DEVELOPMENT ACQUISITION AGREEMENT
THIS DEVELOPMENT ACQUISITION AGREEMENT (this "Agreement") is made and
entered into this ________ day of ____________________, 1997, by and among
QUESTAR PROPERTIES, INC. (the "Developer"), Xxxxxxx X. Xxxx, Xxxx X. Xxxxxx and
BRI OP LIMITED PARTNERSHIP, a limited partnership ("BRI OP").
BACKGROUND
Developer is a Maryland corporation engaged in the business of land
development and the construction of multifamily apartment projects. Xxxxxxx X.
Xxxx and Xxxx X. Xxxxxx are principal shareholders of the Developer.
BRI OP is a Delaware limited partnership engaged in the ownership and
operation of multifamily apartment projects. Berkshire Realty Company, Inc.
("Berkshire"), a publicly traded real estate investment trust, is a limited
partner in BRI OP.
BRI OP desires to engage Developer to identify and acquire sites in the
Mid-Atlantic region of the United States for multifamily apartment projects and
to develop and construct multifamily apartment projects on the sites, and
Developer desires to accept such engagement.
NOW, THEREFORE, in consideration of the foregoing, and other good
and valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the Developer and BRI OP covenant and agree as follows:
1. Engagement of Developer. BRI OP hereby engages Developer and
Developer hereby accepts such engagement to be BRI OP's exclusive
developer/builder in connection with the identification, development and
acquisition of multifamily apartment development sites in the Mid-Atlantic
Region (i.e. Pennsylvania, Delaware, Maryland, Washington, D.C. and Virginia) of
the United States (each a "New Development Site") and the engineering, design
and construction of multifamily apartment projects of between 100 and 1,000
units (each a "New Development Project") on the New Development Sites.
1.1. BRI OP agrees, subject to the terms of this Agreement, that
its engagement of Developer shall be exclusive for the Term (as hereinafter
defined) of this Agreement and that, accordingly, during the Term of this
Agreement:
a. if BRI OP, Berkshire or any of its other affiliates is
presented by a third party with any site in the Mid-Atlantic Region for the
construction of a multifamily apartment project, BRI
OP will advise Developer of such opportunity and allow Developer to negotiate
for the acquisition of the site as a New Development Site in accordance with
this Agreement;
b. except as provided in this Agreement, if BRI OP, Berkshire or
any of its other affiliates is or becomes the owner of any New Development Site
in the Mid-Atlantic Region for the construction of a Multifamily Apartment
Project, BRI OP will engage Developer to design and construct a Multifamily
Apartment Project on the New Development Site in accordance with this Agreement;
and
c. except as provided in this Agreement, BRI OP will not engage
any other person or entity to acquire, develop or construct New Development
Sites or New Development Projects in the Mid-Atlantic Region nor will it, on its
own behalf, or through Berkshire or any of its other affiliates, acquire,
develop or construct New Development Sites or New Development Projects in the
Mid-Atlantic Region.
1.2. Developer agrees that its engagement with BRI OP shall be
exclusive for the Term of this Agreement and that, accordingly, during the Term
of this Agreement:
a. Developer, on its own behalf and on behalf of all of its
affiliates (as defined in Section 7.11) shall acquire New Development Sites and
construct New Development Projects only in the Mid-Atlantic Region and neither
Developer, on its own behalf or on behalf of any other person or entity or of
any of its affiliates, shall acquire any New Development Site in any location in
the United States (other than the Mid-Atlantic Region) nor develop or construct
any New Development Project in any location in the United States (other than the
Mid-Atlantic Region);
b. except as provided in this Agreement, Developer and all of its
affiliates, shall acquire, develop and construct New Development Sites and New
Development Projects in the Mid-Atlantic Region solely for BRI OP, or its
affiliates and for no other person or party;
c. except as provided in this Agreement, neither Developer, on
its own behalf, nor any of its affiliates shall agree with any other person or
entity, other than BRI OP or its affiliates to acquire, develop or construct any
New Development Site or New Development Project in the Mid-Atlantic Region nor
will Developer, on its own behalf, nor will any affiliate of Developer, acquire,
develop or construct New Development Sites or New Development Projects for its
own account in the Mid-Atlantic Region.
d. Developer agrees that it will first present to BRI OP all
opportunities for New Development Sites of which Developer or any of its
affiliates (as defined in Section 7.11) becomes aware in accordance with the
provisions of Section 3 hereof prior to presenting such opportunities to any
other person or entity.
