AGREEMENT AND PLAN OF MERGER
AMONG
BERKSHIRE REALTY COMPANY, INC.,
AND
THE QUESTAR MANAGEMENT COMPANY
AND
ALL SHAREHOLDERS OF
THE MANAGEMENT COMPANY
AGREEMENT AND PLAN OF MERGER
Agreement entered into as of August 25, 1997 by and among Berkshire
Realty Company, Inc., a Delaware corporation ("BRI"), The Questar Management
Company, a Maryland corporation (the "Management Company"), and the stockholders
set forth on Schedule 2.2 attached hereto (collectively the "Stockholders").
BRI, the Management Company and the Stockholders are referred to collectively
herein as the "Parties."
This Agreement contemplates a tax-free merger of the Management Company
into BRI. In such merger, the Stockholders will receive capital stock of BRI in
exchange for their capital stock of the Management Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
1. The Merger.
1.1 The Merger. Upon and subject to the terms and conditions
of this Agreement, the Management Company shall merge with and into BRI (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Management Company shall cease and BRI shall continue as the
surviving corporation in the Merger (the "Surviving Corporation"). The
"Effective Time" shall be the time at which BRI and the Management Company file
the certificate of merger or other appropriate documents prepared and executed
in accordance with the relevant provisions of the Delaware General Corporation
Law (the "Certificate of Merger") with the Secretary of State of the State of
Delaware and the Maryland General Corporation Law with the Department of
Assessments and Taxation of the State of Maryland. The Merger shall have the
effects set forth in Section 259 of the Delaware General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Xxxx and
Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or at such other place
as the Parties may mutually agree, at 10:00 a.m. local time on a date ("Closing
Date") mutually agreed to in writing by the Parties, but not later than October
31, 1997.
1.3 Actions at the Closing. At the Closing, (a) the Management
Company shall deliver to BRI the various certificates, instruments and documents
referred to in Section 8.10, (b) BRI shall deliver to the Company the various
certificates, instruments and documents referred to in Section 9.9, (c) the
Management
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Company and BRI shall file with the Secretary of State of the State of Delaware
the Certificate of Merger, (d) the Management Company and BRI shall file with
the Department of Assessments and Taxation of the State of Maryland the Articles
of Merger, (e) BRI shall deliver certificates for the BRI Shares (as defined
below) to the Stockholders, and (f) the Stockholders shall deliver certificates
for the Company Shares (as defined below).
1.4 Additional Action. BRI may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of the Management Company, in order to
consummate the transactions contemplated by this Agreement.
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of any Party, each share of common stock,
$1.00 par value per share, of the Management Company ("Company Shares") issued
and outstanding immediately prior to the Effective Time shall be converted into
and represent the right to receive such number of shares of common stock, $.01
par value per share, of BRI ("BRI Common Stock") as is equal to one share of BRI
Common Stock multiplied by the Conversion Ratio. The "Conversion Ratio" shall be
determined by dividing (i) the number of shares of BRI Common Stock equal in
value (as such value is determined at the time and in the manner provided herein
below) to $2,676,010 (the "Consideration Amount"), by (ii) the number of Company
Shares issued and outstanding immediately prior to the Effective Time; provided,
however, with respect to each property set forth on Exhibit 1 attached hereto,
as to which the transactions described in the applicable Related Agreement (as
defined in Section 11.6) have not been closed on or prior to the Closing Date
hereunder (a "Non-Acquired Property"), there shall be a reduction in the
Consideration Amount equal to the Reduction Amount for such property. The
Reduction Amount for each such property shall be equal to (A) .6 multiplied by
the amount of the Management Fees for such property as set forth on Exhibit 1
multiplied by (B) five (5). The shares of BRI Common Stock to be issued to the
holders of the Company Shares are referred to herein as the "BRI Shares."
(b) The Parties agree that, for purposes of this
Agreement, the value of each share of BRI Common Stock ("BRI Share Value") shall
be the average of the closing price per share, rounded to the nearest
one-thousandth, of one share of common stock of BRI as such price is published
by The Wall Street Journal for the period from, and including, August 1, 1997
through and including, the date of pricing of the Public Offering contemplated
under Section 11.5 hereof, provided that in any event the BRI Share Value shall
be not less than $10.50 per share (the "Fixed Floor") and not greater than
$11.75 per share (the "Fixed Ceiling"). The foregoing calculation of BRI Share
Value (including the Fixed Floor and Fixed Ceiling) will be
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adjusted as appropriate and customary upon the occurrence of any of the
following events to reflect a stock split, dividend (outside of the ordinary
course), recapitalization or other similar event outside of the ordinary course.
(c) The Management Company and the Stockholders
acknowledge and agree that after the execution hereof, the price of the BRI
Common Stock may increase or decrease in value as the result of market
fluctuations prior and subsequent to the Public Offering. Notwithstanding these
fluctuations, once the value and number of BRI Shares have been established as
provided in this Section 1.5, BRI will not be required to increase or be
permitted to decrease the number of BRI Shares to be issued to the Stockholders
in the event of a decrease or increase in the market value of the BRI Common
Stock subsequent to the closing of the Public Offering and the fixing of the
Offering Price.
1.6 Fractional Shares. In the event that any Shareholder would
be entitled to a fractional share of BRI Common Stock, the number of shares of
BRI Common Stock shall be rounded up or down, as the case may be, to the nearest
whole share of BRI Common Stock.
1.7 Certificate of Incorporation. The Certificate of
Incorporation of the Surviving Corporation shall be the same as the Certificate
of Incorporation of BRI immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be
the same as the By-laws of BRI immediately prior to the Effective Time.
1.9 Directors and Officers. The directors of BRI shall remain
the directors of the Surviving Corporation as of the Effective Time. The
officers of BRI shall remain as officers of the Surviving Corporation after the
Effective Time, retaining their respective positions.
1.10 No Further Rights. From and after the Effective Time, no
Company Shares shall be deemed to be outstanding, and holders of Certificates
shall cease to have any rights with respect thereto, except as provided herein
or by law.
1.11 Closing of Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Shares shall thereafter be made.
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2. Representations with respect to the Management Company. The
Management Company on behalf of itself and each of the Stockholders, severally
and not jointly, represents and warrants to BRI as follows:
2.1 Organization. The Management Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Maryland. The Management Company has all requisite power and authority
(corporate and other) to own its properties, to carry on its business as now
being conducted, to execute and deliver this Agreement and the agreements
contemplated herein and to consummate the transactions contemplated hereby and
thereby to be consummated by it. The Management Company is duly qualified to do
business and is in good standing in all other jurisdictions in which the failure
to be so qualified and in good standing would have a material adverse effect on
the Management Company's business (a "Material Adverse Effect"). Such
jurisdictions are set forth on Schedule 2.1 attached hereto.
2.2 Capitalization of the Management Company. The authorized
capital stock of the Management Company is as set forth on Schedule 2.2 attached
hereto, including the number of Company Shares outstanding. Such Company Shares
are held of record and beneficially owned by the Stockholders as set forth on
Schedule 2.2 attached hereto. All of such Company Shares have been duly and
validly issued, are fully paid and nonassessable and free of all preemptive
rights and were issued in compliance with applicable federal and state
securities laws. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Management Company is a party or
which are binding upon the Management Company providing for the issuance,
disposition or acquisition of any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Management Company. There are no agreements, voting trusts, proxies, or
understandings with respect to the voting, or registration under the Securities
Act, of any Company Shares.
