EXCHANGE AGREEMENT

 

Exhibit 10.12                                                   Salem Ridge

 

                               EXCHANGE AGREEMENT

 

                                  by and among

 

                        BNP Residential Properties, Inc.,

 

                 BNP Residential Properties Limited Partnership,

 

                                       and

 

                            the Contributing Parties

 

                                  listed herein

 

                                   Dated as of

 

                                December 7, 2004

 

 

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                               EXCHANGE AGREEMENT

 

          This EXCHANGE AGREEMENT (the "Agreement") is made as of the 7th day of

December, 2004, by and among BNP Residential Properties, Inc., a Maryland

corporation (the "REIT"), BNP Residential Properties Limited Partnership, a

Delaware limited partnership ("BNP"), Salem Ridge/Shugart, LLC (the "Company"),

and Shugart Management, Inc. ("Contributor").

 

          WHEREAS, BNP is a Delaware limited partnership having the REIT as its

sole general partner, and the REIT has elected to be qualified as a real estate

investment trust under the Internal Revenue Code of 1986, as amended (the

"Code"); and

 

          WHEREAS, the Company owns certain real property located in

Winston-Salem, North Carolina; and

 

         WHEREAS, BNP desires to acquire from Contributor, and Contributor

desires to transfer to BNP, on the terms and conditions set forth herein, all

interests in the Company owned by Contributor as set forth in Schedule A and any

other direct or indirect equity interests Contributor may have, whether now

owned or hereinafter acquired, in the Company or the Property (as defined below

and described on Schedule B attached hereto) (a "Company Interest"); and

 

         WHEREAS, pursuant to the terms hereof, BNP and the Company desire to

combine their respective businesses subject to the terms, conditions, provisions

and limitations of this Agreement.

 

          NOW, THEREFORE, in consideration of the premises herein contained, and

other good and valuable consideration, the receipt and sufficiency of which is

hereby acknowledged, the parties hereto agree as follows:

 

                                    ARTICLE I

                                   DEFINITIONS

 

           The following capitalized terms shall have the following meanings for

all purposes of this Agreement and such meanings are equally applicable to the

singular and plural forms of the terms defined. The terms "hereof," "herein,"

"hereunder," and comparable terms refer to the entire agreement with respect to

which terms are used and not to any particular section, subsection, paragraph or

other subdivision thereof.

 

"Actual Knowledge" for the purposes of this Agreement shall mean information

which is known to an individual or, as to any entity, to the officers, general

partners or managers of such entity without the requirement of additional

inquiry unless such persons are aware of facts or circumstances which would lead

reasonable persons to make or conduct additional inquiry.

 

"Affiliate" means, as to any Person (as defined below), each of the Persons (i)

which directly or indirectly through one or more intermediaries controls, or is

controlled by, or is under common control with such Person; or (ii) which

beneficially owns or holds 10% or more of any class of the outstanding voting

stock (or in the case of a Person which is not a corporation, 10% or more of the

equity interest) of such Person; or (iii) 10% or more of any class of the

outstanding voting stock (or

 

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in the case of a Person which is not a corporation, 10% or more of the equity

interest) of which is beneficially owned or held by such Person. The term

"control" means the possession, directly or indirectly, of the power to direct

or cause the direction of the management and policies of a Person, whether by

ownership of voting stock, by contract, by close family relationships (i.e.,

parent, spouse, child or sibling) or otherwise.

 

"BNP Partnership Agreement" means the Second Amended and Restated Agreement of

Limited Partnership of BNP Residential Properties Limited Partnership dated

December 1, 1997, as amended through the date hereof, including the amendment to

issue additional Units to the Contributor, as well as other amendments from the

date hereof until the Closing made by BNP in the ordinary course of business.

 

"Company Financial Statements" means the periodic income statement and balance

sheets provided to BNP (including the schedules attached thereto) for the

Contributing Parties, and specifically excludes any forecasts and projections.

 

"Contributing Parties" means collectively Contributor and the Company, without

duplication.