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1.3. Except as provided in this Agreement, Xxxxxxx X. Xxxx and
Xxxx X. Xxxxxx agree that during the Term of this Agreement, they will not,
directly or indirectly, as an individual, proprietor, partner stockholder,
officer, employee, director, joint venturer, investor, lender, consultant, or as
any other capacity whatsoever, acquire, develop or construct (or participate in
the formation of a business which does any of the same and/or assist any other
person in doing any of the same) any New Development Site or New Development
Project for any person or party, including themselves, other than BRI OP and its
affiliates except to the extent that the Developer is expressly permitted to do
so under the terms of this Agreement. The foregoing sentence shall not, however,
be construed to (a) prohibit Xxxxxxx X. Xxxx and/or Xxxx X. Xxxxxx from holding
an ownership interest in an entity, whether as a partner, stockholder, investor
or otherwise, in which he or they do not exercise or have the power to exercise
managerial control, do not own 50% or more of the economic interests in a
privately owned entity or 10% or more of the economic interests in a publicly
traded entity and for which they perform no services for which they are paid,
nor (b) apply to any of the properties that are the subject of the Related
Agreements or the subject of those certain Development Contribution Agreements
by and between affiliates of the Developer and BRI OP.
1.4. The provisions of this Section 1 shall not apply to the
acquisition, development or construction of sites for the development of
for-sale housing, including, but not limited to single family, townhouse and
garden condominium projects and such sites shall not be deemed "New Development
Sites".
2. Term.
2.1. The term of this Agreement (the "Term") shall commence on
that date on which closing occurs under those certain agreements by and among
Developer and/or its affiliates and/or entities in which affiliates of Developer
are partners and BRI OP and/or its affiliates, as identified on Exhibit A hereto
(the "Related Agreements"), and shall expire on the fifth anniversary of such
date (the "Termination Date"). Notwithstanding the foregoing, if, after the Term
of this Agreement commences, both of the Termination Events (as hereinafter
defined) occur, then either party, by written notice to the other party, may
terminate this Agreement, in which event (a) the Termination Date shall be
deemed to have occurred upon receipt of such notice by the other party and the
Term of this Agreement shall expire on such Termination Date, (b) neither party
hereto shall have any further rights or obligations hereunder (except as
otherwise provided in Section 2.3), and (c) the Employment Agreements between
BRI OP and Xxxxxxx X. Xxxx and Xxxx X. Xxxxxx and the Consulting Agreement
between BRI OP and Xxxxxx Xxxx shall terminate. The Termination Events shall
consist of (1) closing occurring under both of the Development Contribution
Agreements between BRI OP and Ironhorse Associates, L.L.C. ("Ironhorse") or if
closing does not occur under one or both of such Development Contribution
Agreements, such Development Contribution Agreement(s) as to which closing does
not occur having terminated for any reason (other than a default by the party
giving notice of termination), and (2) pursuant to Section 3.2, BRI OP having
determined on a
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preliminary basis that the Threshold Conditions have not been satisfied with
respect to four consecutive New Development Sites presented by Developer.
2.2. If closing under such Related Agreements has not occurred by
October 31, 1997, (such date being subject to further extension by mutual
written agreement of both parties) then this Agreement shall automatically
terminate and neither party hereto shall have any further rights or obligations
hereunder.
2.3. Notwithstanding the occurrence of the Termination Date, (a)
this Agreement shall continue in effect as to any New Development Site acquired
by Developer or BRI OP prior to the Termination Date or placed under contract to
be acquired by Developer or BRI OP prior to the Termination Date, and (b)
termination upon the Termination Date however shall not affect the rights and
obligations of the parties hereto under any separate agreement including, but
not limited to, a Project Development Agreement (as hereinafter defined) or a
Tri Party Agreement (as hereinafter defined) hereafter entered into pursuant to
the provisions of this Agreement, which rights and obligations shall continue in
full force and effect.
