NYSE" shall mean The New York Stock Exchange, Inc. Section 1.63 "Operating Partnership" shall mean BRI OP Limited Partnership, a Delaware limited partnership, or any successor thereto. Section 1.64 "Operating Partnership Units" shall mean the class of partnership units representing shares of partnership interests in the Operating Partnership. 4 Section 1.65 "Partnership Affiliate" shall have the meaning set forth in Section 3.9(f). Section 1.66 "Partnership Agreement" shall mean that certain Amended and Restated Agreement of Limited Partnership of BRI OP Limited Partnership dated as of May 1, 1995. Section 1.67 "Pension Plans" shall have the meaning set forth in Section 3.13(h). Section 1.68 "Per Share Purchase Price" shall mean the price of $25.00 per share for the Company Preferred Stock. Section 1.69 "Permitted Liens" shall mean (i) Liens (other than liens imposed under ERISA or any Environmental Law or in connection with any Environmental Claim) for taxes or other assessments or charges of Governmental Authorities that are not yet delinquent or that are being contested in good faith by appropriate proceedings, in each case, with respect to which adequate reserves or other appropriate provisions are being maintained by the Company or its Subsidiaries to the extent required by GAAP, (ii) statutory liens of landlords, carriers, warehousemen, mechanics, materialmen and other Liens (other than Liens imposed under ERISA or any Environmental Law or in connection with any Environmental Claim) imposed by law and created in the ordinary course of business for amounts not yet overdue or which are being contested in good faith by appropriate proceedings, in each case, with respect to which adequate reserves or other appropriate provisions are being maintained by the Company or its Subsidiaries to the extent required by GAAP and which do not exceed $100,000 in the aggregate, (iii) the Company Leases, (iv) easements, rights-of-way, covenants and restrictions which are customary and typical for office properties similar to the Company Properties and which do not (x) interfere materially with the ordinary conduct of any Company Property or the business of the Company and its Subsidiaries as a whole or (y) detract materially from the value or usefulness of the Company Property to which they apply, (v) the Liens which were granted by the Company or any of its Subsidiaries to lenders pursuant to credit agreements in existence on the date hereof which are described in Schedule 3.9(c), (vi) the other Liens, if any, described in Schedule 3.11(m), and (vii) such imperfections of title and encumbrances. Section 1.70 "Person" shall mean any individual, partnership, corporation, limited liability company, business trust, joint stock company, unincorporated association, joint venture, other entity of whatever nature or Government Authority. Section 1.71 "Project" shall have the meaning set forth in Section 3.11(j). Section 1.72 "Property Restrictions" shall have the meaning set forth in Section 3.11(a). Section 1.73 "Purchase Price" shall mean the Per Share Purchase Price multiplied by the number of shares of Company Preferred Stock to be purchased and sold at a particular Closing. Section 1.74 "Purchased Shares" shall have the meaning set forth in Section 2.1. Section 1.75 "Registration Rights Agreement" shall have the meaning set forth in Section 2.5(a). Section 1.76 "Regulatory Filings" shall have the meaning set forth in Section 3.4(f). Section 1.77 "REIT" shall have the meaning set forth in Section 3.8(b). Section 1.78 "Release" shall have the meaning set forth in Section 3.12(g)(v). Section 1.79 "Remaining Equity Commitment" shall mean, on any given date after the Initial Closing, the Total Equity Commitment minus the Initial Purchase Price. The Remaining Equity Commitment shall be deemed to be zero on the earlier of (i) the date that the Remaining Equity Commitment actually equals zero or (ii) the later of (A) September 19, 1998 or (B) if Buyer notifies the Company by March 19, 1999 that it is, pursuant 5 to Section 2.4(b), exercising its right to make the Subsequent Purchase equal to the then amount of the Remaining Equity Commitment, then, the date as soon thereafter as (x) Buyer shall be permitted to effect such purchase under Article V of the Amended Company Charter, (y) all conditions to Buyer's obligations to effect such purchase shall have been satisfied or waived, and (z) such purchase shall have been effected. Section 1.80 "Rent Roll" shall have the meaning set forth in Section 3.11(f). Section 1.81 "SEC" shall have the meaning set forth in Section 3.5(a). Section 1.82 "Securities Act" shall have the meaning set forth in Section 3.4(f). Section 1.83 "Securities Laws" shall have the meaning set forth in Section 3.5(a). Section 1.84 "Stock Purchase" shall have the meaning set forth in Section 2.1. Section 1.85 "Subsequent Funding Minimum" shall mean the amount of the Total Equity Commitment minus the Initial Purchase Price. Section 1.86 "Subsequent Purchase Price" shall have the meaning set forth in Section 2.4(a), and shall be the amount of the Total Equity Commitment minus the Initial Purchase Price. Section 1.87 "Subsequent Purchase" shall have the meaning set forth in Section 2.4(a). Section 1.88 "Subsidiaries" shall mean, collectively, the General Partner and the Operating Partnership, and any other Person in which the Company owns a direct or indirect equity interest and of which the Company is the direct or indirect general partner or managing members or as to which the Company has the right to elect a majority of the board of directors or other governing body, or otherwise direct the management of its business and affairs. Section 1.89 "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not. The term "Tax" also includes any amounts payable pursuant to any tax sharing agreement to which any relevant entity is liable as a successor or pursuant to contract. Section 1.90 "Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. Section 1.91 "Tenancy Leases" shall have the meaning set forth in Section 3.11(l). Section 1.92 "The Berkshire Group" shall mean that group of Persons who with George and Douglas Krupp and their Affiliates own substantial equity interests or with respect to which they act as general partner or manager or otherwise exert a substantial influence over management, and includes without limitation, the past and present Affiliates of Berkshire Realty Company, Inc., the BRI OP Limited Partnership, Berkshire Apartments, Inc., Douglas Krupp, George Krupp, or David Marshall, or any Person with whom any of them was affiliated or employed, or any predecessor of any such Persons. Section 1.93 "Total Equity Commitment" shall mean the amount of $68,425,000. 6 Section 1.94 "Warrants" shall mean the not more than 2,664,629 outstanding warrants issued by the Company in connection with its September 6, 1994 effective settlement of a class action litigation. Section 1.95 "Welfare Plans" shall have the meaning set forth in Section 3.13(h). ARTICLE 2 Purchase and Sale of Shares; Closing Section 2.1 "Purchase and Sale." Subject to the terms and conditions hereof, from time to time after the date hereof, at one or more Closings, the Company will sell, convey, assign, transfer, and deliver, and Buyer will purchase and acquire from the Company, an aggregate of 2,737,000 shares of Company Preferred Stock (the "Purchased Shares"). Each Closing at which Buyer purchases any Purchased Shares is herein referred to as a "Stock Purchase." Section 2.2 "Consideration." Subject to the terms and conditions hereof, at each Closing, Buyer shall deliver to the Company the relevant Purchase Price with respect to the number of shares of Company Preferred Stock to be purchased and sold at such Closing by wire transfer of immediately available funds in U.S. dollars to the account or accounts specified by the Company. Section 2.3 "Initial Closing." Subject to the terms and conditions hereof, at a mutually agreeable time promptly following the date on which the conditions set forth herein shall have been satisfied or duly waived, the Company will sell, convey, assign, transfer and deliver, and Buyer will purchase and acquire (and the Advancing Party shall advance to Buyer sufficient funds for such purchase) from the Company, either (a) not more than 600,000 shares of Company Preferred Stock or (b) 2,737,000 shares of Company Preferred Stock, as the Company and Buyer shall indicate on the signature page hereto, and Buyer will pay to the Company the Initial Purchase Price for such shares of Company Preferred Stock. Section 2.4 "Subsequent Purchase and Sale." (a) On notice as set forth in this Section 2.4 (which notice, in the event of a Subsequent Purchase to be accomplished in September, 1998, must be provided as set forth below in August, 1998), during the 12-month period immediately following the Initial Closing, but on not more than one occasion, the Company shall have the right to require Buyer to purchase (and the Advancing Party to advance to Buyer sufficient funds for such purchase) from the Company additional shares of Company Preferred Stock (the "Subsequent Purchase"), the number of shares of which shall be determined by the Company; provided, however, that the Subsequent Purchase shall be made at the Per Share Purchase Price and shall consist of a sufficient number of shares of Company Preferred Stock so that the aggregate purchase price of the Subsequent Purchase (each a "Subsequent Purchase Price") is not less than the Subsequent Funding Minimum, and provided further that the Subsequent Purchase Price to be paid at the Closing is not greater than the Remaining Equity Commitment immediately prior to such Closing. In no event shall Buyer be required to purchase shares of Company Preferred Stock pursuant hereto so that it shall have expended more than the Total Equity Commitment. Subject to the terms and conditions hereof, the Closing of the Subsequent Purchase shall be on the first Business Day following the 15th day of the month following any month in which the Company provides Buyer with written notice of its desire to effect the Closing in the following month, if such written notice is given to Buyer at least five Business Days prior to the end of such preceding month. (b) If the Remaining Equity Commitment on September 19, 1998 is greater than zero, then Buyer shall have the right to make a single Subsequent Purchase from the Company of a sufficient number of shares of Company Preferred Stock at the Per Share Purchase Price so that the Remaining Equity Commitment equals zero by March 19, 1999, or as soon thereafter as all conditions to Buyer's obligation to effect any purchase of Company Preferred Stock hereunder shall have been satisfied or waived. 7 Section 2.5 "Additional Agreements and Closing Deliveries." (a) At the Initial Closing, and as a condition to the parties' obligations hereunder to effect the transactions contemplated hereby at the Closing, the Company and Buyer shall enter into a registration rights agreement that is satisfactory in form and substance to the Buyer (the "Registration Rights Agreement"). (b) In addition to the other things required to be done hereby, at each Closing, the Company shall deliver, or cause to be delivered, to Buyer the following: (i) certificates representing the number of shares of Company Preferred Stock to be issued and delivered at such Closing, free and clear of all liens (unless created by Buyer or any of its Affiliates), with all necessary stock transfer and other documentary stamps attached, (ii) a certificate, dated the relevant Closing Date and validly executed on behalf of the Company, as contemplated by Section 7.1(a), as to the Initial Closing only, and by Section 7.2(a), as to all Closing, (iii) evidence or copies of any consents, approvals, orders, qualifications or waivers required pursuant to Section 7.1, as to the Initial Closing only, and to Section 7.2, as to all Closings, (iv) all certificates and other instruments and documents required by this Agreement to be delivered by the Company to Buyer at or prior to each Closing, and (v) such other instruments reasonably requested by Buyer, as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. (c) In addition to the delivery of the Purchase Price and the other things required to be done hereby, at each Closing, Buyer shall deliver, or cause to be delivered, to the Company the following: (i) a certificate, dated the relevant Closing Date and validly executed by Buyer, to the effect that the "Conditions to Sale" as contemplated by Section 7.3(a) shall have been satisfied, (ii) if not previously delivered to the Company, all other certificates, documents, instruments and writings required pursuant hereto to be delivered by or on behalf of Buyer at or before each Closing, and (iii) such other instruments reasonably requested by the Company, as may be necessary or appropriate to confirm or carry out the provisions of this Agreement. Section 2.6 "Time and Place of Closing." Each Closing shall take place on the relevant Closing Date at such place and time as the Company and Buyer shall mutually agree. Section 2.7 "Right to Assign." Buyer may assign its rights and delegate its obligations created hereby to purchase Company Preferred Stock in accordance with the provisions of Section 10.5. Section 2.8 "Advances to Buyer." At the Initial Closing and at the subsequent Closing, the Advancing Party shall have available and shall advance to Buyer all of the funds necessary to satisfy Buyer's obligations hereunder and to pay any related fees and expenses in connection with the foregoing. The Advancing Party has, and at each Closing will have, written, enforceable subscriptions from its investors sufficient to advance the necessary funds to Buyer as will enable Buyer to purchase the requisite Purchased Shares at each Closing, in accordance with this Agreement. ARTICLE 3 Representations and Warranties of the Company The Company hereby represents and warrants to Buyer as follows: Section 3.1 "Organization and Qualification, Subsidiaries." (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own, operate, lease and encumber its properties and carry on its business as now conducted, and to enter into this Agreement and the Registration Rights Agreement, and to perform its obligations hereunder and thereunder. (b) The General Partner is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The General Partner has all requisite corporate power and authority to own, 8 operate, lease and encumber its properties and carry on its business, and to cause the Operating Partnership to carry on its business, as now conducted. (c) The Operating Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware. The Operating Partnership has all requisite partnership power and authority to own, operate, lease and encumber its properties and carry on its business as now conducted. (d) Each of the Subsidiaries of the Company is a corporation or partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, and has the corporate or partnership power and authority to own its properties and carry on its business as it is now being conducted. (e) Each of the Company and its Subsidiaries is duly qualified to do business and in good standing in each jurisdiction in which the ownership of its property or the conduct of its business requires such qualification, except as set forth in Schedule 3.1(e). (f) Schedule 3.1(f) sets forth the name of each Subsidiary of the Company or the Operating Partnership (whether owned directly or indirectly through one or more intermediaries). All of the outstanding shares of capital stock of, or other equity interest in, each of the Subsidiaries owned by the Company or the Operating Partnership are duly authorized, validly issued, fully paid and nonassessable, and are owned, directly or indirectly, by the Company or the Operating Partnership free and clear of all Liens, except as set forth in Schedule 3.1(f). The following information for each Subsidiary is set forth in Schedule 3.1(f), if applicable: (i) its name and jurisdiction of incorporation or organization, (ii) the type of and percentage interest held by the Company or Operating Partnership in the Subsidiary and, in the case of Subsidiaries, the names of and percentage interest held by the other interest holders, if any, in the Subsidiary, and the partnership agreement or other organizational documents of the Subsidiary, and (iii) any loans from the Company or the Operating Partnership to, or priority payments due to the Company or the Operating Partnership from, the Subsidiary, and the rate of return thereon. Except as set forth in Schedule 3.1(f), there are no existing options, warrants, calls, subscriptions, convertible securities or other rights, agreements or commitments which obligate the Company or any of the Subsidiaries to issue, transfer or sell any shares of capital stock or equity interests in any of the Subsidiaries. Section 3.2 "Authority Relative to Agreements; Board Approval." (a) The execution, delivery and performance of this Agreement, the Registration Rights Agreement, and the Certificate of Designation, the issuance of shares of Company Preferred Stock in accordance herewith and the Certificate of Designation, and the issuance and delivery of shares of Company Common Stock upon conversion of shares of Company Preferred Stock in accordance with the provisions of the Certificate of Designation, have been duly and validly authorized by all necessary corporate action on the part of the Company and all necessary partnership action on the part of the Operating Partnership. This Agreement has been duly executed and delivered by the Company for itself and constitutes the valid and legally binding obligations of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity. Upon the issuance of shares of Company Preferred Stock, the Certificate of Designation will constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity. (b) The Board of Directors of the Company has, as of the date hereof, approved this Agreement, the Registration Rights Agreement, the Amended Company By-laws and the transactions contemplated hereby and thereby. Not by way of limitation of the foregoing, the Board of Directors has, as of the date hereof, determined that the provisions of Article V, including the first paragraph thereof and the paragraphs lettered A, B, C and E of the Company Charter, do not apply to the Company Stock held or to be held by Buyer or the Advancing Party, and the Company has declined, now and for all times in the future, any offer deemed to have been made by Buyer or the Advancing Party pursuant to said paragraph B, and agreed that Buyer and the Advancing Party will for no purpose be deemed to be a "Group Acting in Concert," or portion thereof, or "Interested Shareholder," in each case 9 as set forth in the Company Charter; provided, however, that no assignee of Buyer hereunder or purchaser from Buyer of shares of Company Stock shall be entitled, as to itself, to the benefits of such Board of Directors' action without a subsequent action specifically referencing such assignee or purchaser of Company Stock. (c) The shares of Company Preferred Stock to be acquired pursuant to this Agreement have been duly authorized for issuance, and upon issuance will be duly and validly issued, fully paid and nonassessable, and will be shares of "Voting Stock" (as defined in the Company Charter) and do not and will not constitute Excess Shares (as defined in the Company Charter). The shares of Company Common Stock issuable upon conversion of the Company Preferred Stock to be acquired pursuant to this Agreement will, upon issuance upon such conversion, be duly and validly issued, fully paid and nonassessable, and will be shares of "Voting Stock" (as defined in the Company Charter) and do not and will not constitute "Excess Shares" (as defined in the Company Charter). (d) The Board of Directors of the Company has authorized the creation and issuance of the Company Preferred Stock. As of the Initial Closing, the Certificate of Designation will have been duly authorized, and filed with the Office of the Secretary of State of the State of Delaware such that no further actions are required for the due and valid issuance of Company Preferred Stock in accordance herewith and therewith. Section 3.3 "Capital Stock and Units." (a) The authorized capital stock of the Company on the date hereof consists of 140,000,000 shares of Company Common Stock, and 60,000,000 shares of Company Preferred Stock, par value $0.01 per share. As of August 31, 1997, there were 25,813,752 shares of Company Common Stock issued and outstanding, and no shares of such Company Preferred Stock issued and outstanding, and as of the date hereof, there is no change except for an immaterial change in the number of Company Stock outstanding. All such issued and outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. The Company has no outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities the holders of which have the right to vote) with the stockholders of the Company on any matter. Other than (i) Operating Partnership Units which may be redeemed by the holders thereof for Company Common Stock or the cash equivalent thereof (at the option of the General Partner), or (ii) as set forth in Schedule 3.3(a) to this Agreement, there are no existing options, warrants, calls, subscriptions, convertible securities, or other rights, agreements or commitments which obligate the Company to issue, transfer or sell any shares of capital stock or other equity interests of the Company. (b) As of August 31, 1997, 31,905,298 Operating Partnership Units of the Operating Partnership were validly issued and outstanding, fully paid and nonassessable, of which 25,501,147 Operating Partnership Units are owned by the Company and 312,605 Operating Partnership Units are owned by the General Partner (collectively, the "Company Units"). There are no other classes of units, or any other form of general or limited partnership interest, of the Operating Partnership issued or outstanding as of the date hereof. Except as set forth in Schedule 3.3(b), the Operating Partnership has not issued or granted securities convertible into interests in the Operating Partnership, and is not a party to any outstanding commitments of any kind relating to, or any presently effective agreements or understandings with respect to, interests in Operating Partnership, whether issued or unissued. Since August 31, 1997, there have been no changes to the number of Operating Partnership Units outstanding. On September 22, 1997, the Operating Partnership anticipates it will issue 95,620 Operating Partnership Units in connection with a previously approved acquisition transaction. (c) Except for interests in the General Partner, the Subsidiaries of the Company, the Operating Partnership, and its joint venture interest in the Spring Valley Joint Venture, none of the Company or any of its Subsidiaries owns directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, joint venture, business, trust or entity (other than investments in short-term investment securities). (d) The direct or indirect, beneficial or record, ownership of Douglas Krupp and David F. Marshall, respectively, in Company Common Stock or Operating Partnership Units is as set forth in Schedule 3.3(d). 