2.3 Authorization. The execution and delivery of this
Agreement and the agreements provided for herein by the Management Company, and
the consummation by the Management Company of all transactions contemplated
hereby and thereby to be consummated by it, have been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Management Company is a party
constitute the valid and legally binding obligations of the Management Company,
enforceable against the Management Company in accordance with their respective
terms, subject only to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws for the relief of debtors theretofore or hereafter
enacted to the extent that the same may be constitutionally applied. The
execution, delivery and performance by the
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Management Company of this Agreement and the agreements provided for herein, and
the consummation by the Management Company of the transactions contemplated
hereby and thereby, will not, with or without the giving of notice or the
passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Management Company; (b) violate the provisions of
the Certificate of Incorporation or By-laws of the Management Company; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator which would have a Material Adverse Effect; or (d) conflict with or
result in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Management
Company pursuant to, any indenture, mortgage, deed of trust or other instrument
or agreement to which the Management Company is a party or by which the
Management Company or any of its properties is or may be bound which would have
a Material Adverse Effect. Schedule 2.3 attached hereto sets forth a true,
correct and complete list of all material consents and approvals of third
parties that are required in connection with the consummation by the Management
Company of the transactions contemplated by this Agreement and the agreements
provided for herein.
2.4 Assets. Excluded Assets shall mean all assets of the
Management Company (including cash attributable to periods prior to the Closing)
other than (i) the Contracts and (ii) the assets set forth on Schedule 2.4
hereto. The Management Company shall distribute the Excluded Assets prior to
Closing to the Shareholders. Upon the Closing, the Management Company will own
all tangible assets set forth on Schedule 2.4 attached hereto.
2.5 Financial Statements. Attached hereto as Schedule 2.5 are
unaudited financial statements of the Management Company, including balance
sheets, statements of operations and statements of partners' capital for the
fiscal year ended December 31, 1996 (the "December 31 Financial Statements") and
on or before August 31, 1997 the Management Company shall provide unaudited
financial statements (the "Current Financial Statements") for the six-month
period ending June 30, 1997 (the "Balance Sheet Date"). The December 31
Financial Statements, the Current Financial Statements and the Closing Financial
Statement to be delivered pursuant to Section 6.8 are collectively referred to
as the "Financial Statements". The Financial Statements fairly present the
financial condition of the Management Company as of the respective statement
dates in accordance with generally accepted accounting principles consistently
applied (except as may be indicated in the notes thereto), and reflect all
liabilities, fixed, contingent or otherwise, required to be disclosed in such
Financial Statements in accordance with generally accepted accounting principles
(subject, in the case of any unaudited interim financial statements, to normal
year end adjustments). The Financial Statements shall be certified by the
Management Company's chief financial officer.
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2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected in the December 31 Financial Statements and the Current
Financial Statement (and the notes thereto) of the Management Company, (b) set
forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course of
business after the Balance Sheet Date and not material in amount, either
individually or in the aggregate, the Management Company does not have any
material liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, affecting the Assets. As of the
date of Closing, the Management Company shall have no liabilities or obligations
(absolute or contingent) for borrowed money and shall have no other liabilities
or obligations (absolute or contingent) of any kind, other than (a) liabilities
and obligations incurred in the ordinary course of the Management Company's
business which are either (i) in the aggregate, not material, or (ii) approved
by the BRI Partnership in writing; and (b) liabilities resulting from or
incurred in the ordinary course of business arising under the Contracts. For
purposes of this Subsection 2.6, "material" means any amount in excess of
$50,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, there is no material action, suit or, to the knowledge of the Management
Company or the Stockholders, proceeding or investigation pending or threat
thereof, against the Management Company or the Stockholders which questions the
validity of this Agreement or the right of the Management Company or the
Stockholders to enter into it, or which might result in or have, either
individually or in the aggregate, a Material Adverse Effect on the Management
Company. The Management Company is not in violation of or in default with
respect to any judgment, order, writ, injunction, decree or rule of any court,
administrative agency or governmental authority or any regulation of any
administrative agency or governmental authority except for such violations or
defaults which would not have a Material Adverse Effect.
2.8 Insurance. Set forth on Schedule 2.8 hereto is a true and
complete list of all insurance policies of the Management Company (the
"Insurance Policies") and a list of all presently outstanding claims thereunder.
The Management Company has done nothing to reduce or impair the insurance
afforded by the Insurance Policies. To the Management Company's knowledge, there
are no material disputes with underwriters of any such Insurance Policies and
there are no pending or threatened terminations with respect to any of such
policies.
2.9 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.9 attached hereto or as contemplated by this Agreement,
since the Balance Sheet Date, there has been no change which materially and
adversely affects the business, properties, assets, condition (financial or
otherwise) or prospects of the Management Company. Neither the Management
Company, nor the Stockholders, has any knowledge of any existing or threatened
occurrence, event or development
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which would have a Material Adverse Effect on the business, properties, assets,
condition or prospects of the Management Company.
2.10 Tax Matters.
(a) All federal, state, local and foreign tax returns
and information statements required to be filed by or on behalf of the
Management Company, or for which the Management Company may have any liability,
have been accurately prepared in all material respects and duly and timely filed
(or requests for extensions have been timely filed, granted, and have not
expired). As of the date hereof, there is no deficiency or refund litigation or
matter in controversy with respect to any taxes that might result in a
determination materially adverse to the Management Company. All taxes due with
respect to completed and settled examinations or concluded litigation have been
paid.
(b) The Management Company has not executed an
extension or waiver that is currently in effect of any statute of limitations on
the assessment or collection of any tax.
(c) Neither the Management Company, nor the
Stockholders, know of (A) any audit or investigation of the Management Company
with respect to any liability for taxes relating to the Management Company, or
(B) any threatened claims or assessments for taxes against or relating to the
Management Company.
(d) Attached hereto as Schedule 2.10 is a true and
complete copy of the Federal Income Tax Return for 1996 for the Management
Company, as filed with the Internal Revenue Service.
2.11 Books and Records. The general ledgers and books of
account of the Management Company, all federal, state and local income,
franchise, property and other tax returns filed by the Management Company, and
all other books and records of the Management Company are in all material
respects complete and correct and have been maintained in accordance with good
business practice and in accordance with all applicable procedures required by
laws and regulations.
2.12 Contracts and Commitments.
(a) Schedule 2.12 attached hereto contains a true,
complete and correct list of the following contracts and agreements, whether
written or oral (collectively, the "Contracts"):
(i) all management contracts to which the
Management Company is a party;
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(ii) all loan agreements, indentures, mortgages
and guaranties to which any Management Company is a party or by which the
Management Company or any of its property is bound;
(iii) all pledges, conditional sale or title
retention agreements, security agreements, personal property leases and lease
purchase agreements to which the Management Company is a party or by which the
Management Company or any of its property is bound;
(iv) all contracts, agreements or other
understandings or arrangements between the Management Company and any
stockholder or affiliate of the Management Company except those described in the
Financial Statements or in writing to BRI; and
(v) any other material agreement or contract
entered into by the Management Company.
(b) Except as set forth on Schedule 2.12 attached
hereto:
(i) each Contract is a valid and binding
agreement of the Management Company, enforceable against the Management Company
in accordance with its terms, and neither the Management Company nor any
Stockholder has any knowledge that such Contract is not a valid and binding
agreement of the other parties thereto;
(ii) To the knowledge of the Management Company
and the Stockholders, the Management Company has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it on
its part prior to the date hereof, and neither the Management Company nor any
Stockholder has any reason to believe that the Management Company will not be
able to fulfill, when due, all of its obligations under the Contracts which
remain to be performed after the date hereof except those obligations the
failure to fulfill would not have a Material Adverse Effect;
(iii) To the knowledge of the Management Company
and the Stockholders, the Management Company is not in breach of or default
under any Contract, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance, thereunder
or pursuant thereto except for such defaults, losses, liens, changes or
encumbrances which would not have a Material Adverse Effect; and
(iv) to the best knowledge of the Management
Company and the Stockholders, there is no existing breach or default by any
other party to any
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Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto except, in each case, as would not have a
Material Adverse Effect.
(d) Except as set forth on Schedule 2.12, the
continuation, validity and effectiveness of each Contract will not be affected
by the Merger
(e) True, correct and complete copies of all
Contracts have previously been delivered by the Management Company to BRI.
