LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the 25th day of August,
1997 by and between BRI OP LIMITED PARTNERSHIP, a Delaware limited partnership
("Lender") and GGC, L.L.C., a Maryland limited liability company ("Borrower").
RECITALS
WHEREAS, Borrower has requested that Lender make a loan (the "Loan") to be
secured by a pledge of certain partnership interests of Borrower; and
WHEREAS, Lender has agreed to make the Loan to Borrower subject to an in
accordance with the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. As used herein, the following definitions shall apply:
"Berkshire Offering Cost Percentage" shall have the meaning given to that
term in Section 2.02.
"BRI" shall mean Berkshire Realty Company, Inc., a Delaware corporation.
"BRI OP Cost of Equity" shall have the meaning given to that term in Section
2.02.
"Closing Date" shall mean the date of closing under the Related Agreements.
"Collateral" shall mean the Partnership Units and other security to be
pledged to Lender under the Pledge Agreement as security for the Loan pursuant
to Section 2.05 hereof.
"Common Stock" shall have the meaning given to such term in Section 3.01(c).
"Financing Statements" shall mean UCC-1 Financing Statements with respect to
Lender's security interests under the Pledge Agreement.
"Guarantors" shall mean Xxxxxx Xxxx, Xxxxxxx X. Xxxx and Xxxx X. Xxxxxx.
"Guaranty" shall mean a Guaranty in the form attached hereto as Schedule 5 to
be made by the Guarantors to secure the Loan.
"Loan" shall have the meaning given to such term in the Recitals.
"Loan to Value Ratio" shall have the meaning given to such term in Section
2.05 hereof.
"Note" shall mean a Promissory Note in the original principal amount of the
Loan, in the form attached hereto as Schedule 2.
"Offering Price" shall have the meaning given to such term in Section 2.07
hereof.
"Partnership Agreement" shall mean that certain Amended and Restated
Agreement of Limited Partnership of Lender dated May 1, 1995, as it may be
amended from time to time.
"Partnership Unit" shall mean a unit of limited partnership interests in
Lender under the Partnership Agreement.
"Pledge Agreement" shall mean a Pledge Agreement of the Guarantors' interests
in certain Partnership Units and other security, in the form attached hereto as
Schedule 3.
"Private Placement" shall have the meaning given to such term in Section
3.01(b) hereof.
"Projected 1998 Funds from Operation Per Share of Berkshire Common Stock"
shall mean $1.17/per share.
"Public Offering" shall have the meaning given to such term in Section
3.01(6) hereof.
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"Related Agreements" shall have the meaning given to such term in Section
3.01(c).
"Related Transactions" shall have the meaning given to such term in Section
3.01(c).
"Semi-Annual Loan Review Date" shall have the meaning given to that term in
Section 2.06 hereof.
ARTICLE II
LOAN
2.01 Loan. By and subject to the terms of this Agreement, Lender agrees to
lend and Borrower agrees to borrow on the Closing Date the principal sum of
SEVEN MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($7,500,000.00) or such
lesser amount as Borrower, in its sole discretion may elect at Closing (but once
a lesser amount is elected, no subsequent increase will be allowed), subject to
the limitation described in Section 2.06 below.
2.02 Interest Rate. The Interest Rate shall be equal to the BRI OP Cost of
Equity. The BRI OP Cost of Equity shall be computed as follows: (i) Projected
1998 Funds From Operation Per Share of Berkshire Common Stock divided by (ii)
the initial offering price per Share of Berkshire Common Stock pursuant to the
Public Offering divided by (iii) a decimal equal to one (1) minus the Berkshire
Offering Cost Percentage, where the Berkshire Offering Cost Percentage is the
quotient of the total offering cost incurred by Berkshire divided by the total
dollars raised by Berkshire in connection with the Public Offering. An example
of the computation of the BRI OP Cost of Equity is attached hereto as Schedule
1.
2.03 Payment. Interest only on the outstanding principal balance of the Loan
shall be payable monthly in arrears. Principal may be paid at any time in whole
or in part without penalty. A mandatory payment of one half of the original
principal balance of the Loan shall be due thirty-six (36) months from the date
of Closing.
2.04 Maturity. All principal and any unpaid interest shall be due on the
fifth anniversary of the date of Closing.
2.05 Security. The Loan shall be secured by the Guaranty and a pledge by the
Guarantors of a sufficient amount of the Partnership Units or Common Stock such
that the amount of the Loan does not exceed eighty percent (80%) of the value of
Partnership Units or Common Stock pledged as security for the Loan on either (a)
the Closing Date or (b) to the extent provided in Section 2.06, any Semi-Annual
Loan Review Date. The value of the Partnership
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Units and Common Stock shall be determined in accordance with the provisions of
Section 2.07 hereof.