 

"Environmental Law" means any and all federal, state and local laws,

regulations, ordinances and other requirements relating to pollution or

protection of the environment, including, without limitation, laws, regulations

and requirements relating to the ownership, possession, storage and control of

the Property and to emissions, discharges, releases or threatened releases of

storm water, pollutants, contaminants, toxic or hazardous substances, or solid

or hazardous wastes into the environment (including without limitation ambient

air, surface water, groundwater or land), or otherwise relating to the

manufacture, processing, distribution, use, treatment, storage, disposal,

transport or handling of pollutants, contaminants, toxic or hazardous

substances, or solid or hazardous wastes. The Environmental Laws include,

without limitation, the Comprehensive Environmental Response, Compensation and

Liability Act of 1980, as amended.

 

"Improvements" means all buildings, structures, streets, furnishings, parking

lots, landscaping, walls, ponds, culverts, fixtures, utilities, fences,

driveways, loading docks, security systems and other physical features

constructed or assembled on, at, upon or beneath the Property (whether finished

or unfinished).

 

"Indebtedness" means, without duplication, any obligations for borrowed money

and all obligations to trade creditors, whether heretofore, now or hereafter

owing, arising, due or payable to any Person and howsoever evidenced, created,

incurred, acquired or owing, whether primary, secondary, direct, contingent,

fixed or otherwise and whether matured or unmatured. Without in any way limiting

the generality of the foregoing, Indebtedness specifically includes the

following: (a) all obligations or liabilities of any Person that are secured by

any Lien, claim, encumbrance or security interest upon property; (b) all

obligations or liabilities created or arising under any capital lease of real or

personal property, or conditional sale or other title retention agreement with

respect to property, even though the rights and remedies of the lessor, seller

or lender thereunder are limited to repossession of such property; (c) all

unfunded pension fund, employee medical or welfare obligations and liabilities;

(d) deferred taxes; and (e) all obligations under any

 

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indemnification agreements, guaranty agreements, letters of credit or other

documents creating such contingent liabilities.

 

"Lien" means any interest in property securing an obligation owed to, or a claim

by, a person other than the owner of the property, whether such interest is

based on the common law, statute or contract, and including but not limited to

the lien or security interest arising from a mortgage, encumbrance, pledge,

security agreement, conditional sale or trust receipt or a lease consignment or

bailment for security purposes. The term Lien shall include reservations,

exceptions, defects of any kind or nature, encroachments, easements,

rights-of-way, covenants, conditions, restrictions, leases and other title

exceptions and encumbrances affecting property.

 

"Outstanding Company Debt Financing" means the Indebtedness of the Company as

described on Schedule 3.1(a)(i) attached hereto including any indemnifications

and guarantees related thereto, which maximum principal amount outstanding as of

the Closing Date shall not exceed Two Million Six Hundred Ten Thousand Dollars

($2,610,000). This stated maximum debt amount shall be comprised of principal

only, and shall not include assumption fees, if any, accrued but unpaid

interest, or any other charges or fees that may accrue in connection with the

assumption of the Outstanding Company Debt Financing, which amounts shall be

satisfied by the Company and/or the Contributor at or prior to Closing.

 

"Permitted Lien" means (i) liens for 2004 ad valorem taxes not yet due and

payable; (ii) restrictions, easements, covenants, reservations and rights of way

of record as do not detract from the value or interfere with the present use of

a parcel of property; (iii) zoning ordinances, restrictions and other

requirements imposed by governmental authority as do not detract from the value

or interfere with the present use of a parcel of property; and (iv) such

imperfections of title, liens and encumbrances, if any, as do not detract from

the value or interfere with the present use of a parcel of property and which do

not secure obligations for borrowed money or the deferred purchase price of

property.

 

"Person" means any individual, joint venture, corporation, company, voluntary

association, partnership, trust, joint stock company, unincorporated

organization, association, government, or any agency, instrumentality, or

political subdivision thereof, or any other form of entity.

 

"Property" shall mean the real property together with any Improvements thereon

and all tangible personal property (including, without limitation, books and

records, furniture, equipment and machinery), intangible assets (including,

without limitation, all guaranties, warranties, plans, specifications,

engineering drawings, non-proprietary software and databases, tenant lists,

marketing materials, signage (on-site and off-site), goodwill, transferable

licenses, permits, certificates of occupancy and other approvals, all

copyrights, logos, designs, trademarks and tradenames and all other intellectual

property), and rights, privileges and interests appurtenant thereto owned by the

Company as more particularly described on the Descriptive Property Exhibit

attached hereto at Schedule B.