10 Section 3.4 "No Conflicts; No Defaults, Required Filings and Consents." Except as contemplated hereby, neither the execution and delivery by the Company hereof nor the consummation by the Company of the transactions contemplated hereby in accordance with the terms hereof, will: (a) conflict with or result in a breach of any provisions of the Company Charter or By-laws of the Company; (b) except as set forth in Schedule 3.4(b), result in a breach or violation of, a default under, or the triggering of any payment or other obligations pursuant to, or accelerate vesting under, any of the Company stock option plans or Operating Partnership Unit option plans or similar compensation plan or any grant or award made under any of the foregoing; (c) violate or conflict with any regulation, rule, order, or administrative position of NYSE, or any other national securities exchange on which the Company Common Stock is listed; (d) except as set forth in Schedule 3.4(d), violate or conflict with any statute, regulation, judgment, order, writ, decree or injunction applicable to the Company or its Subsidiaries; (e) except as set forth in Schedule 3.4(e), violate or conflict with or result in a breach of any provision of, or constitute a default (or any event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or result in the creation of any Lien upon any of the properties of the Company or its Subsidiaries under, or result in being declared void, voidable or without further binding effect, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust or any license, franchise, permit, lease, contract, agreement or other instrument, commitment or obligation to which the Company or its Subsidiaries is a party, or by which the Company or its Subsidiaries or any of their properties is bound or affected; or (f) except as set forth in Schedule 3.4(f), require any consent, approval or authorization of, or declaration, filing or registration with, any Government Authority, other than any filings required under the Securities Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), state securities laws ("Blue Sky Laws") (collectively, the "Regulatory Filings"), and any filings required to be made with the Office of the Secretary of the State of Delaware and NYSE or any other national securities exchange on which the Company Common Stock is listed. Section 3.5 "SEC and Other Documents, Financial Statements; Undisclosed Liabilities." (a) The Company has delivered or made available to Buyer, or there are commercially available to Buyer in the ordinary course, the registration statement of the Company filed with the Securities and Exchange Commission ("SEC") in connection with the Company's exchange offering of Company Common Stock for all the assets and liabilities of certain limited partnerships and the subsequent distribution of such Company Common Stock to the limited partners thereof, and all exhibits, amendments and supplements thereto (collectively, the "Company Registration Statement"), and each registration statement, report, proxy statement or information statement and all exhibits thereto prepared by it or relating to its properties since the effective date of the Company Registration Statement, which are set forth in Schedule 3.5(a), each in the form (including exhibits and any amendments thereto) filed with the SEC (collectively, the "Company Reports"). The Company Reports were filed with the SEC in a timely manner and constitute all forms, reports and documents required to be filed by the Company under the Securities Act, the Exchange Act and the rules and regulations promulgated thereunder (the "Securities Laws"). As of their respective dates, the Company Reports (i) complied as to form in all material respects with the applicable requirements of the Securities Laws and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading; provided, however, that as to the compliance of the Company Reports with the requirements of the Securities Laws, insofar as such representation is made as to matters of form established in the Securities Laws, and assuming that such Company Reports were prepared under the direction of 11 and with the advice of independent counsel and auditors to the Company, it is a representation made to the company's Knowledge. There is no unresolved violation or position asserted by any Government Authority with respect to any of the Company Reports except as set forth in Schedule 3.5(a) with respect to the Company's intended position in response to that certain letter of August 14, 1997, from the SEC (but excluding comments 9 and 11 therein, as to which the Company has reached resolution as set forth in Schedule 3.5(a)). No such unresolved violation or position (again, excluding comments 9 and 11 referred to above) is or could be material to the Company or its business, operations or financial position, nor could it reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. (b) Except as set forth in Schedule 3.5(b), each of the balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presented the financial position of the entity or entities to which it relates as of its date and each of the statements of operations, stockholders' equity (deficit) and cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presented the results of operations, retained earnings or cash flows, as the case may be, of the entity or entities to which it relates for the periods set forth therein, in each case in accordance with United States generally accepted accounting principles ("GAAP") consistently applied during the periods involved except as may be noted therein and except, in, the case of the unaudited statements, normal recurring year-end adjustments. (c) Except as and to the extent set forth in the Company Reports or any Schedule hereto, none of the Company or any of its Subsidiaries has any Liabilities (nor do there exist any circumstances that would result in any Liabilities). Section 3.6 "Litigation, Compliance With Law." (a) Except as disclosed in Schedule 3.6(a), there are no Actions pending or threatened against the Company or any of its Subsidiaries which question the validity hereof or any action taken or to be taken in connection herewith, and there are no continuing orders, injunctions or decrees of any Government Authority to which the Company or any of its Subsidiaries is a party or by which any of its properties or assets are bound. (b) To the Company's Knowledge, none of the Company or its Subsidiaries is in violation of any statute, rule, regulation, order, writ, decree or injunction of any Government Authority or any body having jurisdiction over them or any of their respective properties, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and except as set forth in Schedule 3.6(b). Section 3.7 "Absence of Certain Changes or Events." Except as disclosed in the Company Reports filed with the SEC prior to the date hereof or in Schedule 3.7, since December 31, 1996, the Company and each of its Subsidiaries has conducted its business only in the ordinary course of such business and has not acquired any real estate or entered into any financing arrangements in connection therewith, and there has not been (a) any change, circumstance or event that would reasonably be expected to result in an adverse effect on the business, operations or condition (financial or otherwise) of the Company, the Operating Partnership and the Subsidiaries, considered as a whole, (b) any declaration, setting aside or payment of any dividend or other distribution with respect to the Company Common Stock, except in accordance with Section 5.5, (c) any commitment, contractual obligation, borrowing, capital expenditure or transaction (each, a "Commitment") entered into by the Company or any of its Subsidiaries, or (d) any change in the Company's accounting principles, practices or methods. The Company is not now contemplating entering into any Commitment which, had it occurred on or before the date hereof would be required to be disclosed in the Company Reports or in Schedule 3.7. Section 3.8 "Tax Matters; REIT and Partnership Status." (a) The Company and each of its Subsidiaries has timely filed with the appropriate taxing authority all Tax Returns required to be filed by it or has timely requested extensions and any such request has been granted and has not expired. Each such Tax Return is complete and accurate in all respects. All Taxes shown as owed by the Company or any of its Subsidiaries on any Tax Return have been paid or accrued, except for Taxes being contested in good faith and for which adequate reserves have been taken. The Company and each of its Subsidiaries has properly accrued all Taxes for such periods subsequent to the periods covered by such Tax Returns as required by GAAP. None of the Company or 12 any of its Subsidiaries has executed or filed with the IRS or any other taxing authority any agreement now in effect extending the period for assessment or collection of any Tax. Except as set forth in Schedule 3.8(a), none of the Company or any of its Subsidiaries is a party to any pending action or proceedings by any taxing authority for assessment or collection of any Tax, and no claim for assessment or collection of any Tax has been asserted against it. True and complete copies of all federal, state and local income and franchise Tax Returns, or any extensions applicable thereto, filed by the Company and each of its Subsidiaries for the taxable years 1994 to the present and all communications relating thereto, have been delivered to Buyer or have been made available to its representatives. To the Company's Knowledge, no claim has been made by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. Except as set forth in Schedule 3.8(a), there is no dispute or claim concerning any Tax liability of the Company or any of its Subsidiaries claimed or raised by any taxing authority in writing. As of the date hereof, (i) the Company is a "domestically-controlled" REIT within the meaning of Code Section 897(h)(4)(B), and (ii) all non-domestic beneficial owners of Company Common Stock are set forth in Schedule 3.8(a). Except as set forth in Schedule 3.8(a), no person or entity which would be treated as an "individual" for purposes of Section 542(a)(2) of the Code (as modified by Section 856(h) of the Code) owns or would be considered to own (taking into account the ownership attribution rules under Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the value of the outstanding equity interest in the Company. The Company is not "Pension-Held REIT" within the meaning of Section 856(h)(3)(D) of the Code. (b) The Company (i) intends in its federal income tax return for the tax year ended December 31, 1997 and for the tax year that will end on December 31, 1998 to elect to be taxed as a real estate investment trust within the meaning of Section 856 of the Code ("REIT") and has complied (or will comply) with all applicable provisions of the Code relating to a REIT, (ii) has operated, and intends to continue to operate, in such a manner as to qualify as a REIT, (iii) has not taken or omitted to take any action which would reasonably be expected to result in a challenge to its status as a REIT, and no such challenge is pending or threatened, and (iv) assuming the accuracy of Buyer's representation in Section 4.7, will not be rendered unable to qualify as a REIT for federal income tax purposes as a consequence of the transactions contemplated hereby. (c) Any amount or other entitlement that could be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated hereby by any employee, officer, or director of the Company or the Operating Partnership or any of their Affiliates who is a "disqualified individual" (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or plan currently in effect would not be characterized as an "excess parachute payment" (as such term is defined in Section 280G(b)(1) of the Code). (d) The disallowance of a deduction under Section 162(m) of the Code for employee remuneration will not apply to any amount paid or payable by the Company or any of its Subsidiaries under any contract, stock plan, program, arrangement or understanding currently in effect. (e) The Company was eligible to and did validly elect to be taxed as a REIT for federal income tax purposes for calendar year 1991 and all subsequent taxable periods. The Operating Partnership and each Subsidiary of the Company and the Operating Partnership organized as a partnership (and any other Subsidiary that files Tax Returns as a partnership for federal income tax purposes) was and continues to be classified as a partnership for federal income tax purposes. Section 3.9 "Compliance with Agreements." (a) Neither the Company nor any of its Subsidiaries is in default under or in violation of any provision of the Company Charter, the By-laws of the Company or the Partnership Agreement (or equivalent documents), except as set forth in Schedule 3.9(a). (b) The Company and each of its Subsidiaries have filed all material reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to be with any Government Authority and all other material reports and statements required to be filed by them, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, and have 13 paid all fees or assessments due and payable in connection therewith, except as set forth in Schedule 3.9(b). There is no unresolved violation asserted by any regulatory agency, nor has the Company received notice from any regulatory agency with respect to any report or statement relating to an examination of the Company or any of its Subsidiaries. (c) The Company Reports or Schedule 3.9(c) set forth (i) a description of all material indebtedness of the Company and each of its Subsidiaries, whether unsecured, secured or collateralized by mortgages, deeds of trust or other security interests in the Company Properties or any other assets of the Company and each of its Subsidiaries, or otherwise and (ii) each Commitment entered into by the Company or any of its Subsidiaries (including any guarantees of any third party's debt or any obligations in respect of letters of credit issued for the Company's or any Subsidiary's account) which may result in total payments or liability in excess of $250,000, excluding Commitments made in the ordinary course of business with a maturity of less than one year or that are terminable on 30 days or less notice. True and complete copies of the foregoing have been delivered or made available to Buyer or to its representatives. Neither the Company nor any of its Subsidiaries is in default and no event has occurred which, with the giving of notice or the lapse of time or both, would constitute a default, under any of the documents described in clause (i) or (ii) of this paragraph or in respect of any payment obligations thereunder. All joint venture and partnership agreements to which the Company or any of its Subsidiaries is a party as of the date hereof are set forth in Schedule 3.9(c), all of which are in full force and effect as against the Company or such Subsidiary and as against the other parties thereto, and none of the Company or any of its Subsidiaries is in default and no event has occurred which, with the giving of notice or the lapse of time or both, would constitute a default, with respect to any obligations thereunder. The other parties to such agreements are not in breach of any of their respective obligations thereunder. (d) Except as disclosed in the Company Reports or any other Schedule hereto, and except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, Schedule 3.9(d) sets forth a complete and accurate list of all agreements entered into by the Company or any of its Subsidiaries as of the date hereof relating to the development or construction of, additions or expansions to, or management or leasing services for real properties which are currently in effect and under which the Company or any of its Subsidiaries currently has, or expects to incur, any material obligation. True and complete copies of such agreements will be delivered or made available to Buyer within five Business Days from the date hereof. (e) Except as disclosed in the Company Reports, and except for agreements made in the ordinary course of business with a maturity of less than one year or that are terminable on 30 days or less notice, and except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, Schedule 3.9(e) sets forth a complete and accurate list of all agreements entered into by the Company as of the date hereof which are not listed in any other Schedule hereto, including the material Debt Instruments. Each agreement set forth in Schedule 3.9(e) is in full force and effect as against the Company and, as against the other parties thereto, no payments, if any, thereunder are delinquent, and no notice of default thereunder has been sent or received by the Company or any of its Subsidiaries. There does not exist under any agreement set forth in Schedule 3.9(e) any default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default. True and complete copies of each such agreement have been delivered or made available to Buyer. (f) Schedule 3.9(f) sets forth a complete and accurate list of all agreements, with their respective costing in spread sheet form, and policies (in the case of policies which are not manifested by written agreement, Schedule 3.9(f) shall include a correct and complete written summary thereof) of the Company in effect on the date hereof relating to transactions with affiliates and potential conflicts of interest, excluding agreements with Partnership Affiliates (defined below), but including such agreements with and such policies relating to all Affiliates of the Company, including but not limited to The Berkshire Group, and Affiliates of The Berkshire Group, Laurence Gerber, Douglas Krupp, George Krupp, David Marshall, and any Affiliate of a predecessor organization of The Berkshire Group, or any of such Persons. Each agreement or policy set forth in Schedule 3.9(f) is in full force and effect, and the Company, each of its Subsidiaries, and the other parties thereto are in compliance with such agreements and policies, or such compliance has been waived by the Board of Directors as set forth in Schedule 3.9(f). True and complete copies of each such agreement or policy have been delivered to Buyer or to its representatives. As used herein, "Partnership Affiliate" means any limited partnership in which a predecessor 14 organization of The Berkshire Group, Douglas Krupp, George Krupp, or any of them or their Affiliates, directly or indirectly, hold a general or limited partner interest which is in no event less than or equal to 1% of the effective economic interest in any such partnership, nor will any partnership interest in any such partnership now or in the future held, directly or indirectly, by The Berkshire Group, Douglas Krupp, George Krupp, or any of them or their Affiliates, with the passage of time or the occurrence of any event, or both, exceed 1% of any such effective economic interest. Section 3.10 "Financial Records; Company Charter and By-laws; Corporate Records." (a) The books of account and other financial records of the Company and each of its Subsidiaries are in all respects true and complete, have been maintained in accordance with good business practices, and are accurately reflected in all respects in the financial statements included in the Company Reports, except as set forth in Schedule 3.10(a). (b) The Company has previously delivered or made available to Buyer true and complete copies of the Company Charter and the By-laws of the Company, as amended to date, the Partnership Agreement, and the charter, by-laws, organization documents, partnership agreements and joint venture agreements of the Subsidiaries, and all amendments thereto. All such documents are listed in Schedule 3.10(b). A chart of the Company, the Operating Partnership, and the Subsidiaries showing ownership, voting or general partner rights and contractual relationships is set forth in Schedule 3.10(b). (c) The minute books and other records of corporate or partnership proceedings of the Company and each of its Subsidiaries have been made available to Buyer, contain in all material respects accurate records of all meetings and accurately reflect in all material respects all other corporate action of the stockholders and directors and any committees of the Board of Directors of the Company and their Subsidiaries which are corporations and all actions of the partners of the Operating Partnership and Subsidiaries which are partnerships, except for documentation of discussions relating to or in connection with the transactions contemplated hereby or matters related hereto, except as set forth in Schedule 3.10(c). Section 3.11 "Properties." (a) Schedule 3.11(a) sets forth a complete and accurate list and the address of all real property directly or indirectly owned, all or in part, or leased by the Company or any of its Subsidiaries or otherwise used by the Company or its Subsidiaries in the conduct of their business or operations (collectively, and together with the land at each address referenced in Schedule 3.11(a) and all buildings, structures and other improvements and fixtures located on or under such land and all easements, rights and other appurtenances to such land, the "Company Properties"), other than the office space leased by the Company from which the Company operates its business which is listed separately on Schedule 3.11(a) as HQ Space (the "HQ Space"). The Operating Partnership or, in the case of Company Properties owned by Subsidiaries, certain of the Subsidiaries, owns good and marketable fee simple title (or, if so indicated in Schedule 3.11(a), leasehold title) to each of the Company Properties, in each case free and clear of any Liens, title defects, contractual restrictions or covenants, laws, ordinances or regulations affecting use or occupancy (including zoning regulations and building codes) or reservations of interests in title (collectively, "Property Restrictions"), except for (i) Permitted Liens and (ii) Property Restrictions imposed or promulgated by law or by any Government Authority which are customary and typical for similar multi-family residential or commercial properties. None of the matters described in clauses (i) and (ii) of the immediately preceding sentence materially interferes with, impairs, or is violated by, the existence of any building or other structure or improvement which constitutes a part of, or the present use, occupancy or operation (or, if applicable, development) of the Company Properties taken as a whole. Except as set forth in Schedule 3.11(a) and as to the Development Properties for which application for title policies have been or are being made in the ordinary course and as to which the Company has no reason to believe will not issue on customary terms and in customary and marketable form (without exceptions which would render the subject Development Properties unfinanceable), policies of title insurance (issued on customary American Land Title Association forms) have been issued by national title insurance companies insuring the fee simple or leasehold, as applicable, title of the Operating Partnership or its Subsidiaries, as applicable, to each of the Company Properties in amounts at least equal to the original cost thereof subject only to Permitted Liens; such policies are valid and in full force and effect and no claim has been made under any such policy, and the Company is not aware of any fact or information which would constitute a defense by the issuer of any such policy or an exclusion from coverage. True and complete 15 copies of all such policies together with all exceptions referenced therein and the most recent title reports for and surveys of each of the Company Properties available to the Company or any of its Subsidiaries have been made available by the Company to Buyer or to its representatives. (b) Except as set forth in Schedule 3.11(b), and except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the use or occupancy (or, if applicable, development or maintenance) of the Company Properties, any currently required certificate, permit or license (including building permits and certificates of occupancy for tenant spaces) from any Government Authority having jurisdiction over any Company Property or any agreement, easement or other right which is necessary to permit the lawful use, occupancy or operation of the existing buildings, structures or other improvements which constitute a part of any of the Company Properties or which are necessary to permit the lawful use and operation of utility service to any Company Property or of any existing driveways, roads or other means of egress and ingress to and from any of the Company Properties has been obtained and is in full force and effect, and there are no pending threat of modification or cancellation of any of same, and there is no violation by any Company Property of any federal, state or municipal law, ordinance, order, regulation or requirement, including any applicable zoning law or building code, as a result of the use or occupancy of such Company Property or otherwise. Except as set forth in Schedule 3.11(b), there is no uninsured physical damage to any Company Property in excess of $100,000. Except for repairs identified in the Capital Expenditure Budget and Schedule, each Company Property, (i) is in good or better operating condition and repair and is structurally sound and free of defects, with no material alterations or repairs being required thereto under applicable law or insurance company requirements, and (ii) consists of sufficient land, parking areas, driveways and other improvements and lawful means of access and utility service and capacity to permit the use thereof in the manner and for the purposes to which it is presently devoted (or, in the case of the Development Property, for the development and operation thereon of the applicable Project), except, in each such case, to the extent that failure to meet such standards would adversely affect the use or occupancy of the Company Properties taken as a whole (or, in the case of the Development Property, the development and operation thereon of the applicable Project). The Company has made available to Buyer or to its representatives true and complete copies of all engineering reports, inspection reports, maintenance plans and other documents relating to the condition of any Company Property prepared for the Company or otherwise in the Company's or any Subsidiary's possession. (c) Except as set forth in Schedule 3.11(c), and, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) no condemnation, eminent domain or rezoning proceedings are pending or threatened with respect to any of the Company Properties, (ii) no road widening or change of grade of any road adjacent to any Company Property is underway or has been proposed, (iii) no proposed change in the assessed valuation of any Company Property, (iv) no special assessment has been made or threatened against any Company Property, and (v) no Company Properties are subject to any so-called "impact fee" or to any agreement with any Government Authority to pay for sewer extension, oversizing utilities, lighting or like expenses or charges for work or services by such Government Authority. (d) Each of the Company Properties is an independent unit which does not rely on any facilities located on any property not included in such Company Property to fulfill any municipal or governmental requirement or for the furnishing to such Company Property of any essential building systems, utilities or customary amenities, other than facilities the benefit of which inures to the Company Properties pursuant to one or more valid easements, or facilities which are located on or abutting Company Properties and are sufficient to serve more than one property adequately and lawfully. Each of the Company Properties is served by public water and sanitary systems and all other utilities, and each of the Company Properties has lawful access to public roads, in all cases sufficient for the current use and occupancy of each Company Property (or, in the case of the Development Property, for the development and operation thereon of the applicable Project). All parcels of land included in each Company Property that purport to be contiguous are contiguous and are not separated by strips, gaps or gores. No portion of any Company Property lies in any flood plain area (as defined by the U.S. Army Corps of Engineers or otherwise) or includes wetlands or vegetation or species protected by any applicable laws. No improvements constituting a part of any Company Property encroach on real property not constituting a part of such Company Property or an abutting Company Property. 