Document:

Exhibit 10.1

 

SECOND AMENDMENT
TO

CREDIT AGREEMENT

 

This SECOND AMENDMENT TO CREDIT AGREEMENT (this
“Amendment”), effective as of August 1, 2006, is entered into by and
among Asbury Automotive Group, Inc. (the “Company”), each of the
subsidiaries of the Company listed on the signature pages hereof (the “Floor
Plan Borrowers”), each of the Lenders listed on the signature pages hereof (the
“Lenders”), JPMorgan Chase Bank, N.A.,
as Administrative Agent for the Lenders (the “Agent”), JPMorgan Chase Bank, N.A., as Floor Plan
Agent for the Lenders (the “Floor Plan Agent”) and Bank of America, N.A., as Syndication
Agent.

 

PRELIMINARY
STATEMENT

 

WHEREAS,
the Company, the Floor Plan Borrowers, the Lenders, the Agent, the Floor Plan
Agent and the Syndication Agent entered into that certain Revolving Credit
Agreement dated March 23, 2005 (as amended, the “Credit Agreement”),
under the terms of which such Lenders agreed to make available to the Company
(a) a revolving credit commitment not to exceed at any time $150,000,000.00 and
(b) a floor plan loan commitment not to exceed $650,000,000.00; and

 

WHEREAS,
pursuant to the First Amendment to Credit Agreement and Waiver, effective March 1,
2006, all the parties thereto agreed to reduce the revolving credit commitment
to $125,000,000 and the floor plan commitment to $425,000,000; and

 

WHEREAS,
the Company and the Floor Plan Borrowers have requested the Lenders, the Agent
and the Floor Plan Agent to amend certain provisions of the Credit Agreement;
and

 

WHEREAS,
the Lenders, the Agent and the Floor Plan Agent have agreed to do so to the
extent reflected in this Amendment.

 

NOW,
THEREFORE, in consideration of the premises and for other
good and valuable consideration and the mutual benefits, covenants and
agreements herein expressed, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

1.     Defined
Terms. All capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to such terms in the Credit
Agreement.

 

2.     Amendment
to Section 1.1. Section 1.1 of the Credit Agreement is hereby
amended by restating the definition of “Applicable Margin” contained therein to
decrease the Eurodollar Margin and the Alternate Base Rate Margin applicable to
Revolving Credit Loans, to read as follows:

 

“Applicable Margin”
means, on any date, with respect to Eurodollar Loans or Alternate Base Rate
Loans that are Revolving

 

 

Credit Loans, the applicable percentages set forth below based upon the
Total Leverage Ratio in effect as of such date.

 

	
   

  	
   

  	
  Total Leverage

  Ratio

  	
   

  	
  Eurodollar

  Margin

  	
   

  	
  Alternate Base

  Rate Margin

  	
   

  	
  Commitment

  Fee Rate

  	
   

  
	
  Level 1

  	
   

  	
  x > 4.00

  	
   

  	
  2.75

  	
  %

  	
  1.25

  	
  %

  	
  .375

  	
  %

  
	
  Level 2

  	
   

  	
  3.50 < x <
  4.00

  	
   

  	
  2.50

  	
  %

  	
  1.00

  	
  %

  	
  .375

  	
  %

  
	
  Level 3

  	
   

  	
  3.00 < x <
  3.50

  	
   

  	
  2.25

  	
  %

  	
  0.75

  	
  %

  	
  .375

  	
  %

  
	
  Level 4

  	
   

  	
  2.50 < x <
  3.00

  	
   

  	
  2.00

  	
  %

  	
  0.50

  	
  %

  	
  .375

  	
  %

  
	
  Level 5

  	
   

  	
  x < 2.50

  	
   

  	
  1.75

  	
  %

  	
  0.25

  	
  %

  	
  .375

  	
  %

  

 

3.     Amendment
to Section 5.2(b)(ii). Section 5.2(b)(ii) of the Credit
Agreement is amended and restated in its entirety to decrease the Margin applicable
to Eurodollar Loans that are Floor Plan Loans, to read as follows:

 

“(ii) each Eurodollar Loan which is a Floor Plan Loan
(excluding Swing Line Loans) shall bear interest at a rate per annum (computed
on the basis of the actual number of days elapsed over a year of 360 days)
equal to the LIBO Rate for the Interest Period in effect for such Loan plus:
(A) 1.00% if such Loan is to finance New Motor Vehicles or Demonstrators
and (B) 1.125% if such Loan is to finance Used Motor Vehicles or Rental
Motor Vehicles.”

 

4.     Amendment
to Section 5.4(a)(i). Section 5.4(a)(i) of the Credit Agreement is amended to
reduce the Floor Plan Loan Commitment Fee by replacing the reference to “twenty-five-one-hundredths
of one percent (0.25%)” with “twenty-one-hundredths of one percent (0.20%)”.