2.13 Compliance with Agreements and Laws. The Management
Company has all requisite licenses, permits and certificates, including
environmental, health and safety permits, from federal, state and local
authorities necessary to conduct its business and own and operate its assets
(collectively, the "Permits") except as would not have a Material Adverse
Effect. The Management Company is not in violation of any law, regulation or
ordinance (including, without limitation, laws, regulations or ordinances
relating to building, zoning, environmental, disposal of hazardous substances,
land use or similar matters) relating to its properties, the violation of which
would have a Material Adverse Effect on the Management Company or its
properties. The business of the Management Company does not violate, in any
material respect, any federal, state, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment discrimination, occupational safety, environmental protection,
hazardous waste (as defined in the Resource Conservation and Recovery Act, as
amended, and the regulations adopted pursuant thereto), conservation, or corrupt
practices, the enforcement of which would have a Material Adverse Effect on the
Management Company. Except as set forth on Schedule 2.13 attached hereto, the
Management Company has not since January 1, 1997 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance which would have a
Material Adverse Effect.
2.14 Absence of Certain Changes or Events. Except as
contemplated by this Agreement or as set forth on Schedule 2.14 attached hereto,
since the Balance Sheet Date, the Management Company has not entered into any
transaction which is not in the usual and ordinary course of business, and,
without limiting the generality of the foregoing, the Management Company has
not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Mortgaged, pledged or subjected to lien, charge
or other encumbrance any assets of the Management Company;
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(c) Except with respect to the Excluded Assets to be
distributed prior to Closing and liabilities to be paid prior to Closing,
consistent with the terms of this Agreement, sold or purchased, assigned or
transferred any of its assets or cancelled any debts or claims;
(d) Made any material amendment to or terminated any
Contract or committed any act or omitted to do any act which would cause the
breach of any Contract; or
(e) Received notice of any litigation.
2.15 Bank Accounts. Schedule 2.15 attached hereto contains a
true, correct and complete list of all bank accounts and safe deposit boxes in
the name of or controlled by the Management Company and the names of persons
having access thereto as of the date hereof.
2.16 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Management Company and which are
necessary for the execution and delivery by the Management Company of this
Agreement and the documents to be executed and delivered by the Management
Company in connection herewith are set forth on Schedule 2.16 attached hereto.
2.17 Employee Benefits.
(a) Schedule 2.17 contains a list of all employees of
the Management Company, along with the position and the annual rate of
compensation of each such person.
(b) Schedule 2.17 contains a complete and accurate
list of all Employee Benefit Plans (as defined below) maintained, or contributed
to, by the Management Company or any ERISA Affiliate (as defined below). For
purposes of this Agreement, "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written plan, agreement or
arrangement involving direct or indirect compensation, including without
limitation insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation. For purposes of this Agreement, "ERISA Affiliate" means any entity
which is a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the
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regulations under Section 414(o) of the Code), any of which includes the
Management Company. Complete and accurate copies of (i) all Employee Benefits
Plans, (ii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iii) all annual reports filed on IRS Form 5500, 5500C or
5500R for the last three plan years for each Employee Benefit Plan, have been
delivered to the BRI. Each Employee Benefit Plan has been administered in all
material respects in accordance with its terms and each of the Management
Company and the ERISA Affiliates has in all material respects met its
obligations with respect to such Employee Benefit Plan and has made all required
contributions thereto. The Management Company and all Employee Benefit Plans are
in compliance in all material respects with the currently applicable provisions
of ERISA and the Code and the regulations thereunder.
(c) There are no investigations by an governmental
entity, termination proceedings or other claims (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders), suits or proceedings
against or involving any Employee Benefit Plan or asserting any rights or claims
to benefits under any Employee Benefit Plan that could give rise to any material
liability.
(d) All the Employee Benefit Plans that are intended
to be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Employee
Benefit Plans are qualified and the plans and the trusts related thereto are
exempt from federal income taxes under Sections 401(a) and 501(a), respectively,
of the Code, no such determination letter has been revoked and revocation has
not been threatened, no such Employee Benefit Plan has been amended since the
date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would likely result in a
revocation of such determination.
(e) Neither the Management Company nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(f) At no time has the Management Company or any
ERISA Affiliate been obligated to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any
Employee Benefit Plan providing benefits after termination of employment to any
employee of the Management Company (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage required to be continued under
Section 4980B of the Code and insurance conversion privileges under state law.
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3. Representations with respect to the Stockholders. Each of the
Stockholders, on behalf of his or her self, severally and not jointly,
represents and warrants to BRI as follows:
3.1 Authorization. Such Stockholder has full power and
authority to enter into and deliver this Agreement and the other agreements
provided for herein and to consummate the transactions contemplated hereby and
thereby. This Agreement and all such other agreements and obligations entered
into and undertaken in connection with the transactions contemplated hereby
constitute the valid and legally binding obligations of such Stockholder,
enforceable against such Stockholder in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied. The execution, delivery
and performance by such Stockholder of this Agreement and the agreements
provided for herein, and the consummation by such Stockholder of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to such Stockholder; (b) violate any
judgment, decree, order or award of any court, governmental body or arbitrator;
or (c) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under, or
cause the creation of any lien, charge or encumbrance upon the Company Shares of
such Stockholder pursuant to, any indenture, mortgage, deed of trust or other
instrument or agreement to which such Stockholder is a party or by which such
Stockholder is or may be bound. Schedule 3.1 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required in connection with the consummation by such Stockholder of the
transactions contemplated by this Agreement.
3.2 Investment.
(a) Such Stockholder is acquiring the BRI Shares for
investment only to be received by it for its own account and not with any view
to the sale or distribution of the same or any part thereof in violation of the
Securities Act of 1933, as amended (the "Act"), and it will not sell or
otherwise dispose of such BRI Shares except in compliance with the registration
requirements or exemption provisions of any applicable securities laws and in
accordance with the terms of the Registration Rights Agreement (as defined
below).
(b) Such Stockholder understands that the BRI Shares
to be issued to Stockholder will not be registered under the Act, or the
securities laws of any state ("Blue Sky Laws") by reason of a specific exemption
or exemptions from registration under the Act and applicable Blue Sky Laws and
that BRI's reliance on
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such exemptions is predicated in part on the accuracy and completeness of the
representations and warranties of such Stockholder.
(c) Such Stockholder acknowledges and agrees that,
for the reasons set forth in paragraphs (a) and (b) above, the BRI Shares may
not be offered, sold, transferred, pledged, or otherwise disposed of by such
Stockholder except (i) pursuant to an effective registration statement under the
Act and any applicable Blue Sky Laws, (ii) pursuant to a no-action letter issued
by the Securities and Exchange Commission to the effect that a proposed transfer
of the BRI Shares may be made without registration under the Act, together with
either registration or an exemption under applicable Blue Sky Laws, or (iii)
upon BRI receiving an opinion of counsel knowledgeable in securities law matters
(and which opinion and counsel shall be reasonably acceptable to BRI) to the
effect that the proposed transfer is exempt from the registration requirements
of the Act and any applicable Blue Sky Laws, and that, accordingly, such
Stockholder must bear the economic risk of an investment in the BRI Shares for
an indefinite period of time. Such Stockholder acknowledges, represents and
agrees that (i) his or her economic circumstances are such that he or she is
able to bear all risks of the investment in BRI and the BRI Shares for an
indefinite period of time, including the risk of a complete loss of his or her
investment in the BRI Shares, (ii) he or she has knowledge and experience in
financial and business matters sufficient to evaluate the risks of investment in
BRI, and (iii) he or she has consulted with his or her own separate counsel and
tax advisor, to the extent necessary, as to all legal and taxation matters
covered by this Agreement and has not relied upon BRI, its affiliates or its
legal counsel and advisors for any explanation of the application of the various
United States or state securities laws or tax laws with regard to his or her
acquisition of the BRI Shares. Such Stockholder further acknowledges and
represents that he or she has made his or her own independent investigation of
BRI and the business conducted or proposed to be conducted by BRI.