3. Acquisition of New Development Sites.
3.1. BRI OP agrees to purchase on an annual basis from or through
Developer New Development Sites, to the extent available, which can accommodate
an aggregate minimum of 500 apartment units in New Development Projects which
satisfy the following conditions (the "Threshold Conditions"):
a. Each New Development Site shall have potential for development
of a New Development Project of no less than 100 and no more than 1,000
apartment units.
b. Each New Development Site shall be located in the Mid-Atlantic
Region.
c. Each New Development Site shall have potential for development
of a 100% market rental New Development Project, with no rent controls or rent
subsidies.
d. BRI OP shall have conducted and approved, in its reasonable
discretion, all due diligence inspections necessary to determine that an
adequate market for the New Development Project exists and that the proposed New
Development Project is appropriate for the market.
e. BRI OP shall have no obligation to purchase and/or develop a
New Development Site unless the development costs (i.e. (i) hard development
costs, (ii) soft development costs, including interest and third party
professional costs, (iii) Land Acquisition Costs (as hereinafter defined), and
(iv) a G.C. Development Fee of 7% of the costs listed in (i) through (iii)
payable to Developer) reasonably projected by Developer and reasonably agreed to
by BRI OP (the "Projected Total Development Cost") to develop the New
Development Project are equal or less
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than the Target Development Cost. The Target Development Cost is equal to
Stabilized NOI (as hereinafter defined) divided by the New Development Cap Rate
(as hereinafter defined).
(i) Stabilized NOI is the net operating income at 93% occupancy
reasonably projected by Developer for the New Development Project and reasonably
agreed to by BRI OP for the 12-month period of operations of the New Development
Project commencing on the first month after 90% of the units in the New
Development Project have been leased for a period of 3 months.
(ii) Operating expenses used in determining net operating income
shall consist of the following: the customary and reasonable operating expenses
of the Property, including, but not limited to, expenses for insurance, on-site
employees, utilities, lawn care, ordinary maintenance and repair, real estate
taxes, a management fee of 5%, advertising and leasing, interior painting and
redecorating, and general and administrative, but not including depreciation or
capital expenses.
(iii) The New Development Cap Rate is the greater of (x) 10.0% or
(y) the sum of the BRI OP Blended Cost of Capital (as hereinafter defined) plus
100 basis points.
(iv) The BRI OP Blended Cost of Capital is the sum of (x) the BRI
OP Equity Rate (as hereinafter defined) multiplied by 0.6, plus (y) the BRI OP
Debt Rate (as hereinafter defined) multiplied by 0.4.
(v) The BRI OP Equity Rate is calculated as follows: (x) the BRI
OP Budgeted FFO (i.e. funds from operations as determined in accordance with the
NAREIT standards), as established by BRI OP (for the calendar year in which the
development and construction of the New Development Site is to commence) divided
by (y) the share price of the Common Stock of Berkshire at the time of analysis
divided by (z) the BRI OP Offering Cost Percentage (as hereinafter defined).
(vi) The BRI OP Offering Cost Percentage is the quotient of the
total offering costs incurred by Berkshire in its 1997 public offering of Common
Stock divided by the total dollars raised by Berkshire in connection with the
public offering.
(vii) The BRI OP Debt Rate is the permanent debt rate available
at the time of the analysis to qualified borrowers for a mortgage loan by the
Federal National Mortgage Association under its Tier IV loan guidelines.
(viii) An example of the calculation of the BRI OP Blended Cost
of Capital is attached as Exhibit B.