 

"Unit" means a Common Partnership Unit as such term is defined in the BNP

Partnership Agreement.

 

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In addition, the terms set forth below shall have the meanings ascribed thereto

on the referenced pages.

 

Term                                             Page

 

 

Act..................................................20

Authorizations.......................................24

Blue Sky Laws........................................20

BNP Reports..........................................23

Claim................................................28

Closing...............................................6

Closing Date..........................................5

Closing Documents.....................................6

Code..................................................2

Contracts............................................16

Contribution Price....................................8

Contributor's Representative..........................9

Development Property.................................11

Environmental Assessments............................17

Existing Operating Agreements........................19

Indemnified Party....................................29

Indemnifying Party...................................29

Investigation Period.................................25

Leases...............................................15

Management and Leasing Agreements....................19

Other Properties.....................................24

Post-Closing Adjustment Period........................9

Records..............................................26

Registration Rights Agreement.........................6

Schedule of Leases...................................15

SEC..................................................12

Tax Claim............................................28

 

 

 

                                   ARTICLE II

                          THE TRANSACTIONS AND CLOSING

 

         2.1      General; Consideration. Subject to the terms, conditions,

provisions and limitations in this Agreement, on the date of the Closing (the

"Closing Date") the parties shall cause the transactions contemplated hereby to

be consummated, including, but not limited to:

 

                  (a) The contribution of the Contributor's Interests to BNP,

free and clear of Liens other than Permitted Liens, in exchange for that

aggregate number of Units determined by dividing the Contribution Price (as

determined under Article III herein) by 13.50 (each Unit having a value of

$13.50), with such Units being payable to Contributor on the Closing Date; and

 

                  (b) The termination of the operating agreement of the Company

so that the Company will be governed by the default provisions of the North

Carolina Limited Liability Company Act.

 

         2.2      Distribution on Units. For the first fiscal quarter of BNP

ending after the date of Closing, partnership distributions attributable to such

quarter payable by BNP to Contributor with respect to the Units issued hereby at

the Closing pursuant to Section 5.1 of the BNP Partnership Agreement shall be

prorated to take into account the period of time during such quarter that such

Units were outstanding. The distributions with respect to such Units for such

quarter shall equal that portion of a full quarterly distribution otherwise

attributable to Units outstanding for the entire quarter determined by

multiplying the amount of such full distribution by a fraction the numerator of

which is the number of days during such quarter that the Units issued hereby are

outstanding and the denominator of which is the number of days in such quarter.

In the event that the Contributor receives a full cash distribution for such

period, it shall reimburse BNP the prorated portion of such distribution within

five (5) days of receipt.

 

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         2.3      Market Price Fluctuation. EACH OF THE CONTRIBUTOR AND BNP

ACKNOWLEDGES AND AGREES THAT AFTER THE EXECUTION OF THIS AGREEMENT, THE MARKET

VALUE OF THE REIT COMMON STOCK WHICH IS CURRENTLY OUTSTANDING MAY INCREASE OR

DECREASE IN VALUE AS THE RESULT OF MARKET FLUCTUATIONS, AND THAT ANY SUCH

FLUCTUATIONS MAY AFFECT THE VALUE OF THE UNITS. NOTWITHSTANDING THESE

FLUCTUATIONS, BNP WILL NOT BE REQUIRED TO INCREASE THE NUMBER OF UNITS TO BE

ISSUED TO CONTRIBUTOR IN THE EVENT OF A DECREASE IN THE MARKET VALUE OF THE REIT

COMMON STOCK PRIOR TO THE CLOSING. LIKEWISE, CONTRIBUTOR WHOSE PURCHASE PRICE IS

BEING PAID IN UNITS WILL BE ENTITLED TO THAT NUMBER OF UNITS SET FORTH IN THIS

AGREEMENT NOTWITHSTANDING ANY INCREASE IN VALUE OF THE REIT COMMON STOCK PRIOR

TO THE CLOSING.

 

         2.4      Closing. The closing of the transactions contemplated by this

Agreement (the "Closing") shall take place at the offices of Alston & Bird LLP,

Raleigh, North Carolina or such other place as the parties may agree on or

before March 31, 2005.

 

         2.5      Documents to be Delivered at Closing by the Contributing

Parties.