(d) Such Stockholder is an "accredited investor"
within the meaning of Rule 501(a) promulgated under the Act.
(e) Such Stockholder understands that an investment
in BRI involves substantial risks; such Stockholder acknowledges that he or she
has (i) been given full and complete access to BRI and its management in
connection with this Agreement and the transactions contemplated hereby, (ii)
received and read or had the opportunity to review all documents and information
relevant to its decision to enter into this Agreement and to invest in BRI,
including, without limitation, BRI's SEC Filings (as defined below) and the
Private Placement Memorandum of BRI, dated as of August 25, 1997 (the "PPM") and
(iii) had the opportunity to ask questions of BRI and its management concerning
his or her investment in BRI and the transactions contemplated hereby, which
questions were answered to his or her satisfaction.
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(f) Such Stockholder acknowledges and agrees that:
(i) the BRI Shares to be acquired by him or her
hereunder will not be registered under the Act in reliance upon the
exemption afforded by Section 4(2) thereof for transactions by an
issuer not involving any public offering, and will not be registered or
qualified under any other applicable securities laws;
(ii) Until such time as the following legend is no
longer required, the BRI Shares will bear a legend substantially to the
effect of the following:
"The securities represented by this
certificate have not been registered under
the Securities Act of 1933, as amended (the
"Act"), or the securities laws of any state.
The securities may not be offered, sold,
transferred, pledged or otherwise disposed
of without an effective registration
statement under the Act and under any
applicable state securities laws, receipt of
a no-action letter issued by the Securities
and Exchange Commission (together with
either registration or an, exemption under
applicable state securities laws) or an
opinion of counsel (which opinion and which
counsel shall be acceptable to Berkshire
Realty Company, Inc.) that the proposed
transaction will be exempt from registration
under the Act and its applicable state
securities laws"; and
(iii) BRI reserves the right to place a stop order
against the transfer of the BRI Shares and to refuse to effect any
transfers thereof, in the absence of satisfying the conditions
contained in the foregoing legend.
(g) The address of each Stockholder set forth on
Schedule 2.2 attached hereto is the address of such Stockholder's principal
residence or principal place of business, and such Stockholder has no present
intention of becoming a resident of any country, state or jurisdiction other
than the country and state in which such principal residence or principal place
of business is situated.
(h) The provisions of this Section 3.2 shall survive
the Closing indefinitely.
3.3 Receipt of Documents. Such Stockholder has received all
Exhibits and Schedules described herein as attached hereto.
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4. Representations of BRI. BRI represents and warrants as follows:
4.1 Authority. (a) BRI is a corporation duly organized and
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to carry on its business; (b) BRI has the right,
power and authority to issue the BRI Shares and to operate its properties and to
carry on its business as is presently being conducted and to enter into and
perform all of the agreements and covenants contained in this Agreement and
contemplated hereby and any other documents and instruments relating hereto or
thereto; (c) this Agreement and the documents to be executed and delivered by
BRI at Closing, upon execution and delivery, will have been duly and validly
authorized and executed by BRI and will constitute the valid and binding
obligations of BRI, enforceable in accordance with their respective terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws for the relief of debtors theretofore or hereafter enacted to the
extent that the same may be constitutionally applied; and (d) assuming
compliance with the terms of this Agreement by the parties hereto other than
BRI, the execution and delivery by BRI of this Agreement and all other documents
and instruments contemplated hereby and the performance by BRI of its
obligations hereunder and thereunder do not and will not constitute a default
under, or conflict with or violate, any provision of the Certificate of
Incorporation or By-Laws of BRI or any other material agreement to which BRI is
a party or by which BRI is bound.
4.2 Annual and Quarterly Reports. BRI has delivered to the
Stockholders true and complete copies of the Annual Report on Form 10-K (and
those portions of the Annual Report to Stockholders which are incorporated by
reference therein) of BRI for the fiscal year ended December 31, 1996, as filed
with the Securities and Exchange Commission, and all Quarterly Reports on Form
10-Q and Current Reports on Form 8-K filed by BRI with the Securities and
Exchange Commission since December 31, 1996 (the "SEC Filings"). The financial
statements of BRI included or incorporated by reference in the SEC Filings and
the PPM have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects the consolidated assets, liabilities and financial position of BRI as
of the dates thereof and the consolidated results of its operations and changes
in cash flow for the periods then ended (subject, in the case of any unaudited
interim financial statements, to normal year ended adjustments).
4.3 Governmental Consent, etc. Subject to compliance with
applicable securities laws and the filing of the Certificate of Merger as
required by the Delaware General Corporation Law and the Articles of Merger as
required by the Maryland General Corporation Law or except as disclosed in the
PPM, no consent, approval or authorization of, or designation, declaration or
filing with, any governmental agency, commission, board or public authority is
required on the part
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of BRI in connection with the valid execution and delivery of this Agreement by
BRI and the performance of BRI's obligations hereunder.
4.4 Capitalization. The authorized capital stock of BRI
consists of 140,000,000 shares of BRI Common Stock, of which 25,797,893 shares
were issued and outstanding as of August 1, 1997. All of the issued and
outstanding shares of BRI Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights. All of the BRI
Shares will be, when issued in accordance with this Agreement, duly authorized,
validly issued, fully paid, nonassessable and free and clear of all preemptive
rights and of any lien, claim, change, pledge, encumbrance, limitation,
agreement or instrument whatsoever.
4.5 Bankruptcy. No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy, reorganization
or other similar proceedings are pending or, to BRI's knowledge, threatened
against BRI, nor are any of such proceedings anticipated or contemplated by BRI.
4.6 PPM. The PPM, as of the date thereof, did not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
4.7 REIT Status. Commencing with BRI's taxable year ending
December 31, 1991, BRI has been organized in conformity with the requirements
for qualification as a "real estate investment trust" and its method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code.
4.8 Receipt of Documents. BRI acknowledges that it has
received all of the documents described herein as delivered thereto (unless it
has notified the Management Company or the Stockholders otherwise in writing)
and represents that there are no other documents known to BRI which are required
to be delivered hereunder and have not been so delivered.
4.9 Tax Matters.
(a) All federal, state, local, and foreign tax
returns and information statements required to be filed by or on behalf of BRI
or for which BRI may have any liability have been accurately prepared in all
material respects and duly and timely filed (or requests for extensions have
been timely filed, granted and have not expired). As of the date hereof, there
is no deficiency or refund litigation or matter in controversy with respect to
any taxes that might result in a determination materially adverse to BRI. All
taxes due with respect to completed and settled examinations or concluded
litigation have been paid.
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(b) BRI has not executed an extension or waiver that
is currently in effect of any statute of limitations on the assessment or
collection of any tax.
(c) BRI does not know of (A) any audit or
investigation of BRI with respect to any liability for taxes relating to BRI, or
(B) any threatened claims or assessments for taxes against or relating to BRI.
4.10 Continuity of Business Enterprise. BRI will continue
after Closing at least one significant historic business line of the Management
Company, or use at least a significant portion of the Management Company's
historic business assets in a business, in each case as and to the extent
required by Treasury Regulation Section 1.368-1(d) or any subsequent final
regulations that may be issued in the future by the Internal Revenue Service.
4.11 Litigation, Etc. Except as described in the SEC Filings
there is no material action, suit or, to BRI's knowledge, proceeding or
investigation pending or, to BRI's knowledge, any threat thereof, against BRI or
its properties or any part thereof which questions the validity of this
Agreement and the transactions contemplated hereby or the right of BRI to enter
into it, or which would likely have, either individually or in the aggregate, a
material adverse effect on the business of BRI as such is presently conducted.
4.12 Title to Properties and Assets. BRI or its subsidiaries
or affiliates is the owner as described in the SEC Filings with good title to
its properties as described in the SEC Filings, subject to such financings,
easements, restrictions and other matters which do not have a material adverse
effect on the operation of such properties in accordance with BRI's past
practices. Except as disclosed in the SEC Filings, BRI does not own, or
otherwise hold any interest in, any other material properties.