3.2. Developer shall make a formal, preliminary presentation to
BRI OP of the proposed New Development Site. BRI OP shall determine, on a
preliminary basis, whether all
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Threshold Conditions have been satisfied within 15 days of formal preliminary
presentation by Developer. If BRI OP determines that the Threshold Conditions
are not satisfied, then notwithstanding the provisions of Section 1, Developer
shall be free to acquire the New Development Site and develop it free of all
exclusive and non-competition agreements contained in this Agreement and in any
of the Related Agreements or in any other documents executed in connection
therewith or pursuant thereto, including, but not limited to any Employment
Agreement or Consulting Agreement between BRI OP and any of Xxxxxx Xxxx, Xxxxxxx
X. Xxxx or Xxxx X. Xxxxxx; provided, that if Developer so elects to acquire and
begins development of a multifamily apartment project on any such New
Development Site which BRI OP has not approved (a "Non-Approved New Development
Site"), for each Non-Approved New Development Site in number which Developer
acquires and begins development, notwithstanding the provisions of Section 1,
BRI OP shall be permitted to acquire and/or develop with other BRI OP personnel
or with any third party an equal number of multifamily apartment projects in the
Mid-Atlantic Region, free of all exclusive and non-competition agreements
contained in this Agreement and in any Related Agreement. If, based on the
preliminary presentation, BRI OP determines that the Threshold Conditions are
satisfied, then BRI OP shall proceed to acquire the New Development Site as
provided under Section 3.3. All determinations by BRI OP shall be made by
written notice to Developer, and the specific reasons for any determination
shall be set forth in the notice.
3.3. Each New Development Site to be acquired by BRI OP shall
either be owned by Developer (or an affiliate of Developer that is either a
general partnership, limited partnership, or limited liability company) or, at
the option of Developer, under a binding purchase agreement between Developer
and a third-party seller. Closing on the acquisition of the New Development Site
shall occur either (a) within 60 days after BRI OP determines, on a preliminary
basis, that the Threshold Conditions have been satisfied if Developer or an
affiliate of Developer owns the New Development Site or (b) if the New
Development Site is under a binding purchase agreement, then on the date
required for closing under the binding purchase agreement. At Closing, as
applicable, either Developer shall convey the New Development Site to BRI OP, or
at the option of BRI OP, assign all of the partnership interests or limited
liability company interests in the entity owning the New Development Site to BRI
OP. If Developer owns the New Development Site, the land purchase price payable
by BRI OP shall be equal to the total price paid by Developer (including all
closing costs) at the time it acquired the New Development Site (i.e., a sale
"at cost"). If the New Development Site is under a binding purchase agreement,
the Developer shall assign the existing purchase agreement and the third-party
seller shall convey the New Development Site directly to BRI OP, in which event
the land purchase price shall be equal to the price set forth in the existing
purchase agreement (in either case, the "Land Purchase Price"). In addition,
regardless of the method by which BRI OP acquires the New Development Site, at
Closing, BRI shall pay to Developer an acquisition fee equal to 7% of the Land
Purchase Price (the "Land Acquisition Fee"). Regardless of the method by which
BRI OP acquires the New Development Site, all closing costs not borne by a
third-party seller, including, but not limited to, title insurance premiums,
survey costs and all transfer recordation, documentary
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stamp and other taxes imposed on the conveyance, shall be paid by BRI OP. The
Land Purchase Price, such closing costs and the Land Acquisition Fee are
referred to collectively as the "Land Acquisition Costs."
4. Development and Construction.
4.1. Within 30 days after closing by BRI OP on the New
Development Site, Developer and BRI OP shall agree upon a projected timetable
and schedule of responsibilities for obtaining the information and performing
such studies and analyses as are necessary to determine, on a final basis,
whether the Threshold Conditions are satisfied.
4.2. Within 6 months after Closing by BRI OP on the New
Development Site, Developer shall make a formal, final presentation to BRI OP of
the New Development Project. BRI OP shall determine, on a final basis, whether
all Threshold Conditions for development of the New Development Project upon the
New Development Site are satisfied within 15 days of formal, final presentation
by Developer. At the time that BRI OP makes such decision, BRI OP shall elect
one of the following options to proceed after acquisition: (a) promptly begin
development of the New Development Site with Developer as provided in Section
4.3, or (b) if and only if, in BRI OP's reasonable judgment, the capital markets
do not currently make available sufficient capital for the New Development
Project, but the New Development Site represents an attractive site for future
development of a New Development Project when capital market conditions improve,
hold the New Development Site for future development in accordance with Section
5 below, or (c) if, based upon the final, formal presentation of Developer, BRI
OP has determined that the Threshold Conditions for development of the New
Development Site have not been met, hold and/or dispose of the New Development
Site in accordance with Section 5 below. Once a final determination is made to
proceed with development under Section 4.3, BRI OP shall be obligated to proceed
with the development and construction of the New Development Project unless, in
BRI OP's reasonable judgment, a material adverse change occurs in the capital
markets which makes the capital contemplated for the New Development Project
unavailable, in which case, BRI OP shall immediately notify Developer, and the
provisions of Section 5 below shall apply. All determinations by BRI OP shall be
made by written notice to Developer, and the specific reasons for any
determination shall be set forth in the notice.