 

         (a) At the Closing, Contributor shall deliver to BNP in addition to any

other documents mentioned elsewhere herein, the following (collectively, the

"Closing Documents"):

 

                           (i) A duly executed Assignment of Interest, which

         Assignment shall be in a form as attached at Schedule C and shall

         contain a warranty of title that Contributor owns Contributor's

         Interests free and clear of all encumbrances;

 

                           (ii) Any other documents reasonably necessary to

         assign, transfer and convey Contributor's Interests and effectuate the

         transactions contemplated hereby, including quit claim or limited

         warranty deeds for the Property;

 

                           (iii) A certified copy of all appropriate corporate,

         limited liability company or partnership actions authorizing the

         execution, delivery and performance by Contributor of this Agreement,

         the Closing Documents, and the Ancillary Documents;

 

                           (iv) The Registration Rights Agreement being entered

         into in connection with the transactions contemplated by this Agreement

         (the "Registration Rights Agreement") duly executed by Contributor; and

 

                           (v) An opinion from counsel for the Company and

         Contributor in form and content reasonably acceptable to BNP

         substantially to the effect that each of the Company and Contributor is

         duly organized, validly existing and in good standing under the laws of

         the state of its organization, has all applicable power and authority

         to enter into, deliver and perform this Agreement, the Closing

         Documents and the Ancillary Documents, the execution, delivery and

         performance of which Agreement, Closing Documents and Ancillary

         Documents, and the transactions contemplated hereby and thereby, do not

         and will not constitute a breach or a violation of the operating

         agreement or charter of the

 

 

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         Company or Contributor, as applicable; and that all applicable action

         necessary for the Company and Contributor to execute and deliver this

         Agreement, the Closing Documents and the Ancillary Documents has been

         taken and that the same have been validly executed and delivered and

         are the valid and binding obligations of the Company and Contributor

         enforceable against it, subject to creditors rights and other normal

         and customary exceptions, in accordance with their terms.

 

                  (b) At Closing, the Company shall deliver to BNP, in addition

to any other documents mentioned elsewhere herein, the following:

 

                           (i) Any affidavit required by the title company to

         remove the standard printed exceptions from the title policy and the

         loan policy other than exceptions relating to the Outstanding Company

         Debt Financing.

 

                           (ii) A certified copy of all appropriate limited

         liability company actions authorizing the execution, delivery and

         performance by the Company of this Agreement, the Closing Documents,

         and the Ancillary Documents.

 

                           (ii) Such other documents as may be reasonably

         required to close the transactions contemplated by this Agreement.

 

         2.6      Documents  Required to be  Delivered at Closing by BNP and the

REIT.  BNP and the REIT shall deliver to the Contributor at the Closing, the

following:

 

                  (i) A copy of the BNP Partnership Agreement duly certified by

         the REIT as true, complete and correct.

 

                  (ii) An amendment to the BNP Partnership Agreement, duly

         executed by the REIT and all other necessary parties, to evidence the

         issuance of the Units to the Contributor at the Closing pursuant to

         Section 2.1.

 

                  (iii) A settlement statement with respect to the Closing, duly

         executed by BNP.

 

                  (iv) The Registration Rights Agreement duly executed by the

         REIT.

 

                  (v) Such other documents and instruments as may be reasonably

         necessary to consummate the transactions with the Contributing Parties

         under this Agreement.

 

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                                   ARTICLE III

                       CONTRIBUTION PRICE AND ADJUSTMENTS

 

         3.1     Contribution Price. The contribution price ("Contribution

Price") for the Property shall be as follows:

 

                 (a) Closing Consideration. At the Closing, BNP shall issue the

number of Units determined pursuant to Section 2.1(a) herein having an aggregate

value of Four Million Three Hundred Sixty Thousand Dollars ($4,360,000), subject

to increase or decrease by the adjustments in Section 3.2 below, but less the

following amounts:

 

                          (i) the amount of the Outstanding Company Debt

                  Financing as of the Closing Date;

 

                          (ii) all accrued but unpaid interest under the

                  Outstanding Company Debt Financing as of the Closing Date; and

 

                           (iii) any charges or fees associated with property

                  transfer and documentary taxes and all other costs related to

                  the transfer of the Property (including fees, charges and

                  expenses associated with the assumption of the Outstanding

                  Company Debt Financing, all of which shall be paid by the

                  Contributing Parties and shall be a reduction in the

                  Contribution Price.