16 (e) The Company has supplied or made available to Buyer each survey, study or report prepared by or for the Company or any of the Subsidiaries in connection with any Company Property's compliance or non-compliance with the requirements of the Americans with Disabilities Act (the "ADA"), other than routine correspondence or memoranda. Except as set forth in Schedule 3.11(e), and except as could not, individually or in the aggregate, be reasonably expected to result in a Material Adverse Effect, no Company Property fails to comply with the Requirements of the ADA. (f) The Company has provided to Buyer an accurate rent roll for each Company Property (collectively, the "Rent Rolls") as of the month ended July 31, 1997 all of which remain true, correct and complete as of the date hereof, except for immaterial variations in the ordinary course of business, which identifies and accurately describes each lease of space in each Company Property (collectively, the "Company Leases") and sets forth the vacancy for each. (g) Schedule 3.11(g) sets forth a complete and accurate list of all material commitments, letters of intent or similar written understandings made or entered into by the Company or any of its Subsidiaries as of the date hereof (x) to lease any space larger than 25,000 rentable square feet at any of the Company Properties, (y) to sell, mortgage, pledge, hypothecate any Company Property or to otherwise enter into a material transaction in respect of the ownership or financing of any Company Property, or (z) to purchase or acquire an option, right of first refusal or similar right in respect of any real property, which, in any such case, has not yet been reduced to a written lease or contract, and sets forth with respect to each such commitment, letter of intent or other understanding the principal terms thereof. The Company has previously delivered or made available to Buyer a true and complete copy of each such commitment, letter of intent or other understanding. (h) Except as set forth in Schedule 3.11(h), the Company, the Operating Partnership and all the Subsidiaries have the right, including, but not limited to, to sell, transfer, lease, finance, without limitation, all of the Company Properties. Except for certain rights of first refusal which are set forth in the sections of the partnership agreements referenced in Schedule 3.1(e) and which relate to partnerships in which the Company, directly or indirectly, owns less than a 100% interest, none of the Company or any of its Subsidiaries has granted any outstanding options or has entered into any outstanding contracts with others for the sale, mortgage, pledge, hypothecation, assignment, sublease, lease or other transfer of all or any part of any Company Property, and no person has any right or option to acquire, or right of first refusal with respect to, the Company's or any of its Subsidiaries' interest in any Company Property or any part thereof. Except as set forth in Schedule 3.11(h) none of the Company or any of its Subsidiaries has any outstanding options or rights of first refusal or has entered into any outstanding contracts with others for the purchase of any real property. (i) Schedule 3.11(i) contains a complete and accurate description of any noncompliance by any Company Property, with any law, ordinance, code, health and safety regulation or insurance requirement (except for the ADA, which is addressed in this respect in Section 3.11(e) above), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has provided the Company's or any Subsidiary's capital expenditure budget and schedule for each Company Property (the "Capital Expenditure Budget and Schedule"), which describes the capital expenditures which the Company or any Subsidiary has budgeted for such Company Property for the period running through at least December 31, 2002, and such other capital expenditures as are necessary in order to bring such Company Property into compliance with applicable laws, ordinances, codes, health and safety regulations and insurance requirements (including fire sprinklers, compliance with the ADA abatement or maintenance of asbestos containing material, and mitigation for radon) or which the Company otherwise plans or expects to make in order to cure or remedy any construction, electrical, mechanical or other defects, to renovate, maintain, rehabilitate or modernize such Company Property, or otherwise, excluding, however, any tenant improvements required to be made under any Company Lease. The costs and time schedules for 1997 and subsequent years set forth in each Capital Expenditure Budget and Schedule are reasonable estimates and projections. The Capital Expenditure Budget and Schedule for each Company Property (i) has been established and timely implemented since each Company Property was acquired by the Company (whether by purchase or as a result of initial formation transactions), (ii) has a time period of not less than five years, and (iii) has been provided to Buyer in a true, correct and complete form as in effect on the date hereof and the amounts set forth 17 therein represents the good faith business judgment of the Company as to all known maintenance and capital expenditure items for such Company Property. Except as set forth in Schedule 3.11(i), there are no outstanding or threatened requirements by any insurance company which has issued an insurance policy covering any Company Property, or by any board of fire underwriters or other body exercising similar functions, requiring any repairs or alterations to be made to any Company Property. (j) Schedule 3.11(j) contains a list of each Company Property, or property which the Company has under letter of intent or option, which consists of or includes undeveloped land or which is intended to be or is in the process of being developed or rehabilitated (collectively, the "Development Properties") and a brief description of the development or rehabilitation intended by the Company or any Subsidiary to be carried out or completed thereon (collectively, the "Projects"), including any budget and development or rehabilitation schedule therefor prepared by or for the Company or any Subsidiary (collectively, the "Development Budget and Schedule"). Each Development Property is zoned for the lawful development thereon of the applicable Project, and the Company or its Subsidiaries have obtained all permits, licenses, consents and authorizations required for the lawful development or rehabilitation thereon of such Project. Except as set forth in Schedule 3.11(j), there are no material impediments to or constraints on the development or rehabilitation of any Project within the time frame and for the cost set forth in the Development Budget and Schedule applicable thereto. In the case of each Project the development of which has commenced, the costs and expenses incurred in connection with such Project and the progress thereof are, except as set forth in Schedule 3.11(j), consistent and in compliance in all material respects with all aspects of the Development Budget and Schedule applicable thereto. The Company has made available to Buyer or to its representatives all feasibility studies, soil tests, due diligence reports and other studies, tests or reports performed by or for the Company, or otherwise in the possession of the Company, which relate to the Development Properties or the Projects. (k) Except as set forth in Schedule 3.11(k), and except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company has disclosed to Buyer all adverse matters known to the Company with respect to or in connection with the Company Properties and the HQ Space (including the Company Leases and the Tenancy Leases). (l) The leases for the HQ Space and the ground leases underlying the leased Company Properties referenced in Schedule 3.11(a), if any (collectively, the "Tenancy Leases"), are accurately described in Schedule 3.11(l). Each of the Tenancy Leases is valid, binding and in full force and effect as against the Subsidiary and as against the other party thereto. Except as indicated in Schedule 3.11(l), none of the Tenancy Leases is subject to any pledge, lien, sublease, assignment, license or other agreement granting to any third party any interest therein or any right to the use or occupancy of any premises leased thereunder. True and complete copies of the Tenancy Leases (including all amendments, modifications and supplements thereto) will be delivered to Buyer within five Business Days from the date hereof. Except as set forth in Schedule 3.11(l), there is no pending or threatened proceeding which is reasonably likely to interfere with the quiet enjoyment of the tenant under any of the Tenancy Leases. Except as set forth in Schedule 3.11(l), no payments under any Tenancy Lease are delinquent and no notice of default thereunder has been sent or received by the Company or any of its Subsidiaries, and there does not exist under any of the Tenancy Leases any default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default. (m) The Company and each of its Subsidiaries have good and sufficient title to all the personal and non-real properties and assets reflected in their books and records as being owned by them (including those reflected in the balance sheets of the Company and its Subsidiaries as of June 30, 1997, except as since sold or otherwise disposed of in the ordinary course of business), free and clear of all Liens, except for Permitted Liens, as set forth in Schedule 3.11(m). Section 3.12 "Environmental Matters." (a) Each of the Company and its Subsidiaries has obtained, and now maintains as currently valid and effective, all permits required under the Environmental Laws (the "Environmental Permits") in connection with the operation of its businesses and properties, all of which are listed in Schedule 3.12(a). Except as disclosed in the Executive Summaries of the Company Environmental Reports and 18 except for any Company Property non-compliance as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, each of the Company and its Subsidiaries, and each Company Property is, has been, and will be in compliance with all terms and conditions of the Environmental Permits and all Environmental Laws. (b) To the Company's Knowledge, each of the Company and its Subsidiaries has provided to Buyer all written information and written communications (whether from a Government Authority, citizens' group, employee or other person) in its possession or control regarding (x) alleged or suspected noncompliance of any of the Company Properties with any Environmental Laws or Environmental Permits or (y) alleged or suspected liability of the Company or its Subsidiaries under any Environmental Law. (c) There are no environmental liens or encumbrances on any of the Company Properties and no government actions have been taken or are in process which are reasonably likely to subject any Company Property to such liens or other encumbrances. (d) No Environmental Claim with respect to the operations or the businesses of the Company or its Subsidiaries, or with respect to any of the Company Properties, has been asserted or, to the Company's Knowledge, threatened, and no circumstances exist with respect to the Company or its Subsidiaries or the Company Properties that would reasonably be expected to result in any Environmental Claim being asserted, in any such case, against (i) the Company or its Subsidiaries, or (ii) any person whose liability for any Environmental Claims the Company or its Subsidiaries has or may have retained or assumed either contractually or by operation of law. (e) Except as disclosed in Schedule 3.12(e) or set forth in the Executive Summaries of the Company Environmental Reports and, except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) none of the Company or its Subsidiaries has been notified or anticipates being notified of potential responsibility in connection with any site that has been placed on, or proposed to be placed on, the National Priorities List or its state or foreign equivalents pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., or analogous state or foreign laws, (ii) no Materials of Environmental Concern are present on, in or under any Company Property in a manner or condition that is reasonably likely to give rise to an Environmental Claim, (iii) none of the Company or its Subsidiaries has Released or arranged for the Release of any Materials of Environmental Concern at any location, (iv) no underground storage tanks, surface impoundments, disposal areas, pits, ponds, lagoons, open trenches or disused industrial equipment is present at any Company Property, (v) no transformers, capacitors, ballasts or other equipment containing fluid with more than 50 parts per million polychlorinated biphenyls are present at any Company Property, except for any such transformers, capacitators, ballasts or other equipment owned by any utility company, and (vi) no asbestos or asbestos-containing material is present at any Company Property or at the HQ Space and no employee, agent, contractor or subcontractor of the Company or its Subsidiaries is now or has in the past been exposed to friable asbestos or asbestos-containing material at any Company Property or at the HQ Space. (f) The Company has provided the most recent Phase I environmental report prepared for the Company or its Subsidiaries or otherwise in the possession of any of them with respect to the environmental condition of any Company Property (collectively, the "Company Environmental Reports"). True and complete copies of the executive summaries or conclusions included in the Company Environmental Reports (collectively, the "Executive Summaries of the Company Environmental Reports") have previously been delivered by the Company to Buyer. True and complete copies of each of the Company Environmental Reports have been delivered or made available to Buyer or to its representatives. The Executive Summaries of the Company Environmental Reports disclose all matters known to the Company in respect of the environmental condition (including violations of Environmental Laws, Environmental Claims and the presence or Release of any Materials of Environmental Concern) of the Company Properties (it being understood, however, that reference in the Executive Summaries of the Company Environmental Reports to other environmental reports, investigations, assessments or other documents shall not constitute disclosure of the contents thereof except to the extent such contents are fully in the Executive Summaries of the Company Environmental Reports). 19 (g) For purposes hereof, the terms listed below shall have the following meanings: (i) "Claim" shall mean all actions, causes of action, suits, debts, dues, accounts, reckonings, bonds, bills, covenants, contracts, controversies, promises, trespasses, damages, judgments, executions, claims, liabilities and demands whatsoever, in law or equity. (ii) "Environmental Claim" shall mean any Claim, investigation or notice (written or oral) by any person alleging potential liability (including potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries or fatalities, or penalties) arising out of, based on or resulting from (A) the presence, generation, transportation, treatment, use, storage, disposal or Release of Materials of Environmental Concern or the threatened Release of Materials of Environmental Concern at any location, or (B) activities or conditions forming the basis of any violation, or alleged violation of, or liability or alleged liability under, any Environmental Law. (iii) "Environmental Laws" shall mean federal, state, local, provincial, municipal and foreign laws, ordinances, principles of common law, rules, by-laws, orders, governmental policies, statutes, regulations, agreements, treaties, customary law, and international principles relating to the pollution or protection of the environment or of flora or fauna or their habitat or of human health and safety, or to the cleanup or restoration of the environment, including, but not limited to, any laws relating to (A) generation, treatment, storage, disposal or transportation of wastes, emissions or discharges or protection of the environment from the same, (B) exposure of persons to, or Release or threat of Release of, Materials of Environmental Concern, (C) noise, (D) repetitive motion, and (E) the safety and health of workers and employees. (iv) "Materials of Environmental Concern" shall mean all chemicals, pollutants, contaminants, wastes, toxic substances, petroleum or any fraction thereof, petroleum products and hazardous substances (as defined in Section 101(14) of CERCLA, 42 U.S.C. ss. 6601(14)), or solid or hazardous wastes as now defined and regulated under any Environmental Laws. (v) "Release" shall mean any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration. Section 3.13 "Employees and Employee Benefit Plans." (a) Schedule 3.13(a). sets forth a complete and accurate list of all employment agreements with employees of the Company or any of its Subsidiaries. Except for the employees who are parties to such employment agreements, all of the employees of the Company and each of its Subsidiaries are employed on an at-will basis (except for restrictions or limitations on the at-will basis of such employees imposed by general principles of law or equity). (b) The Company Reports or Schedule 3.13(b) sets forth a complete and accurate list of all Employee Benefit Plans and all material Benefit Arrangements which affect Employees of the Company or any of its Subsidiaries (the "Company Plans"). With respect to each Company Plan, the Company has made available to Buyer or to its representatives, true and complete copies of. (i) the plans and related trust documents and amendments thereto, (ii) the most recent summary plan descriptions, if any, and the most recent annual report, if any, and (iii) the most recent actuarial valuation (to the extent applicable). (c) With respect to each Company Plan, (i) the Company and each of its Subsidiaries is in compliance in all material respects with the terms of each Company Plan and with the requirements prescribed by all applicable statutes, orders or governmental rules or regulations, (ii) the Company and each of its Subsidiaries has contributed to each Pension Plan included in the Company Plans not less than the amounts accrued for such plan for all plan periods for which payment is due, and (iii) none of the Company or any of its Subsidiaries has any funding commitment or other liabilities except as reserved for in the financial statements in or incorporated by reference into the Company Reports, and, in the case of clause (i) through (iii), as is set forth in Schedule 3.13(c). 20 (d) None of the Company or any of its Subsidiaries has made any commitment to establish any new Employee Benefit Plan, to modify any Employee Benefit Plan, or to increase benefits or compensation of Employees of the Company or any of its Subsidiaries (except for normal increases in compensation consistent with past practices), and no intention to do so has been communicated to Employees of the Company or any of its Subsidiaries. (e) There are no pending or anticipated claims against or otherwise involving any of the Company Plans or any fiduciaries thereof with respect to their duties to the Plans and no suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of Company Plan activities) has been brought against or with respect to any such Company Plans. (f) Neither the Company, the Operating Partnership or any entity under "common control" with the Company or the Operating Partnership within the meaning of Section 4001 of ERISA has contributed to, or been required to contribute to, any "multiemployer plan" (as defined in Section 3(37) and 4001(a)(3) of ERISA). (g) Except as set forth on Schedule 3.13(g), the Company and its Subsidiaries do not maintain or contribute to any plan or arrangement which provides or has any liability to provide life insurance, medical or other employee welfare benefits to any Employee or former Employee upon his retirement or termination of employment and the Company and its Subsidiaries have never represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided. (h) For purposes hereof, "Employee Benefit Plans" means each and all "employee benefit plans" as defined in Section 3(3) of ERISA maintained or contributed to by a party hereto or in which a party hereto participates or participated and which provides benefits to Employees, including (i) any such plan that are "employee welfare benefit plans" as defined in Section 3(l) of ERISA, including retiree medical and life insurance plans ("Welfare Plans"), and (ii) any such plans that constitute "employee pension benefit plans" as defined in Section 3(2) of ERISA ("Pension Plans"). "Benefit Arrangements" means life and health insurance, hospitalization, savings, bonus, deferred compensation, incentive compensation, holiday, vacation, severance pay, sick pay, sick leave, disability, tuition refund, service award, company car, scholarship, relocation, patent award, fringe benefit, individual employment, consultancy or severance contracts and other polices or practices of a party hereto providing employee or executive compensation or benefits to Employees, other than Employee Benefit Plans. "Employees" mean all current employees, former employees and retired employees of a party hereto or any of its Subsidiaries, including employees on disability, layoff or leave status. "Controlled Group Liability" means any and all liabilities under (i) Title IV of ERISA, (H) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements of Section 601 et seq, of ERISA and Section 4980B of the Code, and (v) corresponding or similar provisions of foreign laws or regulations, other than such liabilities that arise solely out of, or relate solely to, the Plans. (i) With respect to each plan that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not exist any accumulated funding deficiency within the meaning of Section 412 of the Code or Section 302 of ERISA, whether or not waived, (ii) the fair market value of the assets of such plan equals or exceeds the actuarial present value of all accrued benefits under plan (whether or not vested), on a termination basis, (iii) no reportable event within the meaning of Section 4043(c) of ERISA has occurred, and the consummation of the transactions contemplated by this agreement will not result in the occurrence of any such reportable event, and (iv) all premiums to the Pension Benefit Guaranty Corporation have been timely paid in full. (j) There does not now exist, nor do any circumstances exist that could result in, any Controlled Group liability that would be a liability of the Company following the Closing. Without limiting the generality of the foregoing, neither the Company nor any ERISA Affiliate has engaged in any transaction described in Section 4069 or Section 4204 of ERISA. (k) Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result in, cause the accelerated vesting 21 or delivery of, or increase the amount or value of, any payment or benefit to any employee of the Company, except as set forth in Schedule 3.13 (k). Section 3.14 "Labor Matters." Except as set forth in Schedule 3.14, none of the Company or any of its Subsidiaries is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor union organization. Except for the matters set forth in Schedule 3.14, there is no unfair labor practice or labor arbitration proceeding pending or threatened against the Company or any of its Subsidiaries. There are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of the Company or any of its Subsidiaries. Section 3.15 "Affiliate Transactions." Schedule 3.15 sets forth a complete and accurate list of all transactions, series of related transactions or currently proposed transactions or series of related transactions entered into by the Company or any of its Subsidiaries since January 1, 1991 which are of the type required to be disclosed by the Company pursuant to Item 404 of Regulation S-K of the Securities Laws or, if not of such type, are of a nature referenced in Section 3.9(f) hereof. A true and complete copy of all agreements or contracts relating to any such transaction has been made available to Buyer. Schedule 3.15 sets forth an accounting of such transactions regarding participatory interests, the allocation of overhead and expenses thereunder, and all other matters material to each of such agreements or contracts. Section 3.16 "Insurance." The Company and the Operating Partnership maintain insurance policies covering the assets, business, equipment, properties, operations, employees, officers and directors of the Company and each of its Subsidiaries (collectively, the "Insurance Policies") which are of a type and in amounts customarily carried by persons conducting businesses similar to those of the Company and the Operating Partnership. There is no material claim by the Company or any of its Subsidiaries pending under any of the material Insurance Policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies. Section 3.17 "Delaware Takeover Law." The terms of Section 203 of the General Corporation Law of the State of Delaware will not apply to Buyer, any Stock Purchase or any other transaction contemplated hereby. Section 3.18 "Brokers or Finders." No agent, broker, investment banker or other firm or person, including any of the foregoing that is an Affiliate of the Company with which the Company dealt, is or will be entitled to any broker's or finder's fee or any other commission or similar fee from the Company in connection with this Agreement or any of the transactions contemplated hereby for which Buyer will be responsible. Section 3.19 "Disclosure of Facts." There are no facts peculiar to the Company or the Operating Partnership that the Company has not disclosed to Buyer, nor, is there a reasonable likelihood that there will occur any event that could, individually or in the aggregate, reasonably to be expected to have a Material Adverse Effect on the business, financial condition, assets, results of operations or prospects of the Company, the Subsidiaries, or the Operating Partnership. Section 3.20 "REOC Status." (a) The Company was incorporated as a Delaware corporation in November, 1990 and from its date of incorporation until July 1, 1991, the Company conducted no business and owned no assets. (b) As of the date of the Company's first long-term investment that was not a short-term investment of funds pending long-term commitment, i.e., July 1, 1991 (the "REOC Qualification Date"), and continuously thereafter to and including the Initial Closing, at least 50 percent of the assets of the Company (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, have been invested in real estate which has been under active development or management by the Company. (c) The Company has been actively engaged in the management or development of real estate in the ordinary course of its business at all times from the REOC Qualification Date to and including the Initial Closing. 