2.06 Release of Security. On a semi-annual basis, commencing on the date
which is six months after the Closing (each such date being referred to herein
as a "Semi-Annual Loan Review Date"), the number of pledged Partnership Units or
shares of Common Stock or other collateral held by Lender pursuant to Section
5(a) or 5(c) of the Pledge Agreement shall be reduced to reflect the decrease,
if any, in the outstanding principal balance of the Loan, provided that no such
reduction shall be made to the extent that it would cause the outstanding
principal balance of the Loan on any such Semi-Annual Review Date to be less
than eighty percent (80%) of the value of the Partnership Units or Common Stock
or other collateral held by Lender pursuant to Section 5(a) or 5(c) of the
Pledge Agreement which would remain pledged as security for the Loan on such
date (as such value is determined in accordance with the provisions of Section
2.07(b) hereof).
2.07 Calculation of Loan to Value Ratio.
(a) For purposes of establishing the value of Partnership Units on the
Closing Date, the value of each Partnership Unit shall be the offering price per
share ("Offering Price"), rounded to the nearest one-thousandth, of one share of
Common Stock of BRI as such price is established at the closing of the Public
Offering. If such calculation provided would result in the pledge of a
fractional Partnership Unit under Section 2.05 hereof, the required number of
Partnership Units to be pledged shall be rounded up or down, as the case may be,
to the nearest whole number of Partnership Units.
(b) For purposes of establishing the value of Partnership Units and
Common Stock on each Semi-Annual Loan Review Date, the value of each Partnership
Unit or share of Common Stock shall be the average price per share during the
ten (10) day period immediately preceding the applicable Semi-Annual Loan Review
Date, rounded to the nearest one-thousandth, of one share of Common Stock of
BRI. If such calculation would result in the release of a fractional Partnership
Unit under Section 2.06 hereof, the required number of Partnership Units or
shares of Common Stock (if any) to be released shall be rounded up or down, as
the case may be, to the nearest whole number of Partnership Units or shares of
Common Stock.
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ARTICLE III
CONDITIONS PRECEDENT
3.01 Lender's Conditions Precedent. Lender shall not be obligated to make any
disbursement hereunder or to take any other action under the Loan Documents
unless all of the following conditions precedent are satisfied at the time of
such action:
(a) Delivery of Loan Documents. Borrower and the Guarantors have
delivered to Lender each of the following loan documents (the "Loan
Documents"):
(i) The Promissory Note;
(ii) The Pledge Agreement;
(iii) The Financing Statements for each filing office required to
perfect Lender's security interest in the Collateral;
(iv) The Guaranty; and
(v) Such other documents, certificates and instruments as Lender
may reasonably require in connection with the Loan.
(b) Public Offering. Lender has informed Borrower that in connection
with the consummation of the various Related Transactions, Lender
intends to undertake either or both of (i) a public offering (the
"Public Offering") of common stock or other equity securities of
Lender (the "Common Stock"), or (ii) a private placement of Common
Stock (the "Private Placement"). Borrower shall supply any
documentation and additional information reasonably required by
Lender in order to complete the offering materials in connection
with the Public Offering or the Private Placement. The obligation of
Lender to proceed with the closing of the transactions contemplated
by this Agreement is expressly conditioned upon the successful
completion of the Public Offering and the Private Placement raising
a minimum of $75,000,000.00 dollars. If the Public Offering and
Private Placement do not in the aggregate complete offerings which
raise a minimum of $75,000,000.00 as aforesaid prior to the Closing
Date hereunder, Lender shall have the right to terminate this
Agreement effective
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as of the Closing Date hereunder, and, thereafter this Agreement
shall be void and without recourse to all parties except for
provisions which are expressly stated to survive termination of this
Agreement.
(c) Related Agreements. Simultaneously herewith, Lender has entered into
certain agreements, more particularly described on Schedule 4
attached hereto (collectively the "Related Agreements"). (The
transactions described in the Related Agreements, including this
Agreement, are collectively referred to herein as the "Related
Transactions"). Except to the extent the parties expressly agree
otherwise in writing, in the event that any of the Related
Agreements is terminated pursuant to any termination provision of
any other Related Agreement, this Agreement shall terminate
automatically simultaneously with the termination of any such
Related Agreement, whereupon this Agreement shall be void and
without recourse to all parties, except for provisions which are
expressly stated to survive the termination of this Agreement. The
Closing under this Agreement shall be simultaneous with the closings
under the Related Agreements. Except as provided in the Kickout
Agreement (as such term is defined in the Related Agreements), in
the event the closing under any of the Related Agreements is
cancelled or postponed, the Closing under this Agreement shall be
cancelled or postponed.