 

         3.2      Additional Closing Adjustments.

 

                  (a) Generally. All real estate taxes, charges and assessments

affecting the Property, all charges for water, sewer, electricity, gas and all

other utilities and operating expenses with respect to the Property, to the

extent not paid or payable by tenants under the Leases (as defined in Section

5.6 below), shall be apportioned on a per diem basis as of midnight on the date

immediately preceding the Closing. All such expenses for the period preceding

the Closing shall be deemed expenses of the Contributor and all such expenses

commencing as of the Closing with respect to the Property shall be deemed to be

expenses of BNP. Amounts owed under this paragraph shall be paid to the party to

whom they are owed in cash at the Closing or in the Post-Closing Adjustment

Period (as defined below) in the same manner as if the underlying real property

were being sold. If any real estate taxes, charges or assessments have not been

finally assessed as of the Closing Date for the then current calendar tax year,

they shall be adjusted at the Closing based upon the greater of (i) the most

recently issued bills therefor or (ii) the best reasonable estimate therefor

after consultations with the appropriate taxing officials.

 

                  (b) Rent. Except for delinquent rent, all rent under the

Company's Leases and other income attributable to the Property shall be

apportioned on a per diem basis as of midnight on the date immediately preceding

the Closing. All such rent and other income, including commissions earned, for

the period preceding the Closing shall be deemed to be property of the

Contributor, and all rent and other income for any period commencing as of the

Closing and thereafter shall be the property of BNP for the purpose of making

the adjustments set forth herein. Amounts owed under this paragraph shall be

paid to the party to whom they are owed in cash at the

 

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Closing or during the Post-Closing Adjustment Period. Delinquent rent shall not

be prorated, but shall be deemed the property of the Contributor. Payments

received by BNP from tenants of the Property from and after the Closing with

respect to the Property shall be applied first to rents and other amounts then

due BNP from such tenant and then to such tenant's delinquent rent as of the

time of apportionment. BNP shall use reasonable efforts to collect delinquent

rents for the benefit of the Contributor but in no event shall be obligated to

evict or sue any tenants in order to collect such rents and shall cooperate with

the Contributor in the collection of any delinquent amounts; provided, however,

that the Contributor shall not have any rights to evict such tenants for such

delinquent amounts. Any amounts received by Contributor on account of rent or

other income for the period after the Closing with respect to the Property and

the related personal property shall be turned over to BNP for application in

accordance with the terms of this paragraph. All accounts receivable, notes,

cash and bank accounts of the Company existing as of the Closing Date shall be

transferred at Closing to the Contributor, other than the remaining balance of

any escrow accounts for tenant improvements and lease commissions held by the

Company, the amount necessary to pay prorations of taxes, security deposits and

amounts which belong to BNP after making the closing adjustments for rent and

operating expenses.

 

                  (c) Preclosing Expenses and Liabilities. The parties

acknowledge that not all invoices for expenses incurred with respect to the

Property prior to the Closing will be received by the Closing and that a

mechanism needs to be in place so that such invoices can be paid as received.

All of the prorations referred to above will be done on an interim basis at the

Closing and will be subject to final adjustment in accordance with the

provisions hereof within 60 days or such other agreed upon period of time

following Closing (the "Post-Closing Adjustment Period"). Upon receipt by BNP

after Closing of an invoice for the Property's operating expenses which are

attributable in whole or in part to a period prior to the Closing and which were

not apportioned at Closing, BNP shall submit to Grover F. Shugart, Jr., as agent

for the Contributor ("Contributor's Representative"), a copy of such invoice

with such additional supporting information as Contributor's Representative

shall reasonably request. Within 10 days of receipt of such copy, the

Contributor shall pay to BNP an amount equal to the portion of such invoice

attributable to the period ending as of midnight on the date immediately

preceding the Closing apportioned on a per diem basis.

 

                  (d) Security Deposits/Tenant Inducements. With respect to the

Property to be acquired at Closing, the Company shall pay to BNP in cash at

Closing an amount equal to the sum of (i) the security and other deposits, if

any, which the Company is holding pursuant to the Leases, and (ii) any other

deposits or advances received by the Company relating to services yet to be

provided by the Company, including, without limitation, any prepaid laundry

contract fees, redecoration costs and pet fees.