4.3. If development of the New Development Site is to proceed,
then, within 30 days after the final determination that the Threshold Conditions
have been satisfied, BRI OP and Developer, or an affiliate of Developer
designated by Developer, shall enter into a development agreement for the
development of a New Development Project on the New Development Site acquired by
BRI OP (a "Project Development Agreement"). Under the terms of the Project
Development Agreement, the parties shall agree, among other terms:
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a. Developer shall be solely responsible to develop the New
Development Project, including without limitation, Developer shall (i) engage
the project architect and engineer to design the project, (ii) obtain all
governmental permits and approvals, (iii) engage and supervise all contractors
and suppliers (which may include affiliates of Developer), (iv) obtain the
construction loan financing, (v) clear, grade and develop the New Development
Site, and (vi) construct the New Development Project substantially in accordance
with the plans and specifications. Berkshire Property Management, at the sole
cost and expense of BRI OP shall be responsible for lease-up during and after
construction and property management of buildings following their completion and
as they are placed in service.
b. With respect to construction financing, BRI OP shall not have
any liability or obligation for payment or performance under the construction
loan; it being agreed that the Developer shall be the borrower under the
construction loan and Xxxxxxx X. Xxxx and Xxxx X. Xxxxxx shall provide all
recourse guaranties and/or credit enhancement if required by the construction
lender; however, BRI OP shall agree to grant an accommodation first mortgage of
the New Development Site to the construction lender to secure the construction
loan. In consideration thereof, Xxxxxxx X. Xxxx and Xxxx X. Xxxxxx
("Guarantors") shall provide BRI OP with a recourse indemnity which shall
provide that if the construction lender forecloses the mortgage due to a failure
of the Developer to perform its obligations under the Project Development
Agreement, then the Guarantors shall pay to BRI OP a sum equal to the Land
Acquisition Cost paid by BRI OP for the New Development Site. Until the Payment
Date, Developer shall be responsible to pay for all costs of construction (hard
and soft costs) and to satisfy all requirements of the construction lender
(whether monetary or otherwise).
c. On the Payment Date, the amount to be paid by BRI OP to
Developer for the New Development Project (the "Development Purchase Price")
shall be equal to the lesser of (i) the actual development costs (i.e. (x) hard
costs, (y) soft costs and (z) a G.C. Development Fee of 7% of the costs listed
in (a) and (b) above) or (ii) a guaranteed maximum price (as specified and
agreed to in the Project Development Agreement). All such sums shall be paid in
full on the Payment Date, without deduction, escrow or set off. On the Payment
Date, Developer shall be obligated to pay-off the construction loan in full and
to cause release of all deeds of trust, mortgages and other liens on the New
Development Project being held by the Lender.
d. The payment of the Development Purchase Price by BRI OP to the
Developer on the New Development Project shall occur (such date of payment being
called the "Payment Date") upon the first business day of the first month after
the last to occur of (a) the substantial completion of construction of the New
Development Project, excluding punch-list items not affecting occupancy
(provided Developer shall thereafter complete all punch-list items at no expense
to BRI OP) (the "Completion Date") as evidenced by satisfaction of each of the
following conditions (the "Closing Conditions"): (i) final certificates of
occupancy issued by the appropriate governmental authority, and (ii) a
certificate of substantial completion issued by Developer or such affiliate of
Developer as Developer may designate to be the general contractor
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for construction of the Improvements ("Questar Builders") certifying that the
Improvements have been substantially completed in accordance with the plans and
specifications for the New Development Project, as such may be modified from
time to time by Developer, in accordance with the provisions of the Project
Development Agreement. The issuance of final lien waivers by Questar Builders
and subcontractors covering at least 95% of the construction cost shall be a
condition precedent to payment of the Development Purchase Price. If a dispute
shall exist as to whether substantial completion has occurred, the dispute shall
be promptly submitted to binding arbitration by a qualified third party mutually
acceptable to the parties or, if they are unable to agree upon a third party,
then by arbitrators appointed pursuant to the applicable rules of the American
Arbitration Association. The status of occupancy of the New Development Project
by rent-paying tenants and the rents generated by such occupancy by such
occupancy shall not be conditions to Closing.