(d) Opinion of Borrower's and Guarantors' Counsel. Lender shall have
received the favorable opinion of counsel to Borrower and the
Guarantors, or such other evidence as Lender may reasonably require
(i) that Borrower has been duly formed in accordance with Maryland
law and is validly existing and in good standing under such laws,
(ii) that the Loan Documents executed by Borrower have been duly
executed and delivered and constitute the valid, legal and binding
obligation of Borrower, enforceable in accordance with their terms,
subject only to bankruptcy laws and matters of equitable
jurisdiction, (iii) that the Guaranty, the Pledge Agreement and any
other Loan Documents executed by the Guarantors have been duly
executed and delivered and constitute the valid, legal and binding
obligation of the Guarantors, enforceable in accordance with their
terms, subject only to bankruptcy laws and matters of equitable
jurisdiction, (iv) that the Guarantors are all of the members of
Borrower, (v) that Lender has a valid, enforceable and perfected
security interest in the Collateral, (vi) that, to the best of such
counsel's knowledge, the execution, delivery and performance by the
Borrower and the Guarantors of the Loan Documents to which each is a
party do not conflict with, violate or breach any provision of the
organizational documents of Borrower or any agreement or indenture
by which either the Borrower or any of the Guarantors may be bound,
or any judgments or awards
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specifically naming the Borrower or any of the Guarantors or
specifically applicable to their respective property, (vii) that, to
the best of such counsel's knowledge, there is no action, suit or
proceeding, pending or threatened against the Borrower or any of the
Guarantors, which, if adversely determined, would impair the
validity or enforceability of the Loan Documents, and (viii) that
except for the filing of the Financing Statements with the
applicable filing offices, (and except as may be required in
connection with any Blue Sky or other securities laws, codes, rules
or regulations applicable to the issuance of the Collateral to the
Guarantors by Lender) no approval, consent, order or authorization
of or filing with any governmental authorities is required in
connection with the valid execution and delivery of the Loan
Documents by Borrower or the Guarantors.
(e) Reaffirmation. Borrower shall have delivered a certificate to Lender
reaffirming the representations and warranties of Borrower set forth
herein as of the Closing Date.
(f) BankBoston, N.A. and Mellon Bank, N.A. Approvals. If BankBoston,
N.A. and Mellon Bank, N.A. shall fail to deliver written approval of
the Loan prior to September 15, 1997, Lender and Borrower shall each
have the right to terminate this Agreement effective as of the
Closing Date hereunder, and thereafter this Agreement shall be void
and without recourse to all parties except for provisions which are
expressly stated to survive termination of this Agreement.
3.02 Borrower's Right To Termination. In the event that Lender shall fail to
make the Loan on or before the Closing Date for any reason other than a default
by Borrower hereunder or under any Related Agreement, Borrower shall have the
right to terminate this Agreement effective as of the Closing Date hereunder,
and thereafter this Agreement shall be void and without recourse to all parties
except for provisions which are expressly stated to survive termination of this
Agreement.
ARTICLE IV
BORROWER'S REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Borrower. Borrower hereby represents
and warrants to Lender that as of the date of this Agreement:
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(a) This Loan Agreement has been validly executed, is now binding on
Borrower and is in full force and effect, and that Borrower has faithfully
performed all of its obligations hereunder to the extent accrued as of the date
hereof;
(b) Borrower has been duly formed and is validly existing and in good
standing as a limited liability company under the laws of the State of Maryland
and has the right, power and lawful authority to enter into this Agreement and
the Loan Documents and to consummate the transactions contemplated hereby;
(c) Borrower has duly executed and delivered this Agreement, and all
necessary action has been taken by Borrower to authorize the execution and
delivery thereof, and of the other Loan Documents;
(d) The execution and performance of this Agreement and the consummation
of the transactions hereby contemplated will not result in any breach of, or
constitute a default under, any mortgage, lease, bank loan or credit agreement,
trust indenture, or other instrument to which Borrower is a party or by which
Borrower may be bound or affected; and
(e) There are no actions, suits or proceedings pending or threatened
against or affecting Borrower which may involve or affect the validity or
enforceability of this Agreement or any of the Loan Documents, at law or in
equity, and Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority which
may involve or affect the validity or enforceability of this Agreement or any of
the Loan Documents.