 

                                   ARTICLE IV

                            COVENANTS AND AGREEMENTS

 

         4.1      Operation of Business. After making adequate provisions for

all prorations contemplated herein, the Company may make cash distributions of

all cash on hand immediately prior to the Closing and may otherwise only

distribute all claims or other evidences of money owed to them, it being

understood that, except as otherwise provided herein, no claims, accounts

 

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receivable, notes receivable or other rights to payment of the Company shall

remain assets of the Company, as the case may be, as of the Closing Date. BNP

and the Contributor agree to use their reasonable efforts to reconcile

prorations and other closing adjustments within the Post-Closing Adjustment

Period.

 

         4.2      No Brokers. Each of the Contributing Parties covenants,

represents and warrants to BNP that, no broker or finder or agent has been

involved or engaged by it in connection with the transactions contemplated

hereby and, each hereby agrees to indemnify and hold harmless BNP from and

against any and all broker's or finder's fees, commissions or similar charges

incurred or alleged to have been incurred by such Contributing Party in

connection with the transactions contemplated hereby and any and all loss,

liability, cost or expense (including without limitation reasonable fees of

counsel satisfactory to BNP) arising out of any claim that the indemnifying

party incurred any such fees, commissions or charges.

 

         4.3      Lock-Up. The Units received hereby may not be disposed of

during the applicable Lock-up Period (as defined in the Registration Rights

Agreement), except that a Contributor:

 

                  (i) who is a natural person may dispose of Units to his

         spouse, siblings, parents or any natural or adopted children or other

         descendants or to any personal trust or family partnership in which

         such family members or Contributor retain the entire beneficial

         interest;

 

                  (ii) that is a limited liability company may dispose of Units

         to one or more other entities that are wholly owned and controlled,

         legally and beneficially, by Contributor or by a Person or Persons that

         directly or indirectly wholly owns and controls Contributor;

 

                  (iii) may dispose of Units on his death to Contributor's

         estate, executor, administrator or personal representative or to

         Contributor's beneficiaries pursuant to a devise or bequest or by the

         laws of descent and distribution;

 

                  (iv) may dispose of Units as a bona fide gift; and

 

                  (v) may dispose of Units pursuant to a pledge, grant of

         security interest or other encumbrance effected in a bona fide

         transaction with an unrelated and unaffiliated pledgee;

 

provided, however, that in the case of any transfer of Units pursuant to clauses

(i), (ii), (iv) and (v), the transferee or transferees shall each be an

"accredited investor" within the meaning of Rule 501(a) of Regulation D under

the Securities Act. In the event Contributor disposes of Units as described in

this paragraph, such Units shall remain subject to this lock-up provision and,

as a condition of the validity of such disposition, the transferee (and any

transferee who acquires Units from a pledgee upon foreclosure) shall be required

to agree in writing to similar lock-up provisions as set forth herein.

 

         4.4      Section 754 Elections. The Contributor and the Company agree

(i) to cause an election under Section 754 of the Code to be included in the

closing federal partnership tax returns of the Company indicating BNP as a

partner; (ii) to prepare, at their expense, and timely file

 

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closing partnership tax returns for the period ending on the Closing Date for

the Company; and (iii) to present such tax returns to BNP for its approval,

which shall not be unreasonably withheld, sufficiently in advance of the filing

of such returns.

 

         4.5      Agent of Contributing Parties. Each of the Contributing

Parties hereby irrevocably appoints Grover F. Shugart, Jr. as agent of the

Company for the purposes of consummating the transactions contemplated hereby

and otherwise carrying out the terms of this Agreement, and taking for such

entity all steps deemed necessary or advisable by Grover F. Shugart, Jr., in

such capacity, for carrying out the terms of this Agreement. The Company

acknowledges and agrees that BNP and the REIT, respectively, and their

respective partners, officers, directors, employees, agents, advisors,

accountants, and attorneys, may rely and act upon the action or omission to act

of this appointed agent in carrying out the terms of this Agreement or in

binding the Company to the terms of this Agreement in any way.

 

         4.6      Contributions of Assets. All personal property used by the

Contributing Parties in the operation and management of the Property including

but not limited to that listed on Schedule 4.6 will be transferred to BNP in

conjunction with the Closing and as partial consideration for the transactions

otherwise contemplated by this Agreement.