e. The Developer or any affiliate of Developer that enters into a
Project Development Agreement shall also have the right to collaterally assign
its interests under a Project Development Agreement to a construction lender
providing construction financing to the Developer for the New Development
Project (the "Lender"). If Developer so assigns the Project Development
Agreement, then BRI OP agrees to enter into an agreement with the Lender (the
"Tri Party Agreement") providing that: (a) BRI OP agrees to provide the Lender
with reasonable notice and opportunity to cure any default by Developer
thereunder; (b) BRI OP agrees not to modify or amend the Project Development
Agreement without the prior written consent of Lender, (c) BRI OP, at the
written request of Lender upon a default under the loan, will pay the
Development Purchase Price or such lesser amount as is required to satisfy the
loan directly to Lender provided that all conditions to payment of the
Development Purchase Price provided in the Project Development Agreement have
been satisfied; (d) BRI OP will permit Lender to perform any obligations of
Developer thereunder and will agree to recognize Lender as the Developer
thereunder should Lender succeed to the interest of Developer, provided,
however, that, in such event, Lender's liability under the Project Development
Agreement shall be limited to its interest in the New Development Site; and
further provided that (e) BRI OP will have no liability for payment of the
Lender's loan or the performance of any obligations under any of the loan
documents other than the Tri-Party Agreement.
f. The parties shall negotiate in good faith to agree upon the
terms of the Project Development Agreement within the 30 day period after the
final determination that the Threshold Conditions have been satisfied as
provided in the introductory paragraph of this Section 4.3. If a dispute exists
as to the terms, the parties shall endeavor in good faith to resolve such
dispute within such 30 day period, but if the dispute cannot be resolved, then
such failure to agree shall be deemed a decision by BRI OP under Section 4.2(c)
that the Threshold Conditions have not been satisfied and the provisions of
Section 5 of this Agreement shall be applicable.
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5. BRI OP Hold. If BRI OP opts not to promptly develop the New
Development Project as provided in paragraph 4.2(b) or to hold and/or dispose of
the New Development Site as provided in paragraph 4.2.c., then the following
provisions shall apply:
5.1. BRI OP shall not be permitted to sell the New Development
Site to any third party (other than an affiliate) or to develop the New
Development Project with any third party developer or for its own account for a
period of 24 months after the closing by BRI OP on the acquisition of the New
Development Site (the "Exclusivity Period") without the prior consent of
Developer; provided, however, that if BRI OP elected to hold and/or dispose of
the New Development Site under paragraph 4.2.c. or if BRI OP is deemed to have
so elected under paragraph 4.3.f., then the Exclusivity Period shall be reduced
to 3 months. If the New Development Site is owned by or transferred or sold to
an affiliate of BRI OP, then the provisions of this Section 5 shall continue to
apply.
5.2. At the end of the Exclusivity Period, if BRI OP has not
subsequently determined that the Threshold Conditions are satisfied and
proceeded to commence development with Developer under the provisions of Section
4.3, Developer shall have 120 days from the later of (i) the end of the
Exclusivity Period, or (ii) the date on which Developer receives written notice
from BRI OP of the expiration date of the Exclusivity Period, within which to
elect, by written notice to BRI OP, to purchase the New Development Site from
BRI OP for a purchase price equal to the Land Acquisition Costs. If Developer
purchases the New Development Site, it shall not be subject to any of the
exclusivity or non-competition agreements contained in this Agreement, the
Related Agreements or in any other documents executed in connection therewith or
pursuant thereto, including, but not limited to, any Employment Agreement or
Consulting Agreement between BRI OP and any of Xxxxxx Xxxx, Xxxxxxx X. Xxxx or
Xxxx X. Xxxxxx. All closing costs, including, but not limited to, all transfer,
recordation, documentary stamp and other taxes imposed on the conveyance shall
be paid by Developer. Closing on the acquisition of the New Development Site by
Developer shall occur within 90 days after Developer's written election. At
Closing, BRI OP shall convey good and marketable title to the New Development
Site to Developer or an affiliate of Developer. Developer may elect, in lieu of
a conveyance of the New Development Site to Developer, to require BRI OP to
convey to Developer good and marketable title to 100% of the partnership or
membership interests in the entity owning the New Development Site.