22 (d) The "real estate" referenced above which was purchased on the REOC Qualification Date and thereafter includes the Company Properties. To the extent any of the Company Properties are subject to tenant leases (the "Leases"), the Company has substantial responsibilities under each of the Leases, and none of the Leases provides that substantially all management and maintenance activities with respect to the Company Property in question or any portion thereof are the responsibility of the tenant lessees. (e) The Company has not merely passively assumed the risks of its real estate ownership, but the return to its stockholders from its investment in the Company Properties has been and is based in part on the cash flow and capital appreciation of the Company Properties, and such return depends in substantial part on the success of the Company's management and development efforts with respect to the Company Properties. (f) The employees of the Company perform most of the development and management functions of the real estate business described herein, except that the Company has employed independent contractors, each of which is terminable without cause and without substantial penalty upon reasonably short notice, to perform certain of the day-to-day management activities associated with the Company Properties. In any event, the Company represents and warrants that it has devoted substantial resources to such management and development activities and to the oversight of its independent contractors who perform such activities from the REOC Qualification Date to and including the Initial Closing. (g) The Company covenants and warrants that it will comply with all requirements, and take all actions and cause its subsidiaries to take all actions necessary, to maintain its status as a "real estate operating company" as such term is defined in 29 C.F.R. ss. 2510.3-101. Specifically, but without limitation, the Company covenants that it has or it will establish an "annual valuation period", which will be an annual period of no more than 90 days that will begin no later than the anniversary of the REOC Qualification Date, and that on at least one day within each annual valuation period, the Company will maintain the investment of at least 50 percent of its assets (other than short-term investments pending long-term commitment or distribution to investors), valued at cost, in real estate which is under active development or management by the Company as described above. The Company also covenants to devote substantial resources to the management of the real estate it owns, and continuously to remain actively engaged in the management or development of real estate in the ordinary course of its business. The Company agrees to cooperate with Buyer and to furnish such additional information as may be reasonably requested by Buyer to evidence the actions indicated above. Section 3.21 "Knowledge Defined." As used herein, the phrase "to the Company's Knowledge" (or words of similar import) means actual knowledge of those individuals identified in Schedule 3.21, and includes any facts, matters or circumstances set forth in any written notice from any Government Authority or any other material written notice received by the Company or any Subsidiary, and also includes any matter of which Buyer informs the Company in writing. Section 3.22 "Construction of Material Adverse Effect." For purposes of the construction of any representation and warranty in this Section 3, and as to the accuracy thereof, the term "Material Adverse Effect" shall be considered in each and every event on an aggregate basis with all other representations and warranties which contain an exception for Material Adverse Effect such that, if and when one or more of such representations and warranties, considered in the aggregate, prove to be inaccurate to the extent that an aggregate of $3,000,000 in Loss or Liability is exceeded, then all such representations and warranties which are subject to exception based on Material Adverse Effect shall, if inaccurate in any respect, be deemed to be inaccurate without regard to an exception for Material Adverse Effect and the amount or amounts involved in each such inaccuracy shall be determined as if no such exception was present. 23 ARTICLE 4 Representations and Warranties of Buyer Buyer hereby represents and warrants to the Company as follows: Section 4.1 "Organization." Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has all requisite power and authority to own, operate, lease and encumber its properties and carry on its business as now conducted, and to enter into this Agreement and the Registration Rights Agreement, and to perform its obligations hereunder and thereunder. Section 4.2 "Due Authorization." The execution, delivery and performance of this Agreement and the Registration Rights Agreement have been duly and validly authorized by all necessary action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer for itself and constitutes the valid and legally binding obligations of Buyer, enforceable against Buyer, in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights or general principles of equity. Section 4.3 "Conflicting Agreements and Other Matters." Neither the execution and delivery of this Agreement, nor the performance by Buyer of its obligations hereunder, will conflict with, result in a breach of the terms, conditions or provisions of, constitute a default under, result in the creation of any mortgage, security interest, encumbrance, lien or charge of any kind upon any of the properties or assets of Buyer, pursuant to, or require any consent, approval or other action by or any notice to or filing with any Government Authority pursuant to, the organizational documents or agreements of Buyer, or any agreement, instrument, order, judgment, decree, statute, law, rule or regulation by which Buyer is bound, except for filings after any Closing under Section 13(d) of the Exchange Act. Section 4.4 "Acquisition for Investment, Sophistication, Source of Funds." Buyer is acquiring the Company Preferred Stock being purchased by it for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof, and (except for the possible contemplated sale by Buyer of shares of Company Preferred Stock to Morgan Stanley Real Estate Special Situations, Inc., affiliated partnerships and funds advanced by Morgan Stanley Asset Management, Inc., or by its Affiliates) Buyer has no present intention or plan to effect any distribution of shares of Company Preferred Stock, provided that the disposition of Company Preferred Stock owned by Buyer shall at all times be and remain within its control, subject to the provisions of this Agreement and the Registration Rights Agreement. Buyer is able to bear the economic risk, and will be supplied with the funds for, the acquisition of Company Preferred Stock pursuant hereto and can afford to sustain a total loss on such investment, and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment, and therefore has the capacity to protect its own interests in connection with the acquisition of Company Preferred Stock pursuant hereto. Section 4.5 "Brokers or Finders." Except for the fees of Triton Pacific, L.L.C. (which the Company has represented to Buyer has been retained by the Company as its sole broker and the fees of which will be paid by the Company at the Initial Closing), no agent, broker, investment banker or other firm or person, including any of the foregoing that is an Affiliate of Buyer with which the Buyer dealt, is or will be entitled to any broker's or finder's fee or any other commission or similar fee from Buyer in connection with this Agreement or any of the transactions contemplated hereby for which the Company will be responsible. Section 4.6 "REIT Qualification Matters." No person which would be treated as an "individual" for purposes of Section 542(a)(2) of the Code (as modified by Section 856(h) of the Code) owns or would be considered to own (taking into account the ownership attribution rules under Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the value of the outstanding equity interest in Buyer. 24 Section 4.7 "Investment Company Matters." Buyer is, and after giving effect to the purchase of Company Preferred Stock contemplated hereby, will not be, an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. ARTICLE 5 Representations and Covenants Relating to Closings Section 5.1 "Taking of Necessary Action." Each of Buyer and the Company agrees to use its commercially reasonable best efforts promptly to take, or cause to be taken, all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Registration Rights Agreement, subject to the terms and conditions hereof and thereof. Section 5.2 "Company Preferred Stock, Certificate of Designation; By-laws." At or before the Initial Closing, the Company shall cause to be duly executed and filed with the Office of the Secretary of the State of Delaware, the Certificate of Designation in the form attached as Exhibit A. Section 5.3 "Public Announcements; Confidentiality." (a) Subject to each party's disclosure obligations imposed by law and any stock exchange or similar rules and the confidentiality provisions contained in Section 5.5(b), the Buyer shall have the right to review the development and distribution of all news releases and other public information disclosures with respect to this Agreement and the Registration Rights Agreement, and any of the transactions contemplated hereby or thereby. Buyer shall also have the right to review and, before filing or other public dissemination, approve (which approval will not be unreasonably withheld or delayed) any statements made or information provided with respect to it, the Advancing Party or to the transactions contemplated by this Agreement, including, without limitation, such statements intended to be included in any future Regulatory Filing prepared by or on behalf of the Company. (b) Buyer agrees that all information provided to Buyer or any of its representatives pursuant to this Agreement shall be kept confidential, and Buyer shall not disclose such information to any persons other than the directors, officers, employees, financial advisors, legal advisors, accountants, consultants and affiliates of Buyer who reasonably need to have access to the confidential information and who are advised of the confidential nature of such information; provided, however, the foregoing obligation of Buyer shall not (i) relate to any information that (1) is or becomes generally available other than as a result of unauthorized disclosure by Buyer or by persons to whom Buyer has made such information available, or (2) is or becomes available to Buyer on a non-confidential basis from a third party that is not bound by any other confidentiality agreement with the Company, or (ii) prohibit disclosure of any information if required by law, rule, regulation, court order or other legal or governmental process. (c) The Company agrees that all information provided to the Company or any of its representatives pursuant to this Agreement shall be kept confidential, and the Company shall not disclose such information to any persons other than the directors, officers, employees, financial advisors, legal advisors, accountants, consultants and affiliates of the Company who reasonably need to have access to the confidential information and who are advised of the confidential nature of such information; provided, however, the foregoing obligation of the Company shall not (i) relate to any information that (1) is or becomes generally available other than as a result of unauthorized disclosure by the Company or by persons to whom the Company has made such information available, or (2) is or becomes available to the Company on a non-confidential basis from a third party that is not bound by any other confidentiality agreement with the Company, or (ii) prohibit disclosure of any information if required by law, rule, regulation, court order or other legal or governmental process. Section 5.4 "Conduct of the Business." Except for transactions contemplated hereby, during the period from the date hereof to the date of the Initial Closing, the Company will, except as otherwise consented to or 25 approved by Buyer in writing or as permitted or required hereby, conduct the business of the Company and its Subsidiaries and engage in transactions only in the ordinary course, and during the period from the date hereof to the date on which there shall be outstanding no shares of Company Preferred Stock, the Company will not, except as otherwise consented to or approved by Buyer in writing or as permitted or required hereby, (i) change or fail to change any provision of the Company Charter or the Amended Company By-laws in a manner that would be adverse to Buyer, or (ii) conduct the business of the Company and its Subsidiaries and engage in transactions except in the ordinary course, except as is permitted by the Certificate of Designation. Section 5.5 "No Solicitation of Transactions." Until the Remaining Equity Commitment shall be zero, the Company and the Operating Partnership will not issue Common Stock or securities of either the Company or the Operating Partnership in any transaction other than a publicly underwritten, widely distributed offering of Company Common Stock or the acquisition by the Operating Partnership of interests in real estate in consideration for Operating Partnership Units, except for the exercise of outstanding Warrants or stock options, or the conversion of outstanding Operating Partnership Units. Section 5.6 "Information and Access." From the date hereof to the date on which there shall remain outstanding no Company Preferred Stock, the Company and its Subsidiaries shall afford to Buyer and Buyer's accountants, counsel and other representatives full and reasonable access during normal business hours (and at such other times as the parties may mutually agree) to its properties, books, contracts, commitments, records and personnel and, during such period, shall furnish promptly to Buyer (1) a copy of each report, schedule and other document filed or received by it pursuant to the requirements of the Securities Laws, and (2) all other information concerning their businesses, personnel and the Company Properties as Buyer may reasonably request. Buyer and its accountants, counsel and other representatives shall, in the exercise of the rights described in this Section, not unduly interfere with the operation of the businesses of the Company or its Subsidiaries. Section 5.7 "Notification of Certain Matters." Until all of the Company Preferred Stock has been issued or if all of the Company Preferred stock has not been issued until March 19, 1999, each of Buyer and the Company shall use its good faith efforts to notify the other party in writing of its discovery of any matter that would render any of such party's or the other party's representations and warranties contained herein untrue or incorrect in any material respect, but the failure of either party to so notify the other party shall not be deemed a breach of this Agreement. ARTICLE 6 Certain Additional Covenants Section 6.1 "Resale." Buyer acknowledges and agrees that the Company Preferred Stock that Buyer will acquire in any Stock Purchase will not, as of the relevant Closing thereof, be registered under the Securities Act or the securities laws of any state and that it may be sold or otherwise disposed of only in one or more transactions registered under the Securities Act and, where applicable, such state securities laws or as to which an exemption from the registration requirements of the Securities Act and, where applicable, such state securities laws is available. Section 6.2 "Use of Funds." The Company shall use the funds received from Stock Purchases for the repayment of debt (of either the Company or the Operating Partnership) or for the acquisition, rehabilitation, development or refinancing by the Company or the Subsidiaries of properties, and for the payment to Triton Pacific, L.L.C., referred to in the parenthetical in Section 4.5 hereof. Section 6.3 "REIT Status." From and after the date hereof, the Company will elect to be taxed as a REIT in its federal income tax returns, will comply with all applicable laws, rules and regulations of the Code relating to a REIT, and will not take any action or fail to take any action which would reasonably be expected to, 26 alone or in conjunction with any other factors, result in the loss of its status as a REIT for federal income tax purposes or the failure of the representations in Section 3.8 hereof to be true and correct. Section 6.4 "Payments." The Company acknowledges and agrees to pay or reimburse from time to time upon the direction of Buyer, at and after the Execution Closing, reasonable third-party transaction costs to Buyer, up to an aggregate amount equal to $300,000, incurred or paid by Buyer and the Advancing Party in completing this transaction (as invoiced by reasonably detailed statements or invoices of the nature attached as Schedule 6.4, with appropriate insertions), as well as with respect to expenses of Buyer and the Advancing Party incurred or paid in connection with any amendment or modification of, or waiver of, the transaction documents. It is understood that Buyer will share the results of its due diligence review, and that of its counsel, with Lehman Brothers, Inc., as representative of the several underwriters, so as to enable Lehman Brothers, Inc., to reduce any out-of-pocket expenses it might incur associated with an anticipated subsequent public offering of Company Common Stock. The Company shall have paid Buyer's expense in an amount equal to $100,000 which shall have been funded into Buyer's bank account as contemplated by the letter of intent dated as of August 22, 1997. The Company acknowledges and agrees that, at the Execution Closing, the $100,000 so paid to Buyer shall be credited towards transaction costs incurred by the Buyer and payable by the Company. At the Execution Closing, the Company acknowledges and agrees to pay the amount of $750,000 to Buyer, as a holdback allowance, which Buyer may, at its option, deduct from the amount of Purchase Price which would otherwise be payable at the Initial Closing. Notwithstanding any termination of this Agreement by Buyer pursuant to Section 9.1(b) or 9.1(d), the Company acknowledges and agrees to make the payments as set forth above. Section 6.5 "Preemptive Rights." (a) Buyer shall have the rights set forth in this Section 6.5 as the holder of record and beneficially of shares of Company Stock. The rights set forth herein are in favor of Buyer and its successors and assigns, provided that any exercise procedures to be accomplished hereunder shall be performed by Buyer or its nominee and no other person may accomplish such procedures or seek to exercise the preemptive right set forth in this Section 6.5. Absent an express assignment of the rights of Buyer under this Section 6.5, no transfer by Buyer of shares of Company Preferred Stock or Company Common Stock shall affect the rights of Buyer hereunder. (b) Buyer shall have, at any time and from time to time, the preemptive right to purchase, in the case of the proposed issuance by the Company of, or the proposed granting by the Company of shares of, any class of Company Stock, or any rights to subscribe for or to purchase, or any options for the purchase of, Company Stock or any stock or securities convertible into or exchangeable for Company Stock (including, without limitation, interests in the Operating Partnership) (such rights or options being hereinafter referred to as "Options" and such convertible or exchangeable stock or securities being hereinafter referred to as "convertible securities"). Except upon the occurrence on or before November 31, 1997, of an underwritten widely distributed offering of Company Common Stock at a price per share to the public of not less than $11.3125, with not more than $150,000,000 in gross offering proceeds, on each occasion that the Company proposes to issue Company Stock, options, warrants or convertible securities, or any of the foregoing, the Company shall give to Buyer prior written notice (the "Company Notice") of its intention, by first class mail, postage prepaid, addressed at its last address as shown by the records of the Company describing the same, the price and the specific terms (or in the context of an offering of Company Stock, convertible securities, warrants or options to the public, a range of price and terms) upon which the Company proposes to issue the same. Buyer shall have 15 Business Days from the date of the receipt by Buyer of the Company Notice to deliver a notice (the "Rights Exercise Notice") notifying the Company of Buyer's intention to purchase all or a part of its pro rata share of shares or other securities represented by Company Stock, convertible securities, warrants or options, or any of the foregoing, in accordance herewith, for the price and upon the terms specified by the Company Notice, such pro rata share to be 19.9% (or, in the event of the widely distributed public offering on the schedule, at the price and in the amount of gross offering proceeds noted above, such lesser percentage as Buyer shall hold immediately after such offering assuming no purchase by Buyer in such 27 offering or hereunder in connection with such offering) reduced after completion of the public offering of Company Common Stock by Lehman Bros., Inc. (or such lesser percentage as may reflect the beneficial ownership of Buyer of such shares or securities or Company Stock, options, warrants or convertible securities, warrants or any of the foregoing, but assuming until March 19, 1999, that Buyer has purchased as at the Execution Closing all 2,737,000 shares of Company Preferred Stock the sale and purchase of which is the object of this Agreement, and assuming thereafter that Buyer is the holder of each and every outstanding share of Company Preferred Stock), and at a price or prices no less favorable to Buyer than the price or prices at which such Company Stock, convertible securities, options or warrants are proposed to be offered for sale to others, less, in the event of any sale other than a public offering, the per unit amount of any placement fees or commissions, and provided, however, that the purchase of such Company Stock, convertible securities, warrants or options shall be consummated prior to the later of (i) 30 days after the date of the Rights Exercise Notice and (ii) the date that the Company consummates the issuance of the Company Stock, convertible securities, warrants or options described in the Company Notice. If, in connection with any proposed issue of Company Stock, convertible securities, warrants or options, the Buyer fails to exercise in full its preemptive right as set forth in this Section 6.5, then subject to the next following sentence, the Company may sell the unsold Company Stock, convertible securities, warrants or options at any time within 180 days (60 days in the case of a public offering) thereafter at a price and upon terms no more favorable to the purchasers thereof than specified in the Company Notice; provided, that the Company shall not sell or grant, or permit conversion under, any Company Stock, convertible securities, warrants or Options, or any of the foregoing, after such 180-day period (or 60-day period in the case of a public offering) without renewed compliance with this Section 6.5; provided, further, that in the case of a widely distributed underwritten public offering of Company Stock, convertible securities, warrants or options, if in the good faith opinion of the Company and the underwriter, such renewed compliance by the Company with the procedural requirements hereunder (i.e., timing of notices, etc.) would otherwise materially impede the consummation of such public offering, the parties agree to take such further action as may be reasonably necessary to effectuate such offering while preserving Buyer's substantive preemptive right hereunder. (c) The provisions of this Section 6.5 shall not apply to any shares of any class of the Company Stock or convertible securities, warrants, options, or any of them, (i) issuable upon redemption of Operating Partnership Units, the conversion of any Company Preferred Stock, or upon exercise of the Warrants; (ii) issuable upon conversion of convertible securities or the exercise of options or warrants, or both, if Buyer was offered the opportunity to purchase such shares or securities, or convertible securities, warrants or options, or both, pursuant to this Section 6.5, and declined the same, or as to which Buyer was not given such opportunity by reason of the application of this Section 6.5; (iii) issuable in connection with stock splits, stock dividends or recapitalizations as to the effects of which adjustment will be made as provided elsewhere herein, or in the Certificate of Designation pertaining to the Company Preferred Stock; (iv) issuable to employees and prospective employees, directors and prospective directors, pursuant to any plan or pattern of employee or director equity participation set forth in Schedule 3.3(a); and (v) issuable upon acquisition of assets by the Operating Partnership in consideration for the issuance of Operating Partnership Units. (d) Notwithstanding the foregoing, if and to the extent that Buyer is prevented or prohibited from the exercise in full or in part of its preemptive right to purchase any Company Stock, convertible securities, warrants or options, due to restrictions on the ownership by Buyer (or any group of holders with which such Buyer may be affiliated or may be deemed to be affiliated) of any thereof, whether under applicable Delaware law, or the Amended Company By-laws, or by reason of restrictions applicable for purposes of the Company's continued qualification as a REIT for purposes of the Code (the "Exercise Restriction"), such number of Company Stock, convertible securities, warrants or options required to be purchased pursuant to such preemptive right shall automatically be reduced to such amount as to not exceed the Exercise Restriction, and Buyer from time to time thereafter may exercise such right up to an aggregate number of Company Stock, convertible securities, warrants or options as is equal to such reduction, subject always to the restrictions as aforesaid. (e) The rights of Buyer set forth in this Section 6.5 shall commence on the date hereof and shall expire on the fifth anniversary of the date hereof, except as to purchases as to which Buyer may make on a deferred basis under Section 6.5(d) which shall continue without time restriction. 