 

         4.7      Non-Compete Agreements. Each Contributing Party agrees not to,

and warrants that no Affiliate will, directly or indirectly, build, purchase,

acquire, own or manage any property competing with any business or property

owned or managed by BNP (or any of its Affiliates) within a three-mile radius,

without BNP's consent, for such period of time that the Contributor (assuming

the redemption of the Contributor's Units for shares of the REIT's common stock)

owns (directly or indirectly), in the aggregate, more than 5% of the REIT's

outstanding common stock.

 

         4.8      Future Development Rights. For so long as the Contributor

beneficially owns (directly or indirectly), in the aggregate, more than 5% of

the REIT's outstanding securities (assuming the redemption of the Contributor's

Units for shares of the REIT's common stock), BNP shall have a right of first

refusal to acquire all future multi-family properties developed directly or

indirectly by Contributor, or any Affiliate thereof (a "Development Property")

within a three-mile radius of the Property (such development being subject to

the prior approval of BNP under Section 4.7 above). The Contributor shall not

sell any Development Property without first offering BNP the option to purchase

such Development Property on the same terms as offered to a third party. BNP

shall have 30 days to decide whether or not to purchase such Development

Property on such terms. If BNP declines to exercise this option, the Development

Property may be sold within the next 180 days on terms no more favorable than

those presented to BNP. If the Development Property is not sold within such

180-day period, BNP will again have a right of first refusal prior to any sale

of the Development Property. The decision whether to exercise such option with

respect to any Development Property shall be made by the REIT's board of

directors on a case-by-case basis with any director that is a Contributor or

Affiliated with a Contributor abstaining from such decision.

 

         4.9      Excess Shares. If Contributor is ever deemed to hold "Excess

Shares" as defined in the Articles of Incorporation, the REIT will use

reasonable efforts to try to enable Contributor to

 

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keep such shares; provided that the REIT need not take any steps that would

jeopardize its status as a REIT or that would require the REIT to issue

additional securities.

 

         4.10      Assignment of Warranties. The Contributing Parties will use

their best efforts to cause the maker of any warranties benefiting the Property

to consent to the transfer of the Interests if necessary to preserve the

validity and enforceability of said warranties.

 

         4.11     Completion of Construction and Repairs. Schedule 4.11 lists

all construction, repairs, renovations and similar work in progress at the

Property as of the execution date of this Agreement. The Contributing Parties

agree to complete or have completed on or before the Closing Date all work

listed on Schedule 4.11, as well as any additional repairs jointly agreed upon

by BNP and the Contributing Parties during BNP's Investigation Period, at the

Contributing Parties' sole cost and expense. Such work shall be completed to the

reasonable satisfaction of BNP.

 

         4.12     Public Announcement. Except as otherwise required by law or

regulatory agencies (including, without limitation, the Securities and Exchange

Commission (the "SEC") and the American Stock Exchange), none of the parties

hereto may make public announcements with respect to the transactions

contemplated by this Agreement without the approval of the other parties, which

approval may be withheld for any reason.

 

         4.13     Confidentiality. Each party hereto shall ensure that all

confidential information which such party or any of its respective officers,

directors, employees, counsel, agents or accountants may now possess or may

hereafter create or obtain relating to the financial condition, results of

operations, business, properties, assets, liabilities or future prospects of the

other party, any Affiliate or subsidiary of the other party or any tenant,

customer or supplier of such other party, or any such Affiliate or subsidiary,

shall not be published, disclosed or made accessible by any of them to any other

Person at any time or used by any of them, in each case without the prior

written consent of the other party; provided, however, that the restrictions of

this sentence shall not apply: (i) to the extent that disclosure may otherwise

be required by law; (ii) to the extent such information shall have otherwise

become publicly available; or (iii) to disclosure by or on its behalf to its

lender(s) for the purpose of obtaining financing in connection with the

acquisition of the Property. In the event this Agreement is terminated, each

party promptly will deliver or certify destruction to the other party all

documents, work papers and other material (and any reproductions thereof)

obtained by each party or on its behalf from such other party or its Affiliates

or subsidiaries in connection with the subject transaction, whether so obtained

before or after the execution hereof, and will itself not use any information so

obtained and will use its good faith and diligent efforts to have any

information so obtained kept confidential and not used in any way detrimental to

such other party, subject to the limitations set forth above.