4.02 Representations and Warranties of Lender. Lender hereby represents and
warrants to Borrower as of the date of this Agreement:
(a) This Loan Agreement has been validly executed, is now binding on
Lender and is in full force and effect, and that Lender has faithfully performed
all of its obligations hereunder to the extent accrued as of the date hereof;
(b) Lender has been duly formed and is validly existing and in good
standing as a limited partnership under the laws of the State of Delaware and
has the right, power and lawful authority to enter into this Agreement and the
Loan Documents and to consummate the transactions contemplated hereby;
(c) Lender has duly executed and delivered this Agreement, and all
necessary action has been taken by Lender to authorize the execution and
delivery hereof and of the other Loan Documents, subject to satisfaction of the
condition precedent set forth in Section 3.01(f) hereof;
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(d) The execution and performance of this Agreement and the consummation
of the transactions hereby contemplated will not result in any breach of, or
constitute a default under, any mortgage, lease, bank loan or credit agreement,
trust, indenture or other instrument to which Lender is a party or by which
Lender may be bound or affected, subject to satisfaction of the condition
precedent set forth in Section 3.01(f) hereof; and
(e) There are no actions, suits or proceedings pending or threatened
against or affecting Lender which may involve or affect the validity or
enforceability of this Agreement or any of the Loan Documents, at law or in
equity, and Lender is not in default with respect to any order, writ,
injunction, decree or demand of any court or any governmental authority which
may involve or affect the validity or enforceability of this Agreement or any of
the Loan Documents.
ARTICLE V
COVENANTS OF BORROWER
5.01 Priority of Pledge. Borrower hereby covenants and agrees at all times to
keep the Collateral free from any attachments, encumbrances or other liens of
any kind or nature, whether any such liens or encumbrances be prior to or
subject and subordinate to the Pledge.
5.02 Restrictions on Transfers, Distributions and Borrowings. Borrower hereby
covenants and agrees not without the prior written approval of Lender in each
instance obtained to convey, assign, transfer, dispose of or encumber, or permit
the conveyance, assignment, transfer, disposal or encumbrance of, any part or
all of any legal or beneficial interest in the Collateral (subject to the
provisions of the Pledge Agreement) or in Borrower (provided, however, that any
member of Borrower may, without the prior approval of Lender, transfer any of
its membership interest in Borrower to any member of its immediate family).
ARTICLE VI
EVENTS OF DEFAULT
6.01 Events of Default. The occurrence of any of the following shall
constitute an Event of Default hereunder:
(a) Borrower shall fail to make any payment due to Lender under this
Agreement, the Note or any other Loan Document, and such failure remains uncured
ten (10) days after written notice from Lender, or Borrower shall fail to
perform any other obligation of Borrower under this Agreement, the Note or any
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other Loan Document, and such failure remains uncured thirty (30) days after
written notice from Lender;
(b) Any Guarantor shall fail to make any payment due to Lender under the
Guaranty or the Pledge Agreement, and such failure remains uncured ten (10) days
after written notice from Lender; or any Guarantor shall fail to perform any
other obligation of Guarantor under the Guaranty or the Pledge Agreement, and
such failure remains uncured thirty (30) days after written notice from Lender;
or
(c) any statement, representation or warranty made in this Agreement or
any other Loan Document or in any other instrument securing the Loan, shall
prove to be false, misleading or erroneous in any material respect.
ARTICLE VII
LENDER'S REMEDIES IN EVENT OF DEFAULT
7.01 Remedies. Upon the occurrence of any Event of Default, Lender may at any
time or times thereafter declare the unpaid principal of and accrued interest
and other charges on the Note to be immediately due and payable, whereupon the
same shall become due and payable without any notice or demand.
ARTICLE VIII
MISCELLANEOUS
8.01 Time of Essence. Time is of the essence of this Agreement and each of
the Loan Documents.
8.02 Further Assurances. At Lender's request and at Borrower's expense,
Borrower shall execute, acknowledge and deliver any other instruments and
perform any other acts necessary, desirable or proper (as reasonably determined
by Lender) to carry out the purposes of the Loan Documents or to perfect or
preserve any liens or security interests created by the Loan Documents.
8.03 No Third Parties Benefited. No person other than Lender and Borrower and
their permitted successors and assigns shall have any right of action under any
of the Loan Documents.
8.04 Authority to File Notices. Borrower irrevocably appoints and authorizes
Lender, as Borrower's attorney in fact which agency is coupled with an interest,
to execute and/or record in Lender's or Borrower's name any notices, instruments
or documents that Lender deems appropriate to protect or perfect Lender's
interest under any of the Loan Documents.