5.3. If Developer does not elect to purchase the New Development
Site, then, upon the expiration of the Developer's 120 day election period, (i)
BRI OP shall pay Developer an additional land acquisition fee (the "Second Land
Acquisition Fee") in the amount of 7% of the Land Price, (ii) Developer shall
have no further rights to acquire the New Development Site, and (iii) BRI OP
shall be free to either (a) continue to hold the New Development Site, (b) sell
the New Development Site to any third party or (c) decide in the future to
develop the New Development Site with Developer. If within three years
thereafter, Developer enters into a Project Development Agreement to develop the
New Development Site for BRI OP, then
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Developer shall give a credit to BRI OP against the Development Purchase Price
of the New Development Project equal to one-half of the Second Land Acquisition
Fee.
Section 6. Default. If either party defaults in performing any of
its obligations hereunder, then the other party shall be entitled to exercise
any or all remedies as may be available at law or in equity on account thereof,
including, but not limited to, an action for specific performance, an action for
injunctive relief or an action for money damages. In any litigation between the
parties, the prevailing party shall be entitled to reimbursement by the
non-prevailing party for all court costs and reasonable attorneys' fees. The
restrictions contained in Section 1.2 and 1.3 of this Agreement are necessary
for the protection of the business and goodwill of BRI OP and its affiliates and
are considered by the Developer and Messrs. Gorn and Xxxxxx to be reasonable for
such purpose. The Developer and Messrs. Gorn and Xxxxxx agree that any breach of
Section 1.2 or 1.3 of this Agreement is likely to cause BRI OP and its
affiliates substantial and irrevocable damage and therefore, in the event of any
such breach, the Developer and Messrs. Gorn and Xxxxxx agree that BRI OP, in
addition to such other remedies which may be available, shall be entitled to
specific performance and other injunctive relief.
Section 7. Miscellaneous.
7.1. Assignment. Except as hereinafter provided, this Agreement
may not be assigned by either party hereto. BRI OP shall have the right to
designate an affiliate to accept title to a New Development Site, but shall
remain fully liable for the performance of all of its obligations hereunder
notwithstanding such designation. Developer may designate an affiliate of
Developer to acquire title to a New Development Site and/or to enter into a
Project Development Agreement, such designated affiliate alone being responsible
for the performance of all of the obligations hereunder with respect to the New
Development Site or for the performance of the obligations under the Project
Development Agreement.
7.2. Integration. This Agreement embodies and constitutes the
entire understanding between the parties with respect to the transactions
contemplated herein, and all prior agreements, understandings, representations
and statements, oral or written, including, but not limited to, the agreements
contained in the letter of intent dated May 5, 1997, as amended to date, are
merged into this Agreement. Neither this Agreement nor any provision hereof may
be waived, modified, amended, discharged or terminated except by an instrument
signed by the party against whom the enforcement of such waiver, modification,
amendment, discharge or termination is sought, and then only to the extent set
forth in such instrument.
7.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Maryland. Developer and
BRI OP consent to the personal jurisdiction of the federal and state courts of
the State of Maryland and agree that service of process may be made upon each of
them by certified mail, return receipt requested or in any other manner
permitted by law.
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7.4. Captions. The captions in this Agreement are inserted for
convenience of reference only and in no way define, describe or limit the scope
or intent of this Agreement or any of the provisions hereof.
7.5. Successors and Assigns. Subject to the provisions of this
Agreement, the terms, covenants, agreements, conditions, representations and
warranties contained in this Agreement shall inure to the benefit of and shall
be enforceable by the parties hereto and their respective successors and
permitted assigns.
7.6. Drafts. This Agreement shall not be binding or effective
until properly executed and delivered by both the Developer and BRI OP.
7.7. Number and Gender. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall include the plural and
the plural shall include the singular, as the context may require.