 

         4.14     Relationship of Parties. The parties agree that nothing

contained herein shall constitute any party the agent or legal representative of

the other (except as provided at Section 4.5 hereto) for any purpose whatsoever,

nor shall this Agreement be deemed to create any form of business organization

between the parties hereto, nor is either party granted any right or authority

to assume or create any obligations or responsibility on behalf of the other

party, nor shall either party be in any way liable for any debt of the other.

 

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         4.15     Further Acts. Each party agrees to perform any further acts

and to execute, acknowledge and deliver any documents which may be reasonably

necessary to carry out the provisions of this Agreement.

 

         4.16     Consent to Transfer of Interests and Termination of the

Operating Agreement of the Company. Contributor agrees to and hereby does amend

the operating agreement for the Company to allow for the transactions

contemplated hereby. Contributor hereby irrevocably agrees to the termination

of the operating agreement of the Company effective as of the Closing.

 

         4.17     Certain Expenses.

 

                  (a) If the Closing occurs, BNP shall pay for the costs of any

owners title insurance policy or endorsements thereto and the costs of recording

any deed or similar instrument in connection with the transaction contemplated

by this Agreement. If BNP determines in its sole discretion that a new ALTA

survey is necessary, then BNP shall be responsible for ordering the ALTA survey

(at BNP's costs and in a form required by BNP); provided, however, that if a new

ALTA survey is required by the existing lender under the Outstanding Company

Debt Financing, such costs shall be borne by the Company.

 

                  (b) Whether or not the Closing occurs, BNP and the

Contributing Parties are each responsible for their respective legal fees and

Contributor shall be responsible for payment of his pro rata portion of legal

fees associated with this transaction.

 

                  (c) Notwithstanding anything to the contrary herein, the

Contributing Parties are responsible for the payment of any and all fees,

charges and expenses that arise in connection with the assumption of the

Outstanding Company Debt Financing.

 

 

                                    ARTICLE V

                        REPRESENTATIONS AND WARRANTIES OF

                              CONTRIBUTING PARTIES

 

         To induce BNP and the REIT to enter into this Agreement and the

transactions contemplated hereby, unless otherwise indicated, each of the

Contributing Parties jointly and severally represents and warrants that the

statements contained in Article V are true, correct and complete on the date

hereof and will be true, correct and complete on the Closing Date. It is the

express intention and agreement of each of the Contributing Parties that the

representations and warranties set forth in Article V shall survive the

consummation of the transactions contemplated in this Agreement, but only to the

extent expressly provided in Article X hereof.

 

         5.1      Consents. Except as disclosed on Schedule 5.1 attached hereto,

to the Actual Knowledge of each Contributing Party, (i) no consents, approvals,

waivers, notifications, acknowledgments or permissions which have not been

obtained are required in order for any of the Contributing Parties to fully

perform its, his or her respective obligations under this Agreement or which, if

left unobtained at Closing and thereafter, would have a material adverse affect

on the value, operation, occupation, use or development of the Property, and

(ii) the execution and

 

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delivery of this Agreement by the Contributing Parties and the consummation of

the transactions contemplated hereby, including without limitation the execution

of any related agreements, will not require the consent of, or any prior filing

with or notice to or payment to, any governmental authority or other Person.

 

         5.2      Disclosure. To the Actual Knowledge of each of the

Contributing Parties, the representations and warranties contained in this

Agreement (including Schedules and Exhibits and documents or instruments

delivered in connection herewith) or in any information, statement, certificate

or agreement furnished or to be furnished to BNP by any of the Contributing

Parties in connection with the Closing pursuant to this Agreement, do not

contain any untrue statement of a material fact or omit to state any material

fact necessary to make the statements and information contained herein or

therein, in light of the circumstances in which they are made, not misleading.

 

         5.3      Absence of Conflicts. Except as set forth on Schedule 5.1 and

Schedule 5.3 attached hereto, to the Actual Knowledge of each Contributing

Party, the execution, delivery and performance of this Agreement by the

Contributing Parties and the consummation of the transactions contemplated

hereby, including without limitation, the execution and delivery of any

documents, instruments or agreements contemplated hereby, will not (after a

lapse of time, due notice or otherwise) (a) conflict with, violate or result in