28 Section 6.6 "Board of Directors". On or before October 31, 1997, Buyer or any Affiliate of Buyer designated by Buyer and the Company will have consulted concerning the election of an additional individual to serve on the Board of Directors, the Board of Directors will have considered the views and advice of Buyer or any Affiliate of Buyer designated by Buyer with respect to the background and experience it is desirable that such an individual possess and as to specific individuals to be considered for such a position, and an additional director to the Board of Directors, subject to this Section 6.6, will have been elected and will have agreed so to serve. The consent of Buyer or any Affiliate of Buyer designated by Buyer as to any such election or appointment will not be sought or required. However, except as provided in the Certificate of Designation, in no event will any individual who is an employee or independent contractor of, or employee, independent contractor, consultant or member of a firm which on an ongoing basis is rendering professional services to, the Company, The Berkshire Group, or any Affiliate of The Berkshire Group, or of the Company, be considered by the Company or elected or appointed as such an additional director or to fill any vacancy on the Board of Directors which might otherwise occur. Section 6.7 "Transactions with Affiliates." Except as to matters as set forth in Schedule 3.9(f) as in effect on the date hereof (but not including any renewal, extension, amendment, alteration or other continuation of the same except a renewal of any thereof year by year on the same terms), Buyer shall have the right, and the Company, the Operating Partnership and the Subsidiaries shall be bound by such right, to approve or disapprove in its sole and absolute discretion any proposed transaction involving Affiliates of the Company, including but not limited to The Berkshire Group, and Affiliates of The Berkshire Group, Laurence Gerber, Douglas Krupp, George Krupp, David Marshall, and any Affiliate of a predecessor organization of The Berkshire Group, or any of such Persons, but excluding from the prohibition in this Section 6.7 transactions involving Partnership Affiliates. Without having previously secured in writing such approval of Buyer as to any such transaction, the Company, the Operating Partnership and the Subsidiaries, or any of such Persons, will not incur any obligation or liability as to any such transaction, nor make any announcement thereto. Section 6.8 "Company Stock Authorized, Issued and Outstanding." As of the date seven days after the Initial Closing, Company shall inform Buyer of the number of shares of Company Stock authorized, issued and outstanding, as of the date thereof. ARTICLE 7 Conditions to Closings Section 7.1 "Conditions of Purchase at Initial Closing." The obligations of Buyer to purchase and pay for the Purchased Shares at the Initial Closing are subject to satisfaction or waiver of each of the following conditions precedent: (a) "Representations and Warranties; Covenants." The representations and warranties of the Company contained herein shall have been true and correct in all respects on and as of the date hereof, and shall be true and correct in all respects on and as of the date of the Initial Closing with the same effect as though such representations and warranties had been made on and as of the date of the Initial Closing (except for representations and warranties that speak as of a specific date or time other than the date of the Initial Closing (which need only be true and correct in all respects as of such date or time)). The covenants and agreements of the Company to be performed on or before the date of the Initial Closing in accordance with this Agreement shall have been duly performed in all respects (except for the Company's obligation to deliver the relevant shares of Company Preferred Stock at the Initial Closing). The Company shall have delivered to Buyer at the Initial Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to Buyer dated the date of the Initial Closing to such effect. (b) "Company Preferred Stock; Certificate of Designation." The Certificate of Designation shall have been duly filed with the office of the Secretary of State of Delaware, any other Government Authority or NYSE and shall be in full force and effect. 29 (c) "Company By-laws; Modification of Ownership Limit; Rights of Holder of Company Preferred Stock; Modification of Partnership Agreement." The amendment to the Company By-laws in the form attached as Exhibit C (subject to modification satisfactory to both the Company and Buyer prior to the Initial Closing) (the "Amended Company By-laws") shall have been approved by the Board of Directors, all as required or permitted by and in accordance with the Company Charter, duly filed if any filing thereof shall be required by any Government Authority or NYSE, and shall be in full force and effect. The Board of Directors resolutions pertaining to this Agreement, and the procedures, findings and transactions contemplated hereby, shall have been presented at a meeting at which a quorum of the Board of Directors was present and acting throughout, shall have been duly approved and adopted by the Board of Directors, the Secretary shall have been instructed to place the record of such action of the Board of Directors in the records of the meetings of the Board of Directors, and the Secretary shall have placed the record of such action in such records and shall be in form and substance satisfactory to Buyer. The Partnership Agreement shall have been modified, if necessary, (i) so as to create a primary distribution to the Company in order to assure that the Company will receive, on a priority basis, before the Operating Partnership makes other distributions, amounts sufficient to pay all amounts due from time to time upon the Company Preferred Stock, and (ii) in all other respects necessary to permit ERISA counsel to the Buyer to confirm to the Buyer that its investment in the Company Preferred Stock is in compliance with the rules and regulations promulgated under and the provisions of ERISA. (d) "HSR Act." Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been terminated, and no action shall have been instituted by the United States Department of Justice or the United States Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, which action shall not have been withdrawn or terminated, or the Company and Buyer shall have mutually concluded that no filing under the HSR Act is required with respect to the transactions contemplated hereby and counsel to the Company shall have rendered to both its opinion to such effect. (e) "Consents." The Company shall have obtained the consents set forth in Schedule 3.4(f). (f) "Accountants." The Company shall have caused to be supplied to Buyer a letter, satisfactory to Buyer in scope, form and substance, as to financial statement matters referenced in Section 3.5(a) of this Agreement. (g) "Disclosure Schedules." All schedules to this Agreement shall have been amended or modified, if necessary, to reflect completion of Buyer's review thereof and shall otherwise be satisfactory in scope and content to the Buyer in all respects. (h) "Registration Rights Agreement." The parties shall have executed and delivered the Registration Rights Agreement. Section 7.2 "Conditions of Purchase at All Closings." The obligations of Buyer to purchase and pay for the Purchased Shares at each Closing (including the Initial Closing) are subject to satisfaction or waiver of each of the following conditions precedent: (a) "Representations and Warranties; Covenants." The representations and warranties of the Company contained herein shall have been true and correct in all respects on and as of the date hereof, and shall be true and correct in all respects on and as of the relevant Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time other than such Closing Date (which need only be true and correct in all respects as of such date or time)). The covenants and agreements of the Company to be performed on or before the relevant Closing Date in accordance with this Agreement shall have been duly performed in all respects except for the Company's obligation to deliver the relevant shares of Company Preferred Stock at the relevant Closing. The terms and conditions of the Certificate of Designation shall have been observed in all respects by the Company on and as of the relevant Closing Date. As to each Closing other than the Initial Closing, no condition to the obligations 30 of Buyer to purchase and pay for the Purchased Shares at the Initial Closing, and that was not duly waived by Buyer, shall have failed to be satisfied as of the Initial Closing. The Company shall have delivered to Buyer at the relevant Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to Buyer dated the relevant Closing Date to such effect. (b) "No Injunction." There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby and there shall be no pending Actions which would reasonably be expected to have a material adverse effect on the ability of the Company to consummate the transactions contemplated hereby or to issue the Purchased Shares. (c) "Proceedings." All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to Buyer and Buyer shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (d) "REIT Status." The Company shall have elected to be taxed as a REIT in its most recent federal income tax return, and shall be in compliance with all applicable laws, rules and regulations, including the Code, necessary to permit it to be taxed as a REIT. The Company shall not have taken any action or have failed to take any action which would reasonably be expected to, alone or in conjunction with any other factors, result in the loss of its status as a REIT for federal income tax purposes. (e) "Opinion of Counsel." Buyer shall have received an opinion from Peabody & Brown, counsel to the Company, in form and substance reasonably satisfactory to Buyer. (f) "Certain Conditions Still True." The conditions precedent set forth in Section 7.1 shall continue to be satisfied or waived in all respects on and as of each relevant Closing Date. Section 7.3 "Conditions of Sale." The obligation of the Company to issue and sell any Purchased Shares at any Closing (including the Initial Closing) is subject to satisfaction or waiver of each of the following conditions precedent: (a) "Representations and Warranties, Covenants." The representations and warranties of Buyer contained herein shall have been true and correct in all respects on and as of the date hereof, and shall be true and correct in all respects on and as of the relevant Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date (except for representations and warranties that speak as of a specific date or time other than such Closing Date (which need only be true and correct in all respects as of such date or time)). The covenants and agreements of Buyer to be performed on or before the relevant Closing Date in accordance with this Agreement shall have been duly performed in all respects (except for Buyer's obligation to pay the relevant Purchase Price at the relevant Closing). Buyer shall have delivered to the Company at the relevant Closing a certificate of an appropriate officer in form and substance reasonably satisfactory to the Company dated the relevant Closing Date to such effect. (b) "HSR Act." Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been terminated, and no action shall have been instituted by the United States Department of Justice or the United States Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, which action shall not have been withdrawn or terminated, or the Company and Buyer shall have mutually concluded that no filing under the HSR Act is required with respect to the transactions contemplated hereby. (c) "No Injunction." There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which enjoins or prohibits consummation of the transactions contemplated hereby and there shall be no pending Actions which would reasonably be expected to have a material adverse effect on the ability of Buyer to consummate the transactions contemplated hereby or to acquire the Purchased Shares. 31 (d) "Consents." The Company shall have obtained the consents set forth in Schedule 3.4(d). (e) "Proceedings." All corporate and other proceedings to be taken by Buyer in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to the Company and the Company shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (f) "Opinion of Counsel." The Company shall have received an opinion from Buyer Counsel in form and substance reasonably satisfactory to the Company. ARTICLE 8 Survival; Indemnification Section 8.1 "Survival." All representations, warranties and (except as provided by the last sentence of this Section 8.1) covenants and agreements of the parties contained herein, including indemnity or indemnification agreements contained herein, or in any Schedule or Exhibit hereto, or any certificate, document or other instrument delivered in connection herewith shall survive the Initial Closing until the third anniversary of the final Subsequent Purchase. No Action or proceeding may be brought with respect to any of the representations and warranties, or any of the covenants or agreements which survive until the third anniversary of the final Subsequent Purchase, unless written notice thereof, setting forth in reasonable detail the claimed misrepresentation or breach of warranty or breach of covenant or agreement, shall have been delivered to the party alleged to have breached such representation or warranty or such covenant or agreement prior to the first anniversary of the Initial Closing. Those covenants or agreements that contemplate or may involve actions to be taken or obligations in effect after the Initial Closing shall survive in accordance with their terms, and the indemnification described in Section 6.4 shall survive until the running of the applicable statutes of limitations. Section 8.2 "Indemnification by Buyer or the Company." (a) Subject to Section 8.1, from and after any Closing Date, Buyer shall indemnify and hold harmless the Company, its successors and assigns, from and against any and all damages, claims, losses, expenses, costs, obligations, and liabilities, including liabilities for all reasonable attorneys' fees and expenses (including attorney and expert fees and expenses incurred to enforce the terms of this Agreement) and Liabilities (collectively, "Loss and Expenses") suffered, directly or indirectly, by the Company by reason of, or arising out of, (i) any breach as of the date made or deemed made or required to be true of any representation or warranty made by Buyer in or pursuant to this Agreement, or (ii) any failure by Buyer to perform or fulfill any of its covenants or agreements set forth herein. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Loss and Expenses include a party's incidental or consequential damages. (b) Subject to Section 8.1, from and after any Closing Date, the Company shall indemnify and hold harmless Buyer, its successors and assigns, from and against any and all Loss and Expenses, suffered, directly or indirectly, by Buyer by reason of, or arising out of, (i) any breach as of the date made or deemed made or required to be true of any representation or warranty made by the Company in or pursuant to this Agreement and any statements made in any certificate delivered pursuant to this Agreement, or (ii) any failure by the Company to perform or fulfill any of its covenants or agreements set forth herein. Notwithstanding any other provision of this Agreement to the contrary, in no event shall Loss and Expenses include a party's incidental or consequential damages. Loss and Expenses of Buyer as to which Buyer shall be indemnified by the Company in accordance with this Section 8.2(b) shall include amounts measured as provided in the next two following sentences. Any breach or inaccuracy of any sort referred to in clause (i) of the first sentence of this Section 8.2(b) (any such, an "Inaccuracy") shall create Loss and Expenses of Buyer in an amount equal to the product of the Buyer Portion (as defined below) multiplied by the amount or amounts of (i) any Loss or Expenses of the Company or any Subsidiary 32 and (ii) any failure to receive, loss of or reduction in revenue of the Company or any Subsidiary, in either case misstated in or omitted from the Agreement or any certificate in an Inaccuracy. In all cases, Loss and Expenses of Buyer shall be adjusted upwards to reflect payment, when made by the Company to Buyer, of indemnity pursuant to this Section 8.2(b), such that Buyer receives indemnity from the Company with respect to the Liability represented by any payment to Buyer pursuant to this Section 8.2(b). As used in this Section 8.2(b), "Buyer Portion" shall mean a fraction (i) the numerator of which is the sum of (A) the number of shares of Company Common Stock held by Buyer plus (B) the number of shares of Company Common Stock which Buyer would at any time be entitled to receive on conversion of Company Preferred Stock purchased by Buyer (at the then applicable Conversion Price, and otherwise as set forth in and established pursuant to Article FIRST, Section 5 of the Certificate of Designation, and assuming until March 19, 1999, that Buyer has purchased at the Execution Closing all 2,737,000 shares of Company Preferred Stock the sale and purchase of which is the object of this Agreement, and assuming thereafter that Buyer is the holder of each and every outstanding share of Company Preferred Stock), and (ii) the denominator of which is a number equal to (A) the number of all shares of Company Common Stock then outstanding or which would be outstanding after giving effect to rights to receive shares of Company Common Stock pursuant to the exercise of conversion privileges under then outstanding, fully paid and non-assessable securities of the Company, including the Company Preferred Stock, minus (B) the number of shares established in clause (i) as the numerator of the fraction. (c) Notwithstanding the foregoing, (i) neither Buyer nor the Company shall be responsible for any Loss and Expenses as provided by paragraphs (a) and (b), respectively, of this Section 8.2, until the cumulative aggregate amount of such Loss and Expenses suffered by Buyer or the Company, as the case may be, exceeds $400,000, in which case Buyer or the Company, as the case may be, shall then be liable for such Loss and Expenses exceeding such amount, and (ii) the cumulative aggregate indemnity obligation of each of Buyer and the Company under this Section 8.2 shall in no event exceed the Total Equity Commitment. Except with respect to third-party claims being defended in good faith or claims for indemnification with respect to which there exists a good faith dispute, the indemnifying party shall satisfy its obligations hereunder within 30 days of receipt of a notice of claim under this Article 8. Section 8.3 "Third-Party Claims." If a claim by a third party is made against an Indemnified Party and if such Indemnified Party intends to seek indemnity with respect thereto under this Article, such Indemnified Party shall promptly notify the indemnifying party in writing of such claims setting forth such claims in reasonable detail. The indemnifying party shall have 20 days after receipt of such notice to undertake, through counsel of its own choosing and at its own expense, the settlement or defense thereof, and the Indemnified Party shall cooperate with it in connection therewith, provided, however, that the Indemnified Party may participate in such settlement or defense through counsel chosen by such Indemnified Party, provided that the fees and expenses of such counsel shall be borne by such Indemnified Party. The Indemnified Party shall not pay or settle any claim which the indemnifying party is contesting. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such claim, provided that in such event it shall waive any right to indemnity therefor by the indemnifying party. If the indemnifying party does not notify the Indemnified Party within 20 days after the receipt of the Indemnified Party's notice of a claim of indemnity hereunder that it elects to undertake the defense thereof, the Indemnified Party shall have the right to contest, settle or compromise the claim but shall not thereby waive any right to indemnity therefor pursuant to this Agreement. ARTICLE 9 Termination Section 9.1 "Termination." This Agreement may be terminated at any time prior to the Initial Closing by: (a) the mutual consent of the Company and Buyer; 33 (b) Buyer (if it is not in breach of any of its material obligations hereunder) in the event of a breach or failure by the Company that is material in the context of the transactions contemplated hereby of any representation, warranty, covenant or agreement by the Company contained herein which has not been, or cannot be, cured within 30 Business Days after written notice of such breach is given to the Company; (c) the Company (if it is not in breach of any of its material obligations hereunder) in the event of a breach or failure by Buyer that is material in the context of the transactions contemplated hereby of any representation, warranty, covenant or agreement by Buyer contained herein which has not been, or cannot be, cured within 30 Business Days after written notice of such breach is given to Buyer; or (d) Buyer if the Initial Closing shall not have occurred on or prior to December 19, 1997, unless the failure of such occurrence shall be due to the failure of Buyer to perform or observe any material covenant or agreement set forth herein required to be performed or observed by Buyer on or before the date of the Initial Closing. Section 9.2 "Procedure and Effect of Termination." In the event of termination of this Agreement by either or both of the Company and Buyer pursuant to Section 9.1, written notice thereof shall forthwith be given by the terminating party to the other party hereto, and this Agreement shall thereupon terminate and become void and have no effect, and the transactions contemplated hereby shall be abandoned without further action by the parties hereto, except that the provisions of Sections 5.4 (Public Announcements), 6.4 (Payments), 9.3 (Expenses), 10.2 (Governing Law), and 10.4 (Notices) shall survive the termination of this Agreement; provided, however, that such termination shall not relieve any party hereto of any liability for any breach of this Agreement. Section 9.3 "Expenses." Except as set forth in this Agreement, whether or not any Stock Purchase is consummated, all legal and other costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. ARTICLE 10 Miscellaneous Section 10.1 "Counterparts." This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. Section 10.2 "Governing Law." THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. Section 10.3 "Entire Agreement." This Agreement (including agreements incorporated herein) and the Schedules and Exhibits hereto contain the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. This Agreement is not intended to confer upon any person not a party hereto (and their successors and assigns) any rights or remedies hereunder. Section 10.4 "Notices." All notices and other communications hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below. Notices to the Company shall be addressed to: 34 Berkshire Realty Company, Inc. 470 Atlantic Avenue Boston, MA 02210 Attention: David Marshall Marianne Pritchard Telecopy Number: 617-556-8171 with a copy to: Berkshire Realty Company, Inc. 470 Atlantic Avenue Boston, MA 02210 Attention: Scott D. Spelfogel, Esq. Telecopy Number: 617-556-8171 and a copy to: Peabody & Brown 101 Federal Street Boston, MA Attention: Alexander J. Jordan, Jr. Telecopy Number: 617-345-1300 or at such other address and to the attention of such other person as the Company may designate by written notice to Buyer. Notices to Buyer shall be addressed to: Westbrook Partners, L.L.C. 599 Lexington Avenue New York, NY 10022 Attention: Michael Barr Telecopy Number: 212-849-8801 with a copy to: Westbrook Partners, L.L.C. 13155 Noel Road, LB 54, Suite 2300 Dallas, TX 75240 Attention: Patrick Fox Telecopy Number: 972-934-8333 and a copy to: Rogers & Wells 200 Park Avenue New York, NY 10166 Attention: Allen Curtis Greer, II Telecopy Number: 212-878-8375 Section 10.5 "Successors and Assigns." This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. Except as specifically provided hereby, Buyer shall not be permitted to assign any of its rights hereunder to any third party, other than to one or more Affiliates of Buyer or the Advancing Party of which Buyer and the Advancing Party collectively, directly or indirectly, own a majority of the voting power, provided that such Affiliates agree to be bound hereby, and provided that any bona fide 35 financial institution to which any Buyer, or any permitted transferee has transferred (including upon foreclosure of a pledge) shares of Company Stock for the purpose of securing bona fide indebtedness of any Buyer and which has agreed to be bound by this Agreement shall also be entitled to enforce the rights of Buyer hereunder. Section 10.6 "Headings." The Section, Article and other headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement. All references to Sections or Articles contained herein mean Sections or Articles of this Agreement unless otherwise stated. Section 10.7 "Amendments and Waivers." This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. Section 10.8 "Interpretation; Absence of Presumption." (a) For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (including all of the Schedules and Exhibits hereto) and not to any particular provision of this Agreement, and Article, Section, paragraph, Exhibit and Schedule references are to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall apply, when appropriate, to successive events and transactions. (b) This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. Section 10.9 "Severability." Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. The obligations and liabilities of Buyer and the Advancing Party under or in connection with this Agreement are several. Section 10.10 "Further Assurances." The Company and Buyer agree that, from time to time, whether before, at or after any Closing Date, each of them will execute and deliver such further instruments of conveyance and transfer and take such other action as may be necessary to carry out the purposes and intents hereof. Section 10.11 "Specific Performance." Buyer and the Company each acknowledge that, in view of the uniqueness of the parties hereto, the parties hereto would not have an adequate remedy at law for money damages in the event that this Agreement were not performed in accordance with its terms, and therefore agree that the parties hereto shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which the parties hereto may be entitled at law or in equity. Section 10.12 "Schedules." Any matter set forth on any Schedule shall be deemed to be referred to on all other Schedules to which such matter logically relates and where such reference would be appropriate and can reasonably be inferred from the matters disclosed on the first Schedule as if set forth on such other Schedules. 36 IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties hereto as of the day first above written. BERKSHIRE REALTY COMPANY, INC. By: _______________________________________ President WESTBROOK BERKSHIRE HOLDINGS, L.L.C. By: _______________________________________ Managing Member Initial Closing Number of Shares of Company Preferred Stock: 2,737,000 ________________ Berkshire Realty Company, Inc. (initials) ________________ Westbrook Berkshire Holdings, L.L.C. (initials) 37 Advancing Party Westbrook Real Estate Fund II, L.P. hereby joins in the foregoing Agreement for purposes of Section 2.8 thereof. WESTBROOK REAL ESTATE FUND II, L.P. General Partner By: Westbrook Real Estate Partners Management II, L.L.C., General Partner By: Westbrook Real Estate Partners, L.L.C., Managing Member By: ______________________________________________ Jeffrey M. Kaplan, Managing Member 38 EX-10.33 11 EXCHANGE AND AMENDMENT AGREEMENT EXCHANGE AND AMENDMENT AGREEMENT (the "Agreement") dated as of September 30, 1997, by and among Berkshire Realty Company, Inc., a Delaware corporation (the "Company"), Westbrook Berkshire Holdings, L.L.C., a Delaware limited liability company ("Holdings"), and Morgan Stanley Asset Management, Inc., as attorney-in-fact for certain clients ("MSAM"). WHEREAS, the Company, Holdings and the Advancing Party have entered into a Stock Purchase Agreement dated as of September 19, 1997 (the "Stock Purchase Agreement"), pursuant to which Holdings agreed to purchase 2,737,000 shares, and has purchased 2,337,000 shares, of Series A Convertible Preferred Stock, par value $.01 per share (the "Series A Convertible Preferred Stock"), of the Company on September 25, 1997 (the "Closing Date"), and the Company and Holdings have entered into a Registration Rights Agreement dated as of September 25, 1997 (the "Registration Rights Agreement"), which provides for the registration rights set forth therein: WHEREAS, Holdings caused to be issued an aggregate of 400,000 shares of Series A Convertible Preferred Stock to certain clients (the "Transferees") of MSAM who were identified in a letter agreement dated September 25, 1997, among the Company, Holdings and MSAM; WHEREAS, on the Closing Date, the Company filed a Certificate of Designation (the "Series A Certificate of Designation") designating 2,737,000 shares of preferred stock of the Company as 2,737,000 shares of Series A Convertible Preferred Stock; WHEREAS, on October , 1997, the Company filed a Certificate of Designation (the "Series 1997-A Certificate of Designation") designating 2,737,000 shares of preferred stock of the Company as 2,737,000 shares of Series 1997-A Convertible Preferred Stock, par value $.01 per share (the "Series 1997-A Convertible Preferred Stock"); WHEREAS, the Series 1997-A Convertible Preferred Stock is identical in all material respects to the Series A Convertible Preferred Stock, except that Dividend Payment Dates with respect to the Series 1997-A Convertible Preferred Stock are February 15, May 15, August 15 and November 15, and the dividend payable to a holder of a share of Series 1997-A Convertible Preferred Stock on the first Dividend Payment Date after such share is issued will be the accrued dividend calculated from September 25, 1997 to such Dividend Payment Date; WHEREAS, the holders of the Series A Convertible Preferred Stock have agreed to exchange (the "Exchange") their shares of Series A Convertible Preferred Stock for a like number of Series 1997-a Convertible Preferred Stock, and the Company has agreed to cancel the Series A Convertible Preferred Stock immediately after the Exchange and promptly cause the elimination of the Series A Certificate of Designation from the Company's Restated Certificate of Incorporation; and WHEREAS, on the Closing Date BRI OP Limited Partnership, a Delaware limited partnership ("BRI OP"), issued a promissory note (the "Note") payable to the Company in the principal amount of $68,425,000 (or such lesser amount as shall be equal to the aggregate unpaid principal amount of the loan(s) to be made by the Company to BRI OP from the proceeds from the sale of the Series A Convertible Preferred Stock); NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: SECTION 1. Capitalized terms not defined in this Agreement shall have the respective meanings set forth in the Stock Purchase Agreement or the Registration Rights Agreement, as the case may be. SECTION 2. On the date hereof, and subject to the terms of this Agreement, (i) Holdings and MSAM, on behalf of certain of its clients, shall deliver to the Company certificates evidencing all outstanding shares of Series A Convertible Preferred STock held by them, such certificates to be duly endorsed, or accompanied by stock powers duly executed, in such manner as is necessary to transfer such certificates to the Company in accordance with Article 8 of the Uniform Commercial Code of the State of Delaware (6 Del. Code ss.ss. 8-101 et. seq.): (ii) the Company shall deliver to Holdings and MSAM certificates representing Series 1997-A Convertible Preferred Stock in the same denominations and registered in the same names as set forth on the certificates being delivered to the Company under the preceding clause (i), and such shares of Series 1997-A Convertible Preferred Stock shall be delivered to Holdings and MSAM free and clear of all liens (unless created by Holdings or MSAM or any of their affiliates, as the case may be); and (iii) upon the delivery to the Company of the shares of Series A Convertible Preferred Stock referred to in clause (i) above, such shares of Series A Convertible Preferred Stock shall be cancelled, and (iv) the Company shall promptly take all such steps as are necessary to eliminate from the Company's Restated Certificate of Incorporation all matters set forth in the Series A Certificate of Designation. SECTION 3. (a) The representations and warranties of the Company set forth in Article 3 of the Stock Purchase Agreement are hereby incorporated by reference in this Agreement and made a part hereof to the same extent as if set forth in full in their entirety in this Agreement. (b) As incorporated by reference herein and made a part hereof, the representations and warranties referred to in clause (A) are hereby amended, as of the date of the Exchange, as follows: (i) all references to "Company Preferred Stock" shall be deemed to be references to Series 1997-A Convertible Preferred Stock; (ii) all references to "Certificate of Designation" shall be deemed to be references to the Series 1997-A Certificate of Designation attached as Exhibit A hereto; (iii) all references to the "Amended Company By-laws" shall be deemed to be references to the By-laws attached hereto as Exhibit B; and (iv) all references to "this Agreement" or "This Agreement" shall be deemed to be references to this Agreement, and all references to "the Registration Rights Agreement" shall be deemed to be references to the Registration Rights Agreement, as amended by this Agreement. -2- (c) Holdings represents and warrants that the execution, delivery and performance of this Agreement and the consummation of the Exchange have been duly and validly authorized by all necessary action on the part of Holdings. (d) Section 5.6 of the Stock Purchase Agreement is hereby incorporated by reference in this Agreement and made a part hereof to the same extent as if set forth in full in its entirety in this Agreement. All references in such Section 5.6, as incorporated herein are made a part hereof, to "Company Preferred Stock" shall be deemed to be references to the Series 1997-A Convertible Preferred Stock. (e) The Stock Purchase Agreement is hereby amended as follows: (i) The definition of "Company Stock" is hereby amended to include the Series 1997-A Convertible Preferred Stock; (ii) all references to "Company Preferred Stock" and "Certificate of Designation" in Section 6.5 of the Stock Purchase Agreement shall be deemed to be references to the Series 1997-A Convertible Preferred Stock and the Series 1997-A Certificate of Designation, respectively; and (iii) all references to "Certificate of Designation" in Section 6.6 of the Stock Purchase Agreement shall be deemed to be references to the Series 1997-a Certificate of Designation. (f) Article 8 of the Stock Purchase Agreement is hereby incorporated by reference in this Agreement and made a part hereof as if set forth in full in its entirety in this Agreement. All references in such Article 8, as incorporated herein and made a part hereof, to "this Agreement" shall be deemed to be references to this Agreement. The parties agree that the provisions of such Article 8, as incorporated herein and made a part hereof, shall apply with the same effect as if the Series 1997-A Convertible Preferred Stock had been purchased at the Initial Closing. Notwithstanding the foregoing, each of the Transferees shall be entitled to the benefits of Article 8 without regard to the definition of "Buyer Portion." (g) Section 10.4 of the Stock Purchase Agreement is hereby incorporated by reference in this Agreement and made a part hereof as if set forth in full in its entirety in this Agreement. Such Section 10.4, as incorporated herein and made a part hereof, is hereby amended by adding thereto the following sentence: "Notices to any Transferee or to MSAM shall be addressed to: Morgan Stanley Asset Management, Inc., 1221 Avenue of the Americas, New York, New York 10020, Attention: , Telecopy Number: ." (h) The Registration Rights Agreement is hereby amended as follows: All references to "Company Common Stock" in the definition of "Registrable Securities" in the Registration Rights Agreement shall be deemed to be references to the Company's common stock, par value $.01 per share, issuable upon conversion of the Series 1997-A Convertible Preferred Stock. (i) Not by limitation of the foregoing, all references to the Series A Convertible Preferred Stock in other instruments and agreements delivered in connection with the purchase and issuance of the Series A Convertible Preferred Stock shall, when is necessary or convenient for a proper reading, be deemed to be references to Series 1997-A Convertible Preferred Stock. -3- SECTION 4. The obligations of Holdings and MSAM to consummate the Exchange are subject to satisfaction or waiver of each of the following conditions precedent: (a) The representations and warranties of the Company contained in this Agreement shall have been true and correct in all respects on and as of the date hereof, and shall be true and correct in all respects on and as of the date of the Exchange with the same effect as though such representations and warranties had been made on and as of the date of the Exchange (except for representations and warranties that speak as of a specific date or time other than the date of the Exchange (which need only be true and correct in all respects as of such date or time)). The covenants and agreements of the Company to be performed on or before the date of the Exchange in accordance with this Agreement shall have been duly performed in all respects. The Company shall have delivered to Holdings and MSAM at the Exchange a certificate of an appropriate officer in form and substances reasonably satisfactory to Holdings dated the date of the Exchange to such effect. (b) The Series 1997-A Certificate of Designation shall have been duly filed with the office of the Secretary of State of Delaware, any other necessary Government Authority or the NYSE and shall be in full force and effect. (c) The amendment to the Company By-laws in the form attached as Exhibit C hereto shall have been approved by the Board of Directors, all as required or permitted by and in accordance with the Company Charter, duly filed if any filing thereof shall be required by any Government Authority or NYSE, and shall be in full force and effect. The Board of Directors resolutions pertaining to this Agreement, and the procedures, findings and transactions contemplated hereby, shall have been duly approved and adopted by the Board of Directors, the Secretary shall have been instructed to place the record of such action of the Board of Directors in the records of the meetings of the Board of Directors and the Secretary shall have placed the record of such action in such records and shall be in form and substance satisfactory to Holdings. (d) There shall not be in effect any order, decree or injunction of a court or agency of competent jurisdiction which cojoins or prohibits consummation of the transactions contemplated hereby and there shall be no pending Actions which would reasonably be expected to have a Material Adverse Effect on the ability of the Company to consummate the transactions contemplated hereby or to issue the Series 1997-A Convertible Preferred Stock. (e) All corporate and other proceedings to be taken by the Company in connection with the transactions contemplated hereby and all documents incident thereto shall be reasonably satisfactory in form and substance to Holdings and Holdings and MSAM shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (f) The Company shall have elected to be taxed as a REIT in its most recent federal income tax return, and shall be in compliance with all applicable laws, rules and regulations, including the Code, necessary to permit it to be taxed as a REIT. The Company shall not have taken any action or have failed to take any action which would reasonably be -4- expected to, alone or in conjunction with any other factors, result in the loss of its status as a REIT for federal income tax purposes. (g) Holdings and MSAM shall have received opinions, dated the date of the Exchange, of Peabody & Brown, counsel to the Company, and of Morris Nichols Arsht & Tunnell, special Delaware counsel to the Company, in form and substance reasonably satisfactory to Holdings. SECTION 5. Holdings hereby consents to the amendment and restatement of the Note in the form attached as Exhibit D hereto. SECTION 6. Each of the Transferees hereby agrees to be subject to the terms of the Registration Rights Agreement, as amended hereby, to the same extent as if each such Transferee were the Buyer (as defined in the Registration Rights Agreement, as amended hereby) thereunder, provided, however nothing in this Section 6 shall alter or affect any of Holdings' rights under clause (A) of the proviso contained in Section 11(c) of the Registration Rights Agreement, as amended hereby. SECTION 7. Except as otherwise set forth in this Agreement, all terms, provisions and conditions of the Stock Purchase Agreement and the Registration Rights Agreement shall remain in full force and effect. As amended hereby, each of the Stock Purchase Agreement and the Registration Rights Agreement is hereby ratified and confirmed in all respects. SECTION 8. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section, provided receipt of copies of such counterparts is confirmed. SECTION 9. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. SECTION 10. This Agreement contains the entire agreement among the parties with respect to the subject matter hereof, and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein. SECTION 11. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. SECTION 12. The Section headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretations of this Agreement. -5- SECTION 13. This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Either party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The Waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. SECTION 14. For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (h) the terms "hereof," "herein," and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section references are to the Sections of this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall apply, when appropriate, to successive events and transactions. This Agreement shall be constructed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. SECTION 15. Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. SECTION 16. The Company agrees that, from time to time, whether before, at or after the date hereof, the Company will execute and deliver such further instruments and take such other action as may be necessary to carry out the purposes and terms hereof. SECTION 17. The parties acknowledge that, in view of the uniqueness of the parties hereto, the parties hereto would not have an adequate remedy at law for money damages in the event that this Agreement were not performed in accordance with its terms, and therefore agree that the parties hereto shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which the parties hereto may be entitled at law or in equity. -6- IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties hereto as of the day first above written. BERKSHIRE REALTY COMPANY, INC. By: ________________________________________ Name: Title: WESTBROOK BERKSHIRE HOLDINGS, L.L.C. By: ________________________________________ Name: Title: MORGAN STANLEY ASSET MANAGEMENT, INC., as Attorney-in-Fact for Certain Clients Who Own Shares of Series A Convertible Preferred Stock of Berkshire Realty Company, Inc. By: ________________________________________ Name: Title: EX-10.34 12 MATERIAL CONTRACTS - ------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT by and between BERKSHIRE REALTY COMPANY, INC., and WESTBROOK BERKSHIRE HOLDINGS, L.L.C. dated as of September 25, 1997 - ------------------------------------------------------------------------------- TABLE OF CONTENTS Page Section 1. Definitions.............................................. 1 (a) "Agreement".............................................. 1 (b) "Buyer".................................................. 1 (c) "Company"................................................ 1 (d) "Company Registration Expenses".......................... 1 (e) "Commission"............................................. 1 (f) "Exchange Act"........................................... 1 (g) "Exercise Notice"........................................ 1 (h) "Extraordinary Transaction".............................. 1 (i) "Extraordinary Transaction Shares"....................... 1 (j) "Holdings"............................................... 1 (k) "NASD"................................................... 2 (l) "Person"................................................. 2 (m) "Public Offering"........................................ 2 (n) "Registrable Securities"................................. 2 (o) "Registration Expenses".................................. 2 (p) "Registration Suspension Period"......................... 2 (q) "Securities Act"......................................... 2 (r) "Shelf Registration"..................................... 2 (s) "Stock Purchase Agreement"............................... 2 (t) "Suspension Notice"...................................... 2 (u) "Tag-Along Notice"....................................... 2 (v) "Tag-Along Shares"....................................... 2 (w) "Third Party"............................................ 2 (x) "Underwritten/Placed Offering"........................... 2 Section 2. Shelf Registration....................................... 3 (a) Obligation to File and Maintain.......................... 3 (b) Black-Out Periods of Buyer............................... 3 (c) Black-Out Periods of the Company......................... 3 (d) Shelf Registrations...................................... 4 (e) Notice................................................... 4 (f) Expenses................................................. 4 (g) Selection of Underwriters................................ 4 (h) Company Right to Purchase................................ 4 Section 3. Requested Registration................................... 4 (a) Obligation to File....................................... 4 (b) Underwriting............................................. 5 (c) Black-Out Periods of Buyer............................... 5 (d) Black-Out Periods of the Company......................... 5 (e) Expenses................................................. 6 Section 4. Incidental Registrations................................. 6 (a) Notification and Inclusion............................... 