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8.05 Relationship of Parties. The relationship of Borrower and Lender under
the Loan Documents is, and shall at all times remain, solely that of Borrower
and Lender. Lender neither undertakes nor assumes any responsibility or duty to
Borrower or to any third party with respect to the Collateral, except as
expressly provided in the Loan Documents.
8.06 Attorneys' Fees; Enforcement. If any attorney is engaged by Lender to
enforce or defend any provision of this Agreement or any of the other Loan
Documents, or as a consequence of any Event of Default under the Loan Documents,
with or without the filing of any legal action or proceeding, Borrower shall pay
to Lender, immediately upon demand, the amount of all reasonable attorneys' fees
and costs incurred by Lender in connection therewith, together with interest
thereon from the date of such demand until paid at the rate of interest
applicable to the principal balance of the Note as specified therein.
8.07 Assignment. Borrower shall not assign Borrower's interest under any of
the Loan Documents, or in any monies due or to become due thereunder, without
Lender's prior written consent. Any assignment made without Lender's prior
written consent shall be void.
8.08 Integration; Interpretation. The Loan Documents contain or expressly
incorporate by reference the entire agreement of the parties with respect to the
matters contemplated herein and supersede all prior negotiations. Any reference
to the Loan Documents in any of the Loan Documents includes any amendments,
renewals or extensions approved by Lender. Any reference in this Agreement to
the Loan Documents shall include all or any of the provisions of the Agreement
and the Loan Documents unless otherwise specified.
8.09 Joint and Several Liability. The liability of all persons or entities
who are in any manner obligated under the Note or any other Loan Document shall
be joint and several.
8.10 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
8.11 Paragraph Headings. The paragraph headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
8.12 No Waiver; Cumulative Remedies. Lender shall not by any act (except by a
written instrument pursuant to Section 8.13 hereof), delay, indulgence, omission
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or otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of Lender, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which Lender would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
8.13 Waivers and Amendments; Successors and Assigns; Governing Law. None of
the terms or provisions of this Agreement may be waived, amended, supplemented
or otherwise modified except by a written instrument executed by the Lender and
Borrower, provided that any provision of this Agreement may be waived by Lender
in a letter or agreement executed by Lender or by facsimile transmission from
Lender. This Agreement shall be binding upon the successors and assigns of the
Borrower and shall inure to the benefit of Lender and its successors and
assigns. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland; provided, however, that any suit in
connection with any dispute arising out of or relating to this Agreement shall
be brought only in the federal and state courts of the Commonwealth of
Massachusetts. Borrower and Lender consent to the personal jurisdiction of the
federal and state courts of the Commonwealth of Massachusetts and agree that
service of process may be made upon each of them by certified mail, return
receipt requested or in any other manner permitted by law.
8.14 Notices. Whenever notice, demand or a request under this Agreement may
properly be given to Lender or Borrower, the same shall be in writing and shall
be (a) hand delivered to the party intended to receive the same, or (b) sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed to the parties at their respective addresses as set forth below:
If to Borrower:
GGC, L.L.C.
c/o Questar Properties, Inc.
000 Xxxxx Xxxxxx; Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxx
With a copy to:
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Xxxxx X. Xxxxxx, Esq.
Lenrow, Xxxx, Xxxxxx & Xxxxxx
Signet Tower, 0xx Xxxxx
Xxxxx Xx. Xxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
If to Lender:
BRI OP Limited Partnership
c/o Berkshire Realty Company, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Any party hereto may change its address for purposes of this Agreement by
notice to the other party given in accordance with the provisions of this
Section. Any notice, demand or request given in accordance with this Section
shall be treated as having been given when so delivered, or if mailed, when
deposited with the U.S. Postal Service.
8.15 Non-Recourse. Notwithstanding anything to the contrary contained herein,
in any action brought to enforce the obligation of any Borrower to pay the
indebtedness secured hereby, the judgment or decree shall be enforceable against
such Borrower only to the extent of its interest in the Collateral, and any such
judgment shall not be subject to execution on, nor be a lien on, any assets of
such Borrower other than Borrower's interest in the Collateral;
[This Space Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as a sealed instrument by their respective authorized officers as of
the day and year first above written.
GGC, L.L.C.
By: ________________________________________
Name:
Title: Authorized Member
LENDER:
BRI OP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Berkshire Apartments, Inc.,
its general partner
By: _______________________________
Name:
Title:
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SCHEDULES
Schedule Description
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1 Sample Calculation of BRI OP
Cost of Equity
2 Form of Promissory Note
3 Form of Pledge Agreement
4 Related Transactions
5 Form of Guaranty
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