7.8. Headings; Schedules; Exhibits. The headings of the various
Sections of this Agreement have been inserted solely for purposes of
convenience, are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement. All references to Sections or paragraphs herein shall be to the
specified Section or paragraph of this Agreement, unless stated to the contrary,
and all references to Schedules and Exhibits shall be to the specified Schedules
and Exhibits annexed hereto. All Schedules and Exhibits annexed hereto are made
a part hereof. All terms defined herein shall have the same meanings in the
Schedules and Exhibits, except as otherwise provided therein. All references in
this Agreement shall be deemed to include the Schedules and Exhibits.
7.9. Publicity. In no event shall either the Developer or the BRI
OP issue any press release or otherwise communicate to any third party any
information regarding this Agreement or the transactions contemplated hereby
unless the other party has consented thereto and to the form and substance of
any such statement, announcement or release; provided, however, that nothing
herein shall be deemed to limit or impair in any way any party's ability to
disclose the details of the transactions contemplated hereby to the accountants,
attorneys or other authorized agents of such party or as such party deems
necessary or desirable pursuant to any court or governmental order or applicable
securities regulations or financial reporting requirements, nor shall BRI OP or
Berkshire be precluded from describing this Agreement and the transactions
herein contemplated in any filings made pursuant to any securities laws or in
connection with the Public Offering, or from filing this Agreement, the Exhibits
hereto and the Schedules as exhibits to any filings by the BRI OP or Berkshire
required by any securities laws. Notwithstanding the foregoing, no party
hereunder shall have any liability by reason of the details of the transactions
contemplated hereby becoming known by means beyond the reasonable control of
such party. The provisions of this Section 7.9 shall survive any closing on a
New Development Site or New Development Project.
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7.10. Force Majeure. Each party is excused from performing any
act required under this Agreement (except for payment of money) while delayed or
prevented by a cause not within its reasonable control, such as a strike,
lockout, or other labor dispute, insurrection, riot, mob violence, or other
civil commotion, sabotage, inability to obtain labor, material, equipment or
utility services in the open market, failure of transportation, water, sewer or
other utility or building permit moratorium, road construction moratorium, or
other governmental action (including enforcement of requirements of any adequate
public facilities ordinance) condemnation, adverse weather, fire or other
casualty event, or other act of God (each of which is called a "Force Majeure
Event"). Time periods and dates in this Agreement are extended to account for
the delay or prevention caused by the Force Majeure Event.
7.11. Affiliates. For purposes hereof, an "affiliate" of a party
shall be deemed to include any person or entity controlling, controlled by, or
under common control with such party. Berkshire shall be deemed an affiliate of
BRI OP, and Xxxxxx Xxxx, Xxxxxxx X. Xxxx and Xxxx X. Xxxxxx and any entities
controlled by them shall be deemed affiliates of Developer.
7.12. Interpretation. If any restriction set forth in Sections
1.1, 1.2 or 1.3 is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted
to extend only over the maximum period of time, range of activities or
geographic area as to which it may be enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under their respective hands and seals as of the day and year first
above written.
WITNESS: DEVELOPER
________________________________ QUESTAR PROPERTIES, INC.
By:________________________________
Name:
Title:
--------------------------------
Xxxxxxx X. Xxxx
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--------------------------------
Xxxx X. Xxxxxx
BRI OP LIMITED PARTNERSHIP
By: BRI OP Apartments, Inc.
General Partner
____________________________ By: _________________________
Name:
Title:
- BRI OP -
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EXHIBIT A
---------
- List of Related Agreements -
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EXHIBIT B
---------
- Example of BRI OP Blended Cost of Capital -
Blended Cost of Capital = (BRI OP Equity Rate x .6) + (BRI OP Debt Rate x .4)
BRI OP Equity Rate = BRI OP Budgeted FFO/ Share Price/ OP Offering Cost
Percentage
BRI OP Debt Rate = Permanent Debt Rate FNMA Tier IV Loan
If the following assumptions are used, then the calculation is as follows:
Budgeted FFO = $1.14
Share Price = $11.25
FNMA Tier IV = 7.5%
Offering Cost Percentage = 1-.07 = .93%
BRI OP Equity Rate = (1.14/11.25) / .93 = 10.896%
BRI OP Debt Rate = 7.5%
Blended Cost of Capital = (10.896% x .6) 6.537% + (7.5% x .4) 3.00% = 9.537%
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