6 (b) Cut-back Provisions...................................... 6 (c) Expenses................................................. 6 (d) Duration of Effectiveness................................ 6 Page Section 5. Registration Procedures.................................. 7 Section 6. Underwritten Offerings................................... 9 Section 7. Preparation, Reasonable Investigation.................... 9 Section 8. Tag-Along Rights......................................... 9 (a) Rights and Notice........................................ 9 (b) Number of Shares to be Included.......................... 9 (c) Abandonment of Sale...................................... 10 (d) Terms of Sale............................................ 10 (e) Timing of Sale........................................... 10 Section 9. Indemnification.......................................... 10 (a) Indemnification by the Company........................... 10 (b) Indemnification by Buyer................................. 11 (c) Notices of Claims, etc................................... 11 (d) Other Indemnification.................................... 11 (e) Indemnification Payments................................. 12 (f) Contribution............................................. 12 Section 10. Covenants Relating to Rule 144, etc...................... 12 Section 11. Miscellaneous............................................ 12 (a) Counterparts............................................. 12 (b) Governing Law............................................ 13 (c) Entire Agreement......................................... 13 (d) Notices.................................................. 13 (e) Successors and Assigns................................... 14 (f) Headings................................................. 14 (g) Amendments and Waivers................................... 14 (h) Interpretation; Absence of Presumption................... 14 (i) Severability............................................. 15 ii REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated as of September 25, 1997, by and between Berkshire Realty Company, Inc., a Delaware corporation (the "Company"), and Westbrook Berkshire Holdings, L.L.C., a Delaware limited liability company ("Holdings"). Capitalized terms not otherwise defined herein have the meaning ascribed to them in the Stock Purchase Agreement (as hereinafter defined). WHEREAS, the Company, Holdings and others have entered into a Stock Purchase Agreement, dated as of even date herewith (the "Stock Purchase Agreement") provides for the purchase by Holdings and sale by the Company to Holdings of shares of Company Preferred Stock; and WHEREAS, in order to induce Buyer and others to enter into the Stock Purchase Agreement, the Company has agreed to provide the registration rights set forth herein; NOW, THEREFORE, in consideration of the premises and the covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto hereby agree as follows: Section 1. Definitions. As used herein, the following terms shall have the following meanings: (a) "Agreement" shall have the meaning set forth in the first paragraph hereof. (b) "Buyer" shall mean, collectively, as the context may require, Westbrook Real Estate Fund II, L.P. and Holdings, and shall also include any Affiliate of Holdings of which such partners and/or Holdings collectively, directly or indirectly, Beneficially Own a majority or more of the voting power and of the economic interests, or any bona fide financial institution to which any Buyer has Transferred (including upon foreclosure of a pledge) shares of Company Stock for the purpose of securing bona fide indebtedness of any Buyer. (c) "Company" shall having the meaning set forth in the first paragraph hereof. (d) "Company Registration Expenses" means the fees and disbursements of counsel and independent public accountants for the Company incurred in connection with Company's performance of or compliance with this Agreement, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, and any premiums and other costs of policies of insurance obtained by the Company against liabilities arising out of the sale of any securities. (e) "Commission" means the Securities and Exchange Commission, and any successor thereto. (f) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and any successor thereto, and the rules and regulations thereunder. (g) "Exercise Notice" shall have the meaning set forth in Section 8(a). (h) "Extraordinary Transaction" means (i) any merger, consolidation, sale or acquisition of assets, recapitalization, other business combination, liquidation, or other action out of the ordinary course of business of the Company, or (ii) any issuance of securities, in either case involving the sale, issuance or other disposition of capital stock of the Company representing, in the aggregate, at least 20% of the capital stock of the Company on a fully diluted basis, except the Public Offering. (i) "Extraordinary Transaction Shares" shall have the meaning set forth in Section 8(a). (j) "Holdings" shall have the meaning set forth in the first paragraph hereof. (k) "NASD" means the National Association of Securities Dealers, Inc. (l) "Person" shall mean any individual, partnership, corporation, limited liability company, business trust, joint stock company, unincorporated association, joint venture, other entity of whatever nature or Government Authority. (m) "Public Offering" shall mean the widely distributed underwritten/placed offering of Company Common Stock led by Lehman Brothers, Inc. on or before November 31, 1997. (n) "Registrable Securities" means (i) any and all shares of Company Common Stock, and (ii) any securities issued or issuable with respect to any Company Common Stock or other securities referred to in clause (i) by way of conversion, exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, or (B) such securities shall have been sold in accordance with Rule 144 (or any successor provision) under the Securities Act. (o) "Registration Expenses" means all registration, filing and stock exchange or NASD fees, all fees and expenses of complying with securities or blue sky laws, all printing expenses, messenger and delivery expenses, any fees and disbursements of any separate counsel retained by Buyer, any fees and disbursements of underwriters customarily paid by sellers of securities who are not the issuers of such securities and all underwriting discounts and commissions and transfer taxes, if any, and any premiums and other costs of policies of insurance obtained by Buyer against liabilities arising out of the public offering of securities. In the case of "Incidental Registration" under Section 4, the term "Registration Expenses" will include all such items as set forth above, with respect to Person other than Buyer, provided that the same are not for the account of Buyer. (p) "Registration Suspension Period" shall have the meaning set forth in Section 2(b). (q) "Securities Act" means the Securities Act of 1933, as amended, and any successor thereof, and the rules and regulations thereunder. (r) "Shelf Registration" shall have the meaning set forth in Section 2(a). (s) "Stock Purchase Agreement" shall have the meaning set forth in the second paragraph hereof. (t) "Suspension Notice" shall have the meaning set forth in Section 2(b). (u) "Tag-Along Notice" shall have the meaning set forth in Section 8(a). (v) "Tag-Along Shares" shall have the meaning set forth in Section 8(a). (w) "Third Party" shall have the meaning set forth in Section 8(a). (x) "Underwritten/Placed Offering"( means a sale of securities of the Company to an underwriter or underwriters for reoffering to the public or on behalf of a person other than the Company through an agent for sale to the public. 2 Capitalized terms which are used in this Agreement and which are not defined herein but are defined in the Stock Purchase Agreement shall have the meanings ascribed to them in the Stock Purchase Agreement. Section 2. Shelf Registration. (a) Obligation to File and Maintain. At any time following the purchase by Buyer of Company Preferred Stock, promptly upon the written request of Buyer, the Company will use its best efforts to file with the Commission a registration statement under the Securities Act for the offering on a continuous or delayed basis in the future of all of the Registrable Securities (the "Shelf Registration"). The Shelf Registration shall be on an appropriate form and the Shelf Registration and any form of prospectus included therein or prospectus supplement relating thereto shall reflect such plan of distribution or method of sale as Buyer may from time to time notify the Company, including the sale of some or all of the Registrable Securities in a public offering or, if requested by Buyer, subject to receipt by the Company of such information (including information relating to purchasers) as the Company reasonably may require, (i) in a transaction constituting an offering outside the United States which is exempt from the registration requirements of the Securities Act in which the Company undertakes to effect registration of such shares as soon as possible after the completion of such offering in order to permit such shares to be freely tradeable in the United States, (ii) in a transaction constituting a private placement under Section 4(2) of the Securities Act in connection with which the Company undertakes to register such shares after the conclusion of such placement to permit such shares to be freely tradeable by the purchasers thereof, or (iii) in a transaction under Rule 144A of the Securities Act in connection with which the Company undertakes to register such shares after the conclusion of such transaction to permit such shares to be freely tradeable by the purchasers thereof. The Company shall use its best efforts to keep the Shelf Registration continuously effective for the period beginning on the date on which the Shelf Registration is declared effective and ending on the first date that there are no Registrable Securities (provided that the Company may terminate the effectiveness of a Shelf Registration on the second anniversary of the date of effectiveness thereof plus a number of days equal to the number of days in all Registration Suspension Periods relating to such Shelf Registration). During the period during which the Shelf Registration is effective, the Company shall supplement or make amendments to the Shelf Registration, if required by the Securities Act or if reasonably requested by Buyer or an underwriter of Registrable Securities, including to reflect any specific plan of distribution or method of sale, and shall use its reasonable best efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing. (b) Black-Out Periods of Buyer. Notwithstanding anything herein to the contrary, (i) the Company shall have the right, by written notice to Buyer (the "Suspension Notice"), exercisable on not more than two occasions during any three-year period, from time to time to require Buyer not to sell under the Shelf Registration or to suspend the effectiveness thereof during the period starting with the date 30 days prior to the Company's good faith estimate, as certified in writing by an executive officer of the Company to Buyer, of the proposed date of filing of a registration statement or a preliminary prospectus supplement relating to an existing shelf registration statement, in either case, pertaining to an underwritten public offering of equity securities of the Company for the account of the Company, and ending on the date 90 days following the effective date of such registration statement or the date of filing of such prospectus supplement, and (ii) the Company shall be entitled to postpone or suspend (but not for a period exceeding 90 days) the filing or effectiveness of a registration statement otherwise required to be prepared and filed by it pursuant to this Section 2 if the Company determines, in its good faith judgment, that such registration and offering or continued effectiveness would interfere with any material financing, acquisition, disposition, corporate reorganization or other material transaction involving the Company or any of its subsidiaries or public disclosure thereof would be required prior to the time such disclosure might otherwise be required, or when the Company is in possession of material information that it deems advisable not to disclose in a registration statement (either, the "Registration Suspension Period"). (c) Black-Out Periods of the Company. Subject to the conditions of this Section 2(c), Buyer shall have the right, exercisable on not more than two occasions during any three-year period, from time to time to require the Company not to sell any common equity securities of the Company or any securities convertible into 3 common equity securities of the Company under any registration statement or prospectus supplement relating to an existing shelf registration statement (other than sales of shares of Common Stock upon the redemption of Operating Partnership Units,or limited partnership units of any other Subsidiary of the Company and sales of equity securities issued or granted pursuant to any employee benefit or similar plan or any dividend reinvestment plan), or to suspend the effectiveness thereof, during the period starting with the date 30 days prior to Buyer's good faith estimate, as certified in writing by an executive officer of Buyer to the Company, of a proposed date of filing of a preliminary prospectus supplement relating to a Shelf Registration filed pursuant to Section 2(a), pertaining to an underwritten public offering of Registrable Securities, and ending on the date 60 days following the date of filing the final prospectus supplement, but in no event on a date later than 75 days following the date of filing of the preliminary prospectus supplement. In no event may the Company include in any preliminary prospectus supplement under which Buyer is offering Registrable Securities covered by this Section 2(c) any equity securities of the Company or any securities convertible into equity securities of the Company. (d) Shelf Registrations. The Company shall be obligated to effect and maintain in effect a Shelf Registration under this Section 2. A Shelf Registration shall not be deemed to have been effected, unless such registration becomes effective pursuant to the Securities Act and is kept continuously effective of a period of at least two years (other than any periods during such period of effectiveness which are Registration Suspension Periods, and provided that no such Registration Suspension Periods shall count towards such two-year period); provided, however, that no Shelf Registration shall be deemed to have been effected if such registration cannot be used by Buyer for more than 45 days as a result of any stop order, injunction or other order of the Commission or other Government Authority for any reason other than an act or omission of Buyer. (e) Notice. The Company shall give Buyer prompt notice in the event that the Company has suspended sales of Registrable Securities under Section 2(b). (f) Expenses. All Company Registration Expenses incurred in connection with any Shelf Registration which may be requested under this Section 2 shall be borne by the Company, and all Registration Expenses incurred in connection with any such Shelf Registration shall be borne by Buyer. (g) Selection of Underwriters. Any and all underwriters or other agents involved in any sale of Registrable Securities pursuant to a registration statement contemplated by this Section 2 shall include such underwriter(s) or other agent(s) as selected by Buyer and are assented to by the Company with such assent not to be unreasonably withheld or delayed. (h) Company Right to Purchase. If Buyer proposes to offer any Registrable Securities in an underwritten offering under a Shelf Registration statement filed by the Company pursuant to Section 2(a), Buyer shall give the Company prior written notice of the proposed offering, setting forth the number of Registrable Securities that Buyer proposes to offer, the expected timing of the proposed offering, and the expected gross selling price of such offering. The Company shall have the right, if it irrevocably so notifies Buyer within 10 Business Days after its receipt of Buyer's notice, to purchase all of the Registrable Securities that Buyer proposes to offer, at the gross selling price set forth in Buyer's notice to the Company. In the event the Company shall so notify Buyer, it shall effect such purchase within 10 Business Days. Section 3. Requested Registration. (a) Obligation to File. If, with respect to Registerable Securities at any time, and from time to time thereafter, the Company shall receive from Buyer a written request for the Company to effect any registration, qualification or compliance with respect to Registerable Securities, then, at a time specified in such request, the Company will use reasonable efforts to effect all such registrations, qualifications and compliances when so specified in such request, subject as aforesaid and provided that the Company shall have at least 85 days after such request (including, without limitation, the execution of an undertaking to file post-effective amendments, appropriate qualification under the applicable blue sky or other state 4 securities laws and appropriate compliance with regulations issued under the Securities Act and any other governmental requirements or regulations) to effect all such registrations, qualifications and compliances as would permit or facilitate the sale and distribution of Registerable Securities as are specified in such request; provided that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 3: (i) in a particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or compliance unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; or (ii) if the Company has already effected one registration for Buyer pursuant to this Section 3 during the immediately preceding twelve-month period or if there is a registration effective pursuant to Section 2 at the time of such request. (b) Underwriting. If Buyer intends to distribute the Registerable Securities covered by its request by means of an underwritten public offering, it shall so advise the Company. Any and all underwriters or other agents involved in any sale of Registrable Securities pursuant to a registration statement contemplated by this Section 3 shall include such underwriter(s) or other agent(s) as selected by Buyer and are assented to Buyer, with such assent not to be unreasonably withheld or delayed. (c) Black-Out Periods of Buyer. Subject to the conditions of this Section 3, (i) the Company shall have the right, exercisable on not more than two occasions during any three-year period, from time to time to require Buyer not to sell under the registration requested pursuant to this Article 3 or to suspend the effectiveness thereof during the period starting with the date 30 days prior to the Company's good faith estimate, as certified in writing by an executive officer of the Company to Buyer, of the proposed date of filing of a registration statement or a preliminary prospectus supplement relating to an existing registration statement, in either case, pertaining to an underwritten public offering of equity securities of the Company for the account of the Company, and ending on the date 90 days following the effective date of such registration statement or the date of filing of such prospectus supplement, and (ii) the Company shall be entitled to postpone or suspend (but not for a period exceeding 90 days) the filing or effectiveness of a registration statement otherwise required to be prepared and filed by it pursuant to this Article 3 if the Company determines, in its good faith judgment, that such registration and offering or continued effectiveness would interfere with any material financing, acquisition, disposition, corporate reorganization or other material transaction involving the Company or any of its subsidiaries or public disclosure thereof would be required prior to the time such disclosure might otherwise be required, or when the Company is in possession of material information that it deems advisable not to disclose in a registration statement. (d) Black-Out Periods of the Company. Subject to the conditions of this Section 3.4, Buyer shall have the right, exercisable on not more than two occasions from time to time, to require the Company not to sell any common equity securities of the Company or any securities convertible into common equity securities of the Company under any registration statement or prospectus supplement relating to an existing registration statement requested pursuant to this Article 3 (other than sales of shares of Common Stock upon the redemption of Operating Partnership Units, or limited partnership units of any other Subsidiary of the Company and sales of equity securities issued or granted pursuant to any employee benefit or similar plan or any dividend reinvestment plan), or to suspend the effectiveness thereof, during the period starting with the date 15 days prior to Buyer's good faith estimate, as certified in writing by an executive officer of Buyer to the Company, of a proposed date of filing of a preliminary prospectus supplement relating to a registration statement filed pursuant to Section 3.1, pertaining to an underwritten public offering of Registrable Securities, and ending on the date 60 days following the date of filing the final prospectus supplement, but in no event on a date later than 75 days following the date of filing of the preliminary prospectus supplement. 5 (e) Expenses. All Company Registration Expenses incurred in connection with any registration which may be requested under this Section 3 shall be borne by the Company, and all Registration Expenses incurred in connection with any such registration shall be borne by Buyer. Section 4. Incidental Registrations. (a) Notification and Inclusion. If the Company proposes to register for its own account any common equity securities of the Company or any securities convertible into common equity securities of the Company under the Securities Act (other than (i) a registration relating solely to the sale of securities to participants in a dividend reinvestment plan, (ii) a registration on Form S-4 relating to a business combination or similar transaction permitted to be registered on such Form S-4, (iii) a registration on Form S-8 relating solely to the sale of securities to participants in a stock or employee benefit plan, (iv) a registration permitted under Rule 462 under the Securities Act registering additional securities of the same class as were included in an earlier registration statement for the same offering and declared effective, (v) a registration on Form S-3 for Company Common Stock issuable upon conversion of Operating Partnership Units issued in exchange for assets or (vi) the Public Offering), the Company shall, at each such time, promptly give written notice of such registration to Buyer. Upon the written request of Buyer given within 10 days after receipt of such notice by Buyer, the Company shall seek to include in such proposed registration such Registrable Securities as Buyer shall request be so included and shall use its best efforts to cause a registration statement covering all of the Registrable Securities that Buyer has requested to be registered to become effective under the Securities Act, provided, that for purposes of this Section 4 Registrable Securities of Buyer shall be limited to Company Common Stock. The Company shall be under no obligation to complete any offering of securities it proposes to make under this Section 3 and shall incur no liability to Buyer for its failure to do so. If, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to Buyer and, thereupon, (i) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses incurred in connection therewith) and (ii) in the case of a determination to delay registering, the Company shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities. The Company agrees, for the benefit of Buyer, not to grant or afford to any holder of Operating Partnership Units (or holder of shares of Company Common Stock issuable upon exercise of Operating Partnership Units) referred to in clause (v) of the parenthetical to the first sentence of this clause (a), any "piggyback" or incidental registration rights that would arise from or become effective upon the registration by the Company on behalf of Buyer of any Registrable Securities. (b) Cut-back Provisions. If a registration pursuant to this Section 4 involves an Underwritten/Placed Offering of the securities so being registered, whether or not solely for sale for the account of the Company, which securities are to be distributed by or through one or more underwriters of recognized standing under underwriting terms customary for such transaction, and the underwriter or the managing underwriter, as the case may be, of such Underwritten/Placed Offering shall inform the Company of its belief that the amount of securities requested to be included in such registration or offering exceeds the amount which can be sold in (or during the time of) such offering without delaying or jeopardizing the success of the offering (including the price per share of the securities to be sold), then the Company will include in such registration (i) first, all the securities of the Company which the Company proposes to sell for its own account and (ii) second, to the extent