4.13 Liabilities. Except as disclosed in the SEC Filings, BRI
has no material liabilities and BRI has not, directly in indirectly, created,
incurred, assumed or guaranteed or otherwise become directly or indirectly
liable for the payment of any material amount of borrowed money.
4.14 Environmental Compliance. Except as disclosed in the SEC
Filings, no action has been commenced by any enforcement agency under any
Environmental Laws which, if adversely determined, would have a material adverse
effect on BRI and BRI is not in material violation of any Environmental Laws to
such an extent that it would have a material adverse effect on BRI.
4.15 Permits and Compliance with Laws. Except as disclosed in
the SEC Filings, BRI has not received written notice that (i) any material
approvals,
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consents, permits, licenses or certificates of occupancy (whether governmental
or otherwise) required for the current use and operation of any of its
properties have not been granted, effected, renewed or performed and completed
(as the case may be) or have been or are about to be revoked; (ii) any fees and
charges therefor have not been fully paid; (iii) any of its properties,
including the current use and occupancy thereof are in violation in any material
respect of any laws or (iv) any governmental authority has a current plan that
would adversely affect the continued use and operation of any of its properties
as currently used and operated except, in the case of clauses (i), (ii), (iii)
and (iv), as would not have a Material Adverse Effect.
5. Access to Information
5.1 Access to Management, Properties and Records; Due
Diligence. From the date of this Agreement until the Closing Date, BRI may
examine the accounting books and other business and financial records, plans,
reports and documents of the Management Company and its business, including all
corporate records, tax returns, contracts, licenses, business plans and
projections, audits and audit work papers, employee benefit plans, employee
records, management plans and records, and any and all other information
reasonably requested by BRI, and the Management Company and the Stockholders
shall cooperate fully with BRI's representatives and make themselves available,
so that BRI may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Management Company, and BRI shall be permitted to make abstracts from, or copies
of, all such books and records. The Management Company shall furnish to BRI such
financial and operating data and other information as to the assets and the
business of the Management Company as BRI shall reasonably request.
6. Covenants of the Management Company and the Stockholders and BRI
From and after the date hereof and until the Closing Date:
6.1 Conduct of Business. Except with the prior written consent
of BRI, on and after the date hereof, the Management Company and the
Stockholders shall conduct the business of the Management Company only in the
ordinary course as heretofore conducted and shall do the following:
(a) Comply with all regulations and laws applicable
to the conduct of the business of the Management Company;
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(b) Duly and timely file, or obtain appropriate
extensions of the time for filing, all material reports, and all tax returns and
other material documents required to be filed with federal, state, local and
other authorities;
(c) Unless the Management Company is contesting the
same in good faith and has established reasonable reserves therefor, pay when
required to be paid all taxes indicated by the Management Company's tax returns
or otherwise lawfully levied or assessed upon it, or any of its properties or
assets, or which it is otherwise legally obligated to pay; and
(d) Comply in all material respects with each and
every undertaking, covenant and obligation of the Management Company under the
Contracts, including up to the Closing Date.
6.2 Absence of Material Changes. Without the prior written
consent of BRI, the Management Company and each Stockholder shall not, as may be
applicable:
(a) Take any action to materially amend the
Management Company's Certificate of Incorporation or By-laws;
(b) Issue or transfer any stock, bonds or other
corporate securities of the Management Company or grant any option or issue any
warrant to purchase or subscribe to any of such securities or issue any
securities convertible into such securities;
(c) Incur any obligation or liability (absolute or
contingent) relating to the business of the Management Company, except current
liabilities incurred and obligations under contracts entered into in the
ordinary course of business;
(d) Sell, assign, or transfer any of the assets of
the Management Company other than the Excluded Assets;
(e) Merge or consolidate with any other entity or
permit any other entity to merge into it; acquire any stock or partnership
interests; effect any reorganization or recapitalization; or acquire any
material assets of any other person, partnership, corporation or business
organization;
(f) Make any election or give any consent under the
Code or the tax statutes of any state or other jurisdiction or make any
termination, revocation or cancellation of any such election or any consent or
compromise or settle any claim for past or present tax due;
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(g) Waive any rights of material value relating to
the business of the Management Company;
(h) Modify, amend, alter or terminate any of its
management contracts or other material contracts;
(i) Take or permit any act or omission constituting a
breach or default under any Contract;
(j) Fail to (i) preserve the possession and control
of its assets and business, (ii) keep in faithful service its present officers
and key employees, (iii) preserve the goodwill of its customers and others
having business relations with it, and (iv) keep and preserve its business
existing on the date hereof until the Closing Date provided that the Management
Company and the Stockholders shall only be required to use reasonable efforts to
perform the activities described in clause (i) through (iv) of this paragraph
(j);
(k) Fail to operate its business and maintain its
books, accounts and records in the customary manner and in the ordinary or
regular course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;
(l) Except in its capacity as management agent
pursuant to the management contracts, enter into any leases, contracts,
agreements or understandings other than those entered into in the ordinary
course of business calling for payments which in the aggregate do not exceed
$50,000 for each such lease, contract, agreement or understanding; or
(m) Commit or agree to do any of the foregoing in the
future.
6.3 Taxes. The Management Company shall, on a timely basis,
file all tax returns for and pay any and all taxes which shall become due or
shall have accrued on account of the operation of the business of the Management
Company for any taxable period ending on or prior to the Closing Date.
6.4 Communication with Parties to Contract. The Parties will
cooperate in communications with parties to contract.
6.5 Compliance with Laws. The Management Company and the
Stockholders will comply with all laws and regulations which are applicable to
the Management Company or to the conduct of the business of the Management
Company and will perform and comply with all contracts, commitments and
obligations by which it is bound.
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6.6 Continued Truth of Representations and Warranties. Neither
the Management Company nor the Stockholders will take any actions which would
result in any of the representations or warranties set forth in Sections 2 and 3
hereof being untrue in any respect.
6.7 Continuing Obligation to Inform. From time to time prior
to the Closing, the Management Company and the Stockholders will deliver or
cause to be delivered to BRI supplemental information concerning events
subsequent to the date hereof which would render any statement, representation
or warranty in this Agreement or any information contained in any Schedule
inaccurate or incomplete in any material respect at any time after the date
hereof until the Closing Date.
6.8 Closing Financial Statement. At Closing, the Stockholders
shall deliver to BRI the balance sheet and related statements of operations and
statements of cash flows with respect to the Management Company for the one
month period that ended immediately preceding the month in which the Closing
occurs, certified by the Management Company's chief financial officer (the
"Closing Financial Statement").
6.9 BRI covenants and agrees that if the closings contemplated
under the Related Agreements for all of the eleven (11) properties set forth on
Exhibit 2 are consummated, simultaneously therewith, BRI shall consummate the
transactions contemplated by this Agreement.
6.10 BRI covenants and agrees to maintain the Insurance
Policies in full force and effect following the Closing in accordance with the
terms thereof, or to maintain other insurance policies having terms that are no
less favorable as a whole.
7. Conditions to Obligations of BRI
The obligations of BRI under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of BRI:
7.1 Continued Truth of Representations and Warranties of the
Stockholder; Compliance with Covenants and Obligations. The representations and
warranties set forth in Sections 2 and 3 shall be true on and as of the Closing
Date as though such representations and warranties were made on and as of such
date, except for any changes permitted by the terms hereof or consented to in
writing by BRI. The Management Company and the Stockholders shall have performed
and complied with all terms, conditions, covenants, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
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7.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Management Company to authorize or carry
out this Agreement shall have been taken.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Management Company and the Stockholders
of the transactions contemplated by this Agreement shall have consented to,
authorized, permitted or approved such transactions.
