Exhibit 10.7
RIGHT OF FIRST REFUSAL AGREEMENT
This Right of First Refusal Agreement is made as of ______________, 1996 by
and between Apple Residential Income Trust, Inc. ("Apple") and Cornerstone
Realty Income Trust, Inc. ("Cornerstone"), and provides:
RECITALS
A. Apple is a Virginia corporation which intends to elect tax treatment as a
"real estate investment trust," and to engage in the business of the
acquisition and ownership of apartment properties in Texas and other areas.
B. Cornerstone is a real estate investment trust engaged in the acquisition,
ownership and management of apartment properties in the mid-Atlantic and
southeastern regions of the United States.
C. Apple Residential Advisors, Inc. ("ARA") and Apple Residential Management
Group, Inc. ("ARM") have agreed to provide to Apple certain company
administration and property management services under contracts between
them and Apple. Cornerstone will own certain stock in ARA and ARM and has
agreed to make certain of its personnel available to assist ARA and ARM in
providing their company administration and property management services to
Apple.
D. Apple and Cornerstone desire to enter into a further agreement under which
Apple will grant to Cornerstone a "right of first refusal" to acquire
certain properties or assets of Apple at such time or times as Apple
proposes to sell or otherwise dispose of such properties or assets, all on
the terms set forth herein.
NOW THEREFORE, in consideration of the matters referred to in the foregoing
Recitals, and other good and valuable consideration, the receipt and sufficiency
of which are acknowledged, the parties agree as follows:
1. Right of First Refusal.
(a) At such time as Apple proposes the sale or other disposition of one or more
properties owned by it or proposes the sale or other disposition by Apple
of substantially all of its assets, stock or business, whether in a single
transaction or in a series of transactions, and whether such transaction is
structured as a sale, exchange, merger, consolidation, lease, share
exchange or otherwise, it shall first offer
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Cornerstone the right to acquire such property or properties or to become
the acquiring property in any such proposed transaction before concluding
the proposed sale, disposition or transaction with any third party.
(b) If the third party offers cash for the property, assets, stock or business
of Apple, Cornerstone must offer cash if it wishes to exercise its right of
first refusal. If the third party offers property other than cash,
Cornerstone will be permitted to offer property of a similar character with
the same value. The value of the property offered by the third party and
Cornerstone will be the market value if the property has a readily
ascertainable market value (such as listed stock), and otherwise will be
determined in good faith by agreement of the boards of directors of Apple
and Cornerstone, or if such boards are unable to agree, by the average of
two appraisals undertaken by two qualified independent appraisers, one
selected by each board of directors.
2. Procedures for Exercise.
(a) Apple shall give Cornerstone written notice (the "Transaction Notice") of
any proposed transaction within the scope of this Agreement (a
"Transaction") not later than 30 days before the closing date set for the
proposed Transaction. Such notice shall set forth in reasonable detail the
subject of the proposed Transaction, including without limitation the
property or other assets proposed to be sold or otherwise disposed of, the
consideration for which such property or other assets are proposed to be
sold or disposed of, the identity of the proposed purchaser or acquiring
party, and all other information which has been disclosed or is proposed to
be disclosed by Apple to the third party in the proposed Transaction. By
notice (the "Exercise Notice") delivered to Apple within 15 days after
receipt of the Transaction Notice, Cornerstone may elect to exercise its
right of first refusal by stating in its Exercise Notice to Apple that it
will acquire the property or other assets described in the Transaction
Notice. The Exercise Notice from Cornerstone shall, if the consideration to
be paid by it is other than cash, include a description of the property
proposed to be provided by Cornerstone as the purchase or acquisition
price.
(b) Should Cornerstone fail to elect by notice sent in compliance with this
Agreement to exercise its right of first refusal, then for not more than 60
days following the expiration of the period for exercise of the right of
first refusal, Apple may conclude the proposed sale or other disposition to
the third party on terms not materially different from those set forth in
the Transaction Notice.
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After the expiration of such 60-day period, the right of first refusal
provided for in this Agreement shall again apply.
3. Liquidated Damages for Breach.
(a) Should Apple default in any obligation to grant to Cornerstone a right of
first refusal to acquire a property or properties or to become the
acquiring property in any proposed transaction as required under this
Agreement, Apple agrees that it shall be obligated to pay to Cornerstone as
liquidated and agreed-upon damages cash in the amount of 3% of the
aggregate consideration agreed to be paid for the property, assets, stock
or business by any third party in the transaction with respect to which
there is a breach.
(b) Apple agrees and acknowledges that it would be impossible to quantify the
damages that would be suffered by Cornerstone in the event of a breach by
Apple of its obligations to grant to Cornerstone a right of first refusal
hereunder, that the agreed-upon liquidated damages set forth herein are
reasonable and a good faith estimate of the minimum damages that
Cornerstone might be expected to suffer as a result of any such breach, and
that it has agreed to pay such liquidated damages in consideration of the
matters referred to in the Recitals and other good and valuable
consideration given by Cornerstone to Apple, including Cornerstone's
execution of this Agreement.
4. Miscellaneous.
This Agreement shall be construed in accordance with and in all respects
governed by the laws of the Commonwealth of Virginia.
WITNESS the following the signatures.
APPLE RESIDENTIAL INCOME TRUST, INC.
By: _____________________________
Title: __________________________
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CORNERSTONE REALTY INCOME TRUST, INC.
By: _____________________________
Title: __________________________
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