of the amount which the Company is so advised can be sold in (or during the time of) such offering, Registrable Securities requested to be included in such registration, pro rata, among Buyer and others exercising incidental registration rights, on the basis of shares of Company Common Stock requested to be included by all such persons. (c) Expenses. The Company shall bear and pay all Company Registration Expenses incurred in connection with any registration of Registrable Securities pursuant to this Section 4 for Buyer, and all Registration Expenses incurred in connection with any registration of any other securities referred to in the first sentence of 6 Section 4(a), and Buyer shall bear and pay all Registration Expenses incurred in connection with any registration of Registrable Securities pursuant to this Section 4, other than Company Registration Expenses, for Buyer. (d) Duration of Effectiveness. At the request of Buyer, the Company shall, subject to Section 2(b), use its best efforts to keep any registration statement for which Registrable Securities are included under this Section 4 effective and usable for up to 90 days (subject to extension for the length of any Registration Suspension Period), unless the distribution of securities registered thereunder has been earlier completed; provided, however, that in no event will the Company be required to prepare or file audited financial statements with respect to any fiscal year by a date prior to the date on which the Company would be so required to prepare and file such audited financial statements if such registration statement were no longer effective and usable. Section 5. Registration Procedures. In connection with the filing of any registration statement as provided in Section 2, 3 or 4, the Company shall use its best efforts to, as expeditiously as reasonably practicable: (a) prepare and file with the Commission the requisite registration statement (including a prospectus therein) to effect such' registration and use its best efforts to cause such registration statement to become effective, provided that before filing such registration statement or any amendments or supplements thereto, the Company will furnish to the counsel selected by Buyer copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel before any such filing is made, and the Company will comply with any reasonable request made by such counsel to make changes in any information contained in such documents relating to Buyer; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until, in the case of Section 2, the termination of the period dur ing which the Shelf Registration is required to be kept effective, or, in the case of Section 3 or Section 4, the earlier of such time as all of such securities have been disposed of and the date which is 90 days after the date of initial effectiveness of such registration statement; (c) furnish to Buyer such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the pro spectus contained in such registration statements (including each complete prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, including documents incorporated by reference, as Buyer may reasonably request; (d) register or qualify all Registrable Securities under such other securities or blue sky laws of such jurisdictions as Buyer shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable Buyer to consummate the disposition in such jurisdictions of the securities owned by Buyer, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this paragraph be obligated to be so qualified, or to consent to general service of process in any such jurisdiction, or to subject the Company to any material tax in any such jurisdiction where it is not then so subject; 7 (e) cause all Registrable Securities covered by such registration statement to be registered with or approved by such other Government Authority as may be reasonably necessary to enable Buyer to consummate the disposition of such Registrable Securities; (f) furnish to Buyer a signed counterpart, addressed to Buyer (and the underwriters), of (i) an opinion of counsel for the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), reasonably satisfactory in form and substance to Buyer, and (ii) to the extent permitted by then applicable rules of professional conduct, a "comfort" letter, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), signed by the independent public accountants who have certified the Company's financial statements included in such registration statement; covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of the accountants' letter, with respect to events subsequent to the date of such financial statements, all as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to the underwriters in underwritten public offerings of securities; (g) immediately notify Buyer at any time when the Company becomes aware that a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of Buyer promptly prepare and furnish to Buyer a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (h) comply or continue to comply in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, and not file any amendment or supplement to such registration statement or prospectus to which Buyer shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the Securities Act, having been furnished with a copy thereof at least five Business Days prior to the filing thereof; (i) provide a transfer agent and registrar for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement; and (ii) list all Company Stock covered by such registration statement on any securities exchange on which any of the Company Stock is then listed. Buyer shall furnish in writing to the Company such information regarding Buyer (and any of its affiliates), the Registrable Securities to be sold, the intended method of distribution of such Registrable Securities, and such other 8 information requested by the Company as is necessary for inclusion in the registration statement relating to such offering pursuant to the Securities Act and the rules of the Commission thereunder. Such writing shall expressly state that it is being furnished to the Company for use in the preparation of a registration statement, preliminary prospectus, supplementary prospectus, final prospectus or amendment or supplement thereto, as the case may be. Buyer agrees by acquisition of the Registrable Securities that upon receipt of any notice from the Company of the happening of any event of the kind described in paragraph (g) of this Section 5, Buyer will forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until Buyer's receipt of the copies of the supplemented or amended prospectus contemplated by paragraph (g) of this Section 5. Section 6. Underwritten Offerings. If requested by the underwriters for any underwritten offerings by Buyer, under a registration requested pursuant to Section 2(a) or Section 3(a), the Company and the Operating Partnership will enter into a customary underwriting agreement with such underwriters for such offering, to contain such representations and warranties by the Company and the Operating Partnership and such other terms as are customarily contained in agreements of this type, including indemnities to the effect and to the extent provided in Section 9. Buyer shall be a party to such underwriting agreement and may, at its option, require that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of Buyer. Buyer shall not be required to make any representations or warranties to or agreement with the Company or the underwriters other than representations, warranties or agreements regarding Buyer and Buyer's intended method of distribution and any other representation or warranty required by law. Section 7. Preparation, Reasonable Investigation. In connection with the preparation and filing of the registration statement under the Securities Act pursuant to Section 2 or 3 hereof, the Company will give Buyer, its underwriters, if any, and their respective counsel, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers, its counsel and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of Buyer's and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. Section 8. Tag-Along Rights. Buyer shall be entitled to the rights set forth in this Section 8. (a) Rights and Notice. The Company shall not directly or indirectly sell or otherwise dispose of shares of Company Stock to any person (a "Third Party") in connection with an Extraordinary Transaction in which the consideration for some or all of the shares of Company Stock is cash or cash equivalents (as determined under GAAP), unless the terms and conditions of such sale or other disposition shall include an offer to Buyer to include, at the option of Buyer, in such sale or other disposition of the Company Stock owned by Buyer at the time of such sale or other disposition determined in accordance with Section 8(b) (the "Tag-Along Shares"). The Company shall send a written notice (the "Tag-Along Notice") to Buyer setting forth the number of shares of Company Stock proposed to be sold or otherwise disposed of in the Extraordinary Transaction (the "Extraordinary Transaction Shares"), and the price at which such shares are proposed to be sold (or the method by which such price is proposed to be determined). At any time within 15 days after its receipt of the Tag-Along Notice, Buyer may exercise its option to sell the Tag-Along Shares by furnishing written notice of such exercise (the "Exercise Notice") to the Company. (b) Number of Shares to be Included. If the proposed sale or other disposition by the Company in connection with an Extraordinary Transaction is consummated, Buyer shall have the right to sell to the Third Party as part of such proposed sale or other disposition of such number of Company Stock (with Company 9 Preferred Stock determined in terms of the number of shares of Company Common Stock into which it would then be entitled to be converted without giving effect to any time restriction on conversion) owned by Buyer equal to the product of (i) the ratio (which in no event shall exceed 20% for purposes of this Section 8) of the total number of shares of Company Stock owned by Buyer at the time that Buyer receives the Tag-Along Notice to the total number of outstanding shares of Company Stock at the time that Buyer receives the Tag-Along Notice, and (ii) the number of Extraordinary Transaction Shares; provided, however, that if the number of Tag-Along Shares is less than the number of shares of Company Stock owned by Buyer at the time that Buyer receives the Tag-Along Notice, such that the number of shares that Buyer would have been able to sell as determined above in this Section 8(b) based upon the total number of shares of Company Stock owned by Buyer at the time Buyer receives the Tag-Along Notice is more, then Buyer shall have the right to sell to the Third Party as part of the proposed sale or other disposition to the Third Party by the Company in connection with an Extraordinary Transaction such larger number of shares as determined based upon the total number of shares of Company Stock owned by Buyer at the time that Buyer receives the Tag-Along Notice. All calculations pursuant to this paragraph shall exclude and ignore any unissued shares of Company Stock issuable pursuant to stock options, warrants and other rights to acquire shares of Company Stock and pursuant to convertible or exchangeable securities other than with respect to the Company Stock held by Buyer, but shall include shares of Company Common Stock issuable upon redemption of limited partnership interests in the Operating Partnership (all of which shares shall be deemed to be outstanding for purposes of this calculation). (c) Abandonment of Sale. Each of the Company and the Third party shall have the right, in its sole discretion, at all times prior to consummation of the proposed sale or other disposition giving rise to the tag-along right granted by this Section 8 to abandon, rescind, annul, withdraw or otherwise terminate such sale or other disposition, whereupon all tag-along rights in respect of such sale or other disposition pursuant to this Section 8 shall become null and void, and neither the Company nor the Third Party shall have any liability or obligation to Buyer with respect thereto by virtue of such abandonment, rescission, annulment, withdrawal or termination. (d) Terms of Sale. The purchase from Buyer pursuant to this Section 8 shall be on the same terms and conditions, including the per share price and the date of sale or other disposition, as are applicable to the Company, and which shall be consistent with the relevant Tag-Along Notice. (e) Timing of Sale. If, with respect to any Tag-Along Notice, Buyer fails to deliver an Exercise Notice within the requisite time period, the Company shall have 150 days after the expiration of the time in which the Exercise Notice is required to be delivered in which to sell or otherwise dispose of not more than the number of shares of Company Stock described in the Tag-Along Notice on terms not more favorable to the Company than were set forth in the Tag-Along Notice. If, at the end of 150 days following the receipt of the Tag-Along Notice, the Company has not completed the sale or other disposition of Company Stock in accordance with the terms described in the Tag-Along Notice, the Company shall again be obligated to comply with the provisions of this Section 8 with respect to, and provide Buyer with the opportunity to participate in, any proposed sale or other disposition of shares of Company Stock in connection with an Extraordinary Transaction. Section 9. Indemnification. (a) Indemnification by the Company. In the event of any registration of any Registrable Securities of the Company under the Securities Act, the Company will, and hereby does, indemnify and hold harmless Buyer, each other person who participates as an underwriter in the offering or sale of such securities and each other person who controls any such underwriter within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which Buyer or any such underwriter or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement 10 thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company will reimburse Buyer and each such underwriter and controlling person for any reasonable legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceedings; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such regis tration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by Buyer or any other person who participates as an underwriter in the offering or sale of such securities, in either case, specifically stating that it is for use in the preparation thereof, and provided, further, that the Company shall not be liable to any person who participates as an underwriter in the offering or sale of Registrable Securities or any other person, if any, who controls such underwriter within the meaning of the Securities Act in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such person's failure to send or give a copy of the final prospectus or supplement to the persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such person if such statement or omission was corrected in such final prospectus or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of Buyer or any such underwriter or controlling person and shall survive the transfer of such securities by Buyer. (b) Indemnification by Buyer. In the event of registration of any Registrable Securities in any registration statement pursuant to Section 2, Section 3 or Section 4, the Company shall receive an undertaking satisfactory to it from Buyer to indemnify and hold harmless (in the same manner and to the same extent as set forth in paragraph (a) of this Section 9) the Company, each director of the Company, each officer of the Company and each other person, if any, who controls the Company within the meaning of the Securities Act, and each other person who participates as an underwriter in the offering or sale of such securities and each other person who controls any such underwriter within the meaning of the Securities Act, with respect to any untrue statement or alleged untrue statement of a material fact in or omission or alleged omission to state a material fact from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by Buyer specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, or controlling person and shall survive the transfer of such securities by Buyer. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 9, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 9, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to the indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. 11 (d) Other Indemnification. Indemnification similar to that specified in the preceding paragraphs of this Section 9 (with appropriate modifications) shall be given by the Company and Buyer with respect to any required registration or other qualification of securities under any federal or state law or regulation of Governmental Authority other than the Securities Act. (e) Indemnification Payments. The indemnification required by this Section 9 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. (f) Contribution. If, for any reason, the foregoing indemnity is unavailable, or is insufficient to hold harmless an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of the expense, loss, damage or liability, (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission), or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in the proportion as is appropriate to reflect not only the relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations. No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation. Section 10. Covenants Relating to Rule 144, etc. The Company will file in a timely manner, information, documents and reports in compliance with the Exchange Act and will, at its expense, forthwith upon the request of Buyer, deliver to Buyer a certificate, signed by the Company's principal financial officer, stating (a) the Company's name, address and telephone number (including area code), (b) the Company's Internal Revenue Service identification number, (c) the Company's Commission file number, (d) the number of shares of Company Common Stock and the number of shares of Company Preferred Stock outstanding as shown by the most recent report or statement published by the Company, and (e) whether the Company has filed the reports required to be filed under the Exchange Act for a period of at least 90 days prior to the date of such certificate and in addition has filed the most recent annual report required to be filed thereunder. If at any time the Company is not required to file reports in compliance with either Section 13 or Section 15(d) of the Exchange Act, the Company will, at its expense, forthwith upon the written request of Buyer, make available adequate current public information with respect to the Company within the meaning of paragraph (c)(2) of Rule 144 of the General Rules and Regulations promulgated under the Securities Act. The Company agrees that if Buyer arranges for the delivery to the Company of an opinion of counsel (reasonably satisfactory to the Company), to the effect that the Registrable Securities may be sold in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act so that all transfer restrictions and legends with respect thereto (other than those required by the Company Charter in effect on the date hereof) are removed upon the consummation of such sale, Buyer may request that its certificates evidencing such Registrable Securities be exchanged by the Company for certificates free and clear of all transfer restrictions and legends (other than those required by the Company Charter in effect on the date hereof, unless deleted from the Company Charter after the date hereof and before any such delivery). The Company agrees to deliver such legend free shares certificates to Buyer within three business days of Buyer's request therefor. Should the Company fail to deliver such certificates within such three business day period, the Company agrees to indemnify Buyer for all losses sustained by Buyer as a result of any decrease in value of such Registrable Securities 12 from such date beginning on the fourth business day following Buyer's request for exchange and continuing until such date as new certificates, free and clear of all legends, has been delivered to Buyer. Section 11. Miscellaneous. (a) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. Copies of executed counterparts transmitted by telecopy, telefax or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 11, provided receipt of copies of such counterparts is confirmed. (b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. (c) Entire Agreement. This Agreement (including agreements incorporated herein) contains the entire agreement between the parties with respect to the subject matter hereof and there are no agreements or understandings between the parties other than those set forth or referred to herein. This Agreement is not intended to confer upon any person not a party hereto (and their successors and assigns) any rights or remedies hereunder. (d) Notices. All notices and other communications hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below. Notices to the Company shall be addressed to: Berkshire Realty Company, Inc. 470 Atlantic Avenue Boston, MA 02210 Attention: David Marshall Marianne Pritchard Telecopy Number: 617-556-8171 The Berkshire Group 470 Atlantic Avenue Boston, MA 02210 Attention: Scott D. Spelfogel, Esq. Telecopy Number: 617-556-8171 with a copy to: Peabody & Brown 101 Federal Street Boston, MA 02110 Attention: Alexander J. Jordan, Jr. Telecopy Number: 617-345-1300 or at such other address and to the attention of such other person as the Company may designate by written notice to Buyer. Notices to Buyer shall be addressed to: 13 Westbrook Partners, L.L.C. 599 Lexington Avenue New York, NY 10022 Attention: Michael Barr Telecopy Number: (212) 849-8801 and a copy to: Westbrook Partners, L.L.C. 13155 Noel Road, LB 54 Dallas, TX 75240 Attention: Patrick Fox Telecopy Number: (972) 934-8333 with a copy to: Rogers & Wells 200 Park Avenue New York, New York 10166 Attention: Allen Curtis Greer, II Telecopy Number: (212) 878-8375 (e) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. Neither party shall be permitted to assign any of its rights hereunder to any third party, except that if (i) Buyer transfers or pledges any or all Registrable Securities to a bona fide financial institution as security for any bona fide indebtedness of any Buyer, the pledgee of the Registrable Securities shall be considered an intended beneficiary hereof and may exercise all rights of Buyer hereunder, (ii) any person included within the definition of the term Buyer shall be permitted to assign its rights hereunder to any other person included in such definition, and (iii) the rights to cause the Company to take actions with respect to Registerable Securities granted by the Company hereunder may be assigned or otherwise conveyed to any Person which is a direct or indirect transferee or assignee of Buyer with respect to Registrable Securities; provided that (A) only Buyer may request, on behalf of itself and other holders of Registrable Securities, registration pursuant to this Agreement, (B) such transfer is effected in accordance with applicable federal and state securities laws, (C) such transferee or assignee becomes a party to this Agreement or agrees in writing to be subject to the terms hereof to the same extent as if it were Buyer hereunder and (D) in the event of a pledge of Registrable Securities, Buyer shall retain and be bound by all obligations of Buyer hereunder during the period of any such pledge and in the event of a foreclosure of the pledged Registrable Securities. (f) Headings. The Section and other headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement. All references to Sections or other headings contained herein mean Sections or other headings of this Agreement unless otherwise stated. (g) Amendments and Waivers. This Agreement may not be modified or amended except by an instrument or instruments in writing signed by the party against whom enforcement of any such modification or amendment is sought. Any party hereto may, only by an instrument in writing, waive compliance by the other party hereto with any term or provision hereof on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision hereof shall not be construed as a waiver of any subsequent breach. 14 (h) Interpretation; Absence of Presumption. For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, paragraph or other references are to the Sections, paragraphs, or other references to this Agreement unless otherwise specified, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified, (iv) the word "or" shall not be exclusive, and (v) provisions shall apply, when appropriate, to successive events and transactions. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. (i) Severability. Any provision hereof which is invalid or unenforceable shall be ineffective to the extent of such invalidity or unenforceability, without affecting in any way the remaining provisions hereof. 15 IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties hereto as of the day first above written. BERKSHIRE REALTY COMPANY, INC. By: _____________________________________ _____________, President WESTBROOK BERKSHIRE HOLDINGS, L.L.C. By: _____________________________________ _____________, Authorized Signatory 16 -----END PRIVACY-ENHANCED MESSAGE-----