7.4 Consents of Third Parties. The Management Company and the
Stockholders shall have received all requisite consents and approvals of all
third parties whose consent or approval is required in order for the Stockholder
to consummate the transactions contemplated by this Agreement, including,
without limitation, those consents and approvals set forth on Schedule 2.3
attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit the transactions contemplated by this Agreement or which might affect
the right of BRI to operate the business of the Management Company after the
Closing.
7.6 Opinion of Counsel. BRI shall have received an opinion of
Xxxxxxx, Xxxxxxx & Xxxxxx, counsel to the Management Company, dated as of the
Closing Date, substantially in the form of Exhibit 3 attached hereto and as to
such other matters as may be reasonably requested by BRI or its counsel.
7.7 Board of Directors and Stockholder Approval. The Board of
Directors and stockholders of the Management Company shall have duly authorized
the transactions contemplated by this Agreement.
7.8 Employment and Consulting Agreements. Xxxxxxx X. Xxxx and
Xxxx X. Xxxxxx shall have executed and delivered employment agreements with BRI,
and Xxxxxx Xxxx shall have executed and delivered a Consulting Agreement with
BRI.
7.9 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 000 Xxxxx Xxxxxx,
Xxxxxxxxx Xxxxxx, Xxxxxxxx, substantially in the form of Exhibit 4 attached
hereto.
7.10 Closing Deliveries. BRI shall have received at or prior
to the Closing each of the following documents:
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(a) such contracts, files and other data and
documents pertaining to the business of the Management Company as BRI may
reasonably request;
(b) copies of the general ledgers and books of
account of the Management Company, and all federal, state and local income,
franchise, property and other tax returns filed since January 1, 1996;
(c) such certificates of the Management Company and
the Stockholders and such other documents evidencing satisfaction of the
conditions specified in Section 8 as BRI shall reasonably request;
(d) certificates of the Secretary of the Management
Company attesting to the incumbency of the Management Company's officers and the
authenticity of the resolutions authorizing the transactions contemplated by the
Agreement to be performed by the Management Company; and
(e) such other documents, instruments or certificates
as BRI may reasonably request.
8. Conditions to Obligations of the Management Company
The obligations of the Management Company under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Management Company;
8.1 Continued Truth of Representations and Warranties of BRI;
Compliance with Covenants and Obligations. The representations and warranties of
BRI in this Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes consented to in writing by the Management Company. BRI shall have
performed and complied with all terms, conditions, obligations, agreements and
restrictions required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.
8.2 Proceedings. All proceedings required to be taken on the
part of BRI to authorize or carry out this Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by BRI of the transactions contemplated by this
Agreement shall have consented to, authorized, permitted or approved such
transactions.
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8.4 Consents of Third Parties. BRI shall have received all
requisite consents and approvals of all third parties whose consent or approval
is required in order for BRI to consummate the transactions contemplated by this
Agreement, including, without limitation, those set forth on Schedule 8.4
attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement.
8.6 Opinion of Counsel. The Management Company shall have
received an opinion of Peabody & Xxxxx, counsel to BRI, dated as of the Closing
Date, substantially in the form of Exhibit 5 attached hereto and as to such
matters as may be reasonably requested by the Management Company or its counsel.
8.7 Employment and Consulting Agreements. Xxxxxxx X. Xxxx and
Xxxx X. Xxxxxx shall have executed and delivered employment agreements with BRI,
and Xxxxxx Xxxx shall have executed and delivered a Consulting Agreement with
BRI.
8.8 Lease. BRI shall have executed and delivered a five-year
lease covering approximately 6,900 square feet of space at 000 Xxxxx Xxxxxx,
Xxxxxxxxx Xxxxxx, Xxxxxxxx, substantially in the form of Exhibit 4.
8.9 Closing Deliveries. The Management Company shall have
received at or prior to the Closing each of the following documents:
(a) such certificates of BRI's officers and such
other documents evidencing satisfaction of the conditions specified in this
Section 9 as the Management Company shall reasonably request;
(b) a certificate of the Secretary of State of the
State of Delaware as to the legal existence and good standing of BRI;
(c) a certificate of the Secretary of BRI attesting
to the incumbency of BRI's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of BRI's Certificate of Incorporation;
(d) the Registration Rights Agreement in the form
attached hereto as Exhibit 6 duly executed by BRI; and
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(e) such other documents, instruments or certificates
as the Stockholder may reasonably request.
9. Indemnification
(a) The Stockholder Indemnity. In the event the
parties proceed to Closing, each Stockholder agrees, severally and not jointly,
to indemnify and hold BRI harmless against and with respect to (i) any loss or
damage (including reasonable attorney's fees) to BRI subsequent to the Closing
Date resulting from (A) any inaccuracy in or breach of any representation or
warranty of the Management Company or of such Stockholder or (B) resulting from
any breach or default by the Management Company or such Stockholder of any
obligation of the Management Company or such Stockholder under this Agreement or
(ii) from liabilities for borrowed money incurred by the Management Company
prior to the Closing; provided that no Stockholder shall be required to
indemnify BRI for any amounts in excess of 50% of the fair market value of the
BRI shares received by such Stockholder as of the date such indemnification
obligation is satisfied (except for indemnification obligations with respect to
representations of each of the Stockholders in Section 3.2, which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI Shares received by such Stockholder
(collectively, the "Cap"); and provided further that to the extent any of the
Stockholders have any indemnification obligation to BRI, the Stockholder may
elect to satisfy such indemnification obligation by directing BRI to cancel such
amount of BRI shares acquired by such Stockholder pursuant to this Agreement
having a fair market value (measured at the time such BRI shares are returned or
cancelled) equal to the indemnification obligation of such Stockholder.
(b) The BRI Partnership's Indemnity. In the event the
parties proceed to Closing, BRI agrees to indemnify and hold the Stockholder
harmless against and with respect to (i) any loss or damage (including
reasonable attorney's fees) to the Stockholder, subsequent to the Closing Date,
resulting from (A) any inaccuracy in or breach of any representation or warranty
of BRI or (B) resulting from any breach or default by BRI of any obligation of
BRI under this Agreement or (ii) from liabilities of the Management Company
accruing after the Closing (including liabilities accruing after the Closing in
connection with employee benefit plans) (except for such liabilities resulting
from a breach or default by the Stockholder or the Management Company for which
BRI is indemnified under Section 9(a) above); provided that BRI shall not be
required to indemnify any Stockholder under Section 9(b)(i) for any amounts in
excess of 50% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI shares received by such Stockholder (except
for indemnification obligations with respect to Section 4.10 which shall be
limited to 100% of the fair market value as of the date such indemnification
obligation is satisfied of the BRI shares received by such Stockholder; and
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(c) The indemnification obligations of the
Stockholders and BRI, respectively, with respect to any representation or
warranty, shall be limited to claims made prior to the last date of survival
thereof set forth in Section 14. No such claim for indemnification shall be
deemed due and payable unless such claim has been agreed to by the parties or
has been finally determined by a final, non-appealable judicial decision.
(d) The amount of the indemnifying party's liability
under this Agreement shall be determined taking into account any applicable
insurance proceeds actually received by, and other savings that actually reduce
the impact of losses upon, the indemnified party.
(e) Neither BRI nor any of the Stockholders shall
have any liability for claims made under Section 9(a) or 9(b) unless and until
the aggregate amount of all losses incurred exceeds $50,000 (in which case the
indemnifying party shall be liable for the portion of losses exceeding $50,000).
(f) The indemnification provided in this Section 9
shall be the sole and exclusive remedy after the Closing Date for damages
available to BRI or the Stockholders for a breach of any of the terms,
conditions, representations or warranties contained herein, and each party
acknowledges and agrees that other than the representations and warranties set
forth herein, no other representations and warranties are being made with
respect to BRI or the Management Company.
(g) Each of the Stockholders, the Management Company
and BRI acknowledge and agree that, unless otherwise agreed to in writing by all
the parties, from and after the Closing, each of the parties hereto will be
deemed to have waived any right to seek indemnification hereunder from the other
party for any breach or default of a representation, warranty or obligation
hereunder by such other party to the extent that the party seeking
indemnification had actual knowledge of such breach or default by such other
party on or prior to Closing.
(h) Promptly after receipt by any party hereto of
notice of the commencement of any action to which any party is entitled to
indemnification under this Section 9, such party shall use its best efforts to
notify each other party hereto in writing of the commencement of such action. In
case any such action is brought, the Stockholders shall be entitled, but shall
not be required, to participate in the defense thereof, or the Stockholders may
elect to take charge of and control the defense of such action, provided that
the stockholders shall agree to pursue the defense of such action or claim in
good faith by appropriate actions or proceedings promptly taken or instituted
and diligently pursued.
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10. Post-Closing Agreements
Intentionally omitted.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall
terminate at 5:00 p.m., Boston time, on October 31, 1997, if the transactions
contemplated hereby have not been consummated, unless such date is extended by
the written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement
may be terminated by the mutual written agreement of the Parties. In the event
of such termination by agreement, BRI shall have no further obligation or
liability to the Management Company and the Stockholders under this Agreement,
and the Management Company and the Stockholders shall have no further obligation
or liability to BRI under this Agreement.
11.3 Management Company's or Stockholders' Default. If as of
the Closing Date, the Management Company or the Stockholders have failed to
perform all of their respective material obligations under this Agreement, the
Management Company and the Stockholders shall be in default under this
Agreement, and BRI shall be entitled to terminate this Agreement by written
notice given to the Management Company and the Stockholders within seven days
after the Closing Date, and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if BRI
desires to consummate the Merger in accordance with the terms of this Agreement
and the Management Company or the Stockholders willfully refuse to perform their
respective obligations hereunder, BRI, at its option, shall have the right to
compel specific performance by the Management Company and the Stockholders to
close the transaction hereunder, in which event BRI shall have the right to
recover from the Management Company and the Stockholders the amount of all
reasonable legal fees, court costs and other litigation expenses incurred by BRI
in connection with the exercise of its right of specific performance.
11.4 BRI's Default. If as of the Closing Date, BRI has failed
to perform all of its material obligations under this Agreement, BRI shall be in
default under this Agreement, and the Management Company shall be entitled to
terminate this Agreement by written notice given to BRI within seven days after
the Closing Date, and thereafter this Agreement shall be void and without
recourse to any party hereunder except for provisions which are expressly stated
to survive termination of this Agreement. In addition to the foregoing, if the
Management Company desires to consummate the Merger in accordance with the terms
of this Agreement and BRI
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willfully refuses to perform its obligations hereunder, the Management Company,
at its option, shall have the right to compel specific performance by BRI to
close the transaction, in which event the Management Company (and the
Stockholders) shall have the right to recover from BRI the amount of all
reasonable legal fees, court costs and other litigation expenses incurred in
connection with the exercise of their right of specific performance.
11.5 Public Offering Condition. BRI has informed the
Management Company and the Shareholders that in connection with the consummation
of the various Related Transactions (as defined in Section 11.6 hereof), BRI
intends to undertake either or both of (i) a public offering of common stock or
other equity securities of BRI (the "Public Offering"), or (ii) a private
placement of common stock or other equity securities of BRI (the "Private
Placement"). The Management Company and the Shareholders shall supply any
documentation and additional information required by BRI in order to complete
the offering materials in connection with the Public Offering or the Private
Placement. The obligation of BRI to proceed with the Closing of the transactions
contemplated by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising a minimum of
$75,000,000.00. If the Public Placement and the Private Placement do not in the
aggregate complete offerings which raise a minimum of $75,000,000 as aforesaid
prior to the Closing Date hereunder, BRI shall have the right to terminate this
Agreement effective as of the Closing Date, and, thereafter this Agreement shall
be void and without recourse to all parties except for provisions which are
expressly stated to survive termination of this Agreement.
11.6 Related Agreements. Simultaneously herewith, BRI and
affiliates of BRI have entered into with various parties various agreements,
including this Agreement, for the conveyance of partnership interests or
property interests or other assets and for the making of certain secured loans,
which agreements are more particularly described on Exhibit 4 attached hereto
(collectively the "Related Agreements"). (The transactions described in the
Related Agreements, including this Agreement, are collectively the "Related
Transactions"). Except to the extent the parties expressly agree otherwise in
writing or in that certain Kickout Agreement [as such term is defined in the
Related Agreements] (the "Kickout Agreement"), in the event that any of the
Related Agreements is terminated pursuant to any termination provision of any
other Related Agreement or does not become effective due to the failure of all
of the other parties to the Related Agreement to execute the Related Agreement
on or before September 22, 1997, unless such date is extended by the written
consent of all of the parties hereto, this Agreement shall terminate
automatically simultaneously with the termination of any such Related Agreement
or upon the failure of all of the other parties to the Related Agreement to
execute the Related Agreement on or before September 22, 1997, unless such date
is extended by the written consent of all of the parties hereto, whereupon this
Agreement shall be void and without recourse to all parties, except for
provisions which are expressly
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stated to survive the termination of this Agreement. The Closing under this
Agreement shall be simultaneous with the closings under the Related Agreements.
Except as provided in the Kickout Agreement, in the event the closing under any
of the Related Agreements is cancelled or postponed, the Closing under this
Agreement shall be cancelled or postponed.
12. Brokers/Allocation of Expenses/Apportionments
12.1 Brokers. The Parties mutually represent and warrant that
none of them has retained a broker, finder or similar agent who might have a
claim or right to claim a commission or fee in connection with this transaction.
The Management Company understands that American Property Consultants ("APC")
had entered into a fee arrangement with Questar Properties, Inc. ("QPI"), which
might not apply to this transaction in any event. Nevertheless, to the extent
that it is determined that a commission or fee is owed to APC, it shall be the
obligation of the Stockholders and QPI in accordance with the provisions of
Section 12.3 hereof. In no event shall any commission be due unless and until
Closing has occurred and the transactions contemplated hereby have been
consummated and in no event shall BRI or the Management Company have any
obligation to pay any commission to APC.
21.2 Allocation of Transaction Costs. Each Stockholder hereby
acknowledges and agrees that a portion of the amount due to such Stockholder
will be used to pay the fees and expenses attributable to the transaction
contemplated by this Agreement, which fees and expenses are the several
obligations of the Stockholder pursuant to the terms of this Agreement. Each
Stockholder and the Management Company hereby agrees that the fees and expenses
attributable to this transaction will be divided into two categories: (i) those
fees which can be specifically allocated to the Management Company due to said
fees solely benefiting it ("Direct Costs") and (ii) those fees which cannot be
so allocated ("Indirect Costs"). Notwithstanding anything to the contrary
contained herein, for the purposes of this Section 12.2, each of the
Stockholders hereby agrees that: (i) QPI shall be entitled to an aggregate
administrative fee of $200,000 in connection with the concurrent contribution of
up to eighteen (18) properties and the management companies, as described in the
PPM by certain transferor partnerships and related entities (collectively, the
"Related Entities"), which shall be Indirect Costs (ii) to the extent it is
determined that APC is due any fee as described in Section 12.1 hereof, up to
$1,000,000 of such fee (which may be paid at Closing or held back in an escrow
account by Questar Investment Corporation until such time as the amount of such
fee, if any, is determined) shall be included as Indirect Costs, with any such
fee in excess of $1,000,000 to APC being the sole responsibility of QPI; and
(iii) all legal and accounting fees of counsel and advisors to Questar
Investment Corporation shall also be Indirect Costs. Each of the Stockholders
acknowledges and agrees that (i) any and all Direct Costs shall be allocated to
each of them with respect to their interest in the Management Company and (ii)
any and all Indirect Costs shall be allocated among
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the Stockholders and Related Entities at Closing based on the pro rata number of
BRI shares allocated at Closing to each of them. Each of the Stockholders
further acknowledges and agrees that Questar Investment Corporation shall be
authorized to determine the allocations of the transaction costs and expenses to
be allocated in accordance with the provisions of this Section 12.2.
12.3 Apportionments. The following apportionments shall be
made between the parties on the Closing Date as of the close of the business day
prior to the Closing Date and the net amount of such prorations and
apportionments shall be settled in cash:
(a) prepaid and collected fees received under any of
the Contracts;
(b) wages and pension benefits of all persons
employed by the Management Company;
(c) charges or prepayments under the Contracts; and
(d) all other income and expenses relating to the
Management Company.
If as of the Closing Date, any items of income or expense attributable
to the Management Company are not known or available, the parties agree to
equitably apportion such items, so long as the same are identified within 90
days after the Closing.
At least five (5) days prior to the Closing Date, the Shareholders and
BRI shall prepare and exchange preliminary calculations of all adjustments and
prorations to be made pursuant to this Section 12.3. The Stockholders and BRI
shall cooperate in the furnishing of all information and documentation necessary
to prepare such calculations.
All cash shall be used by the Management Company to pay all amounts
payable by the Management Company and any excess, together with all Excluded
Assets, shall be distributed to the Shareholders prior to Closing, and if any of
such excess cash applicable to pre-closing periods is not removed from the
Management Company prior to Closing, BRI shall hold such cash as agent for the
Shareholders, and refund such cash to the Shareholders subsequent to Closing.
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13. Notices
All notices under this Agreement shall be in writing and shall
be delivered personally, sent by telecopier with original by first class mail,
sent by Federal Express or other reputable overnight delivery service, or sent
by prepaid registered or certified mail, return receipt requested, addressed as
follows (or to such address as the Management Company, the Stockholders or BRI
shall otherwise have given notice as herein provided):
If to BRI: Berkshire Realty Company, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxx
Telecopier No. 000-000-0000
With a copy to: Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
Telecopier No. 617-526-5000
If to the Management c/o Questar Properties, Inc.
Company or the 000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx: Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx X. Xxxx
Telecopier No. 000-000-0000
With a copy to: Xxxxx X. Xxxxxx, Esq.
Lenrow, Xxxx, Xxxxxx & Xxxxxx
Seven Xx. Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxx, XX 00000-0000
Telecopier No. 000-000-0000
With a copy to: Xxxxxx Xxxxxxxxx, Esq.
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Telecopier No. 000-000-0000
Notices shall be deemed effective, if delivered by hand, when so
delivered; if sent by telecopier with original by first class mail, when so
delivered by telecopier; if sent by overnight delivery service, one business day
after deposited with such delivery service; or, if mailed, one business day
after the date deposited with the U.S. Postal Service.
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14. Survival. The representations, warranties, covenants and other
obligations set forth in Sections 3.2, 4.10, and 9 (subject to the provisions of
9(c)) shall survive the Closing indefinitely and an action based thereon may be
brought at any time after the Closing Date. Representations and warranties in
Sections 2.10, 4.7 and 4.9 shall survive until thirty (30) days after the
expiration of the applicable statute of limitations. Except as set forth in the
immediately preceding sentence or otherwise as specified in this Agreement, the
representations, warranties, covenants and other obligations of the Management
Company and the Stockholders set forth in Sections 2 (other than Section 2.10)
and 3 (other than Section 3.2) and the representations and warranties, covenants
and other obligations of BRI contained in Section 4 (other than Sections 4.7,
4.9 and 4.10) shall survive until 12 months after the Closing Date and
thereafter during the pendency of any claim based upon a breach thereof, and no
action based thereon shall be commenced more than 12 months after the Closing
Date. Except as otherwise specifically provided in this Agreement, no other
representations, warranties, covenants or other obligations of the Management
Company, the Stockholders or BRI set forth in this Agreement shall survive the
Closing, and no action based thereon shall be commenced after Closing.
15. Assignment. No Party may assign all or any portion of its
interest under this Agreement without the prior written consent of the other
Parties.
16. Integration. This Agreement embodies and constitutes the entire
understanding between the parties with respect to the transactions contemplated
herein, and all prior agreements, understandings, representations and
statements, oral or written, are merged into this Agreement. Neither this
Agreement nor any provision hereof may be waived, modified, amended, discharged
or terminated except by an instrument signed by the party against whom the
enforcement of such waiver, modification, amendment, discharge or termination is
sought, and then only to the extent set forth in such instrument.
17. Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of Delaware.
18. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
19. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns. In no event shall the Stockholders have the right to assign
or transfer their right to receive BRI Shares.
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20. Drafts. This Agreement shall not be binding or effective until
properly executed and delivered by the Parties. The delivery by BRI to the
Stockholders and the Management Company of an executed counterpart of this
Agreement shall constitute an offer which may be accepted by the delivery to BRI
of a duly executed counterpart of this Agreement and the satisfaction of all
conditions under which such offer is made, but such offer may be revoked by BRI
by written notice given at any time prior to such acceptance and satisfaction.
21. Number and Gender. As used in this Agreement, the masculine shall
include the feminine and neuter, the singular shall include the plural and the
plural shall include the singular, as the context may require.
22. Headings; Schedules; Exhibits. The headings of the various Sections
of this Agreement have been inserted solely for purposes of convenience, are not
part of this Agreement and shall not be deemed in any manner to modify, explain,
expand or restrict any of the provisions of this Agreement. All references to
Sections or paragraphs herein shall be to the specified Section or paragraph of
this Agreement, unless stated to the contrary, and all references to Schedules
and Exhibits shall be to the specified Schedules and Exhibits annexed hereto.
All Schedules and Exhibits annexed hereto are made a part hereof. All terms
defined herein shall have the same meanings in the Schedules and Exhibits,
except as otherwise provided therein. All references in this Agreement shall be
deemed to include the Schedules and Exhibits.
23. Publicity. In no event shall any Party issue any press release or
otherwise communicate to any third party any information regarding this
Agreement or the transactions contemplated hereby unless the other Parties have
consented thereto and to the form and substance of any such statement,
announcement or release; provided, however, that nothing herein shall be deemed
to limit or impair in any way any Party's ability to disclose the details of the
transactions contemplated hereby to the accountants, attorneys or other
authorized agents of such Party or as such Party deems necessary or desirable
pursuant to any court or governmental order or applicable securities regulations
or financial reporting requirements, nor shall BRI be precluded from describing
this Agreement and the transactions herein contemplated in any filings made
pursuant to any securities laws or in connection with the Public Offering, or
from filing this Agreement, the Exhibits hereto and the Schedules as exhibits to
any filings by BRI required by any securities laws. Notwithstanding the
foregoing, no Party hereunder shall have any liability by reason of the details
of the transactions contemplated hereby becoming known by means beyond the
reasonable control of such Party. The provisions of this Section 24 shall
survive the Closing.
24. Counterparts. This Agreement may be executed and delivered
in any number of counterparts and such counterparts taken together shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
MANAGEMENT COMPANY:
WITNESS: THE QUESTAR MANAGEMENT COMPANY
By: /s/ Xxxxxxx X. Xxxx
-------------------------- ----------------------------------------
Name:
Title:
WITNESS: STOCKHOLDERS:
By: /s/ Xxxxxx Xxxx
-------------------------- ----------------------------------------
Xxxxxx Xxxx
By: /s/ Xxxxxxx X. Xxxx
-------------------------- ----------------------------------------
Xxxxxxx X. Xxxx
By: /s/ Xxxx X. Xxxxxx
-------------------------- ----------------------------------------
Xxxx X. Xxxxxx
WITNESS: BERKSHIRE REALTY COMPANY, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------- ----------------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
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List of Exhibits
Exhibit 1 Management Fees
Exhibit 2 Designated Properties
Exhibit 3 Company Opinion
Exhibit 0 Xxxxx Xxxxxx Lease
Exhibit 5 BRI Opinion
Exhibit 6 Registration Rights Agreement