 

5.     Ratification.
The Company and each of the Floor Plan Borrowers hereby ratify all of its
Obligations under the Credit Agreement and each of the Loan Documents to which
it is a party, and agrees and acknowledges that the Credit Agreement and each
of the Loan Documents to which it is a party are and shall continue to be in
full force and effect as amended and modified by this Amendment. Nothing in
this Amendment extinguishes, novates or releases any right, claim, lien,
security interest or entitlement of any of the Lenders, the Agent or the Floor
Plan Agent created by or contained in any of such documents nor is the Company
nor any Floor Plan Borrower released from any covenant, warranty or obligation
created by or contained herein or therein.

 

6.     Representations
and Warranties. The Company and each of the Floor Plan Borrowers hereby
represents and warrants to the Administrative Agent and the Lenders that
(a) this Amendment has been duly executed and delivered on behalf of the
Company and each of the Floor Plan Borrowers, (b) this Amendment
constitutes a valid and legally binding agreement enforceable against the
Company and each of the Floor Plan Borrowers in accordance with its

 

 

terms, subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law, (c) the representations
and warranties contained in the Credit Agreement and the Loan Documents are
true and correct on and as of the date hereof in all material respects as
though made as of the date hereof, except as heretofore otherwise disclosed in
writing to the Agent, (d) no Default or Event of Default exists under the
Credit Agreement or under any Loan Document and (e) the execution,
delivery and performance of this Amendment has been duly authorized by the
Company and each of the Floor Plan Borrowers.

 

7.     Conditions
to Effectiveness. This Amendment shall be effective upon the execution and
delivery hereof by all parties to the Agent and receipt by the Agent of the
following in form satisfactory to the Agent:

 

(a)   this
Amendment;

 

(b)   a
certificate of an officer and of the secretary or an assistant secretary of
each of the Company, and each Floor Plan Borrower certifying, inter alia, (i) copies of each of the
articles or certificate of incorporation or organization, as amended and in
effect, of such Person, the bylaws or Operating Agreement or regulations, as
amended and in effect, of such Person (or a statement that such documents have
not changed) and the resolutions adopted by the Board of Directors or Managers
of such Person (A) authorizing the execution, delivery and performance by
such Person of the Loan Documents to which it is or will be a party, and (B) approving
the form of this Amendment and (ii) the incumbency and specimen signatures
of the officers of such Person executing any documents on its behalf;

 

(c)   the
payment to the Agent of all fees and expenses (including the fees and
disbursements of Andrews Kurth LLP) and all fees payable to the Lenders in
connection with this Amendment;

 

(d)   such
other consents, approvals, opinions or documents as the Agent or the Lenders
may reasonably request.

 

8.     Release
and Indemnity. (a) The Company does hereby release and forever discharge
the Agent, Floor Plan Agent and each of the Lenders and each affiliate thereof
and each of their respective employees, officers, directors, trustees, agents,
attorneys, successors, assigns or other representatives from any and all
claims, demands, damages, actions, cross-actions, causes of action, costs and
expenses (including legal expenses), of any kind or nature whatsoever, whether
based on law or equity, which any of said parties has held or may now or in the
future own or hold, whether known or unknown, for or because of any matter or
thing done, omitted or suffered to be done on or before the actual date upon
which this Amendment is signed by any of such parties (a) arising directly or
indirectly out of the Loan Documents, or any other documents, instruments or
any other transactions relating thereto and/or (b) relating directly or
indirectly to all transactions by and between the Company, the Floor Plan Borrowers,
or their representatives and the Agent, the Floor Plan Agent and each Lender or
any of their respective directors, officers, agents, employees, attorneys or
other representatives. Such release, waiver, acquittal and discharge shall and
does include, without limitation, any claims of usury, fraud,

 

 

duress, misrepresentation, lender liability, control, exercise of
remedies and all similar items and claims, which may, or could be, asserted by
the Company or any Floor Plan Borrower.

 

(b)   The
Company and each Floor Plan Borrower hereby ratifies the indemnification
provisions contained in the Loan Documents, including, without limitation, Section
13.4 of the Credit Agreement, and agrees that this Amendment and losses,
claims, damages and expenses related thereto shall be covered by such
indemnities.

 

9.     Counterparts.
This Amendment may be signed in any number of counterparts, which may be
delivered in original or facsimile form each of which shall be construed as an
original, but all of which together shall constitute one and the same
instrument.

 

10.   Governing
Law. This Amendment, all Notes, the other Loan
Documents and all other documents executed in connection herewith shall be
deemed to be contracts and agreements under the laws of the State of New York
and of the United States of America and for all purposes shall be construed in
accordance with, and governed by, the laws of New York and of the United
States.

 

11.   Final
Agreement of the Parties. Any previous agreement
among the parties with respect to the subject matter hereof is superseded by
the Credit Agreement, as amended by this Amendment. Nothing in this Amendment,
express or implied is intended to confer upon any party other than the parties
hereto any rights, remedies, obligations or liabilities under or by reason of
this Amendment.

 

[Signatures on
Separate Pages]Exhibit
10.1

Certain
direct and indirect subsidiaries of Equity Residential (collectively, the “Company”)
have agreed to sell the Company’s Lexford Housing Division to certain
affiliates of Empire Group Holdings LLC for a total cash purchase price of
$1,086,000,000, as reported in the Company’s current report on
Form 8-K dated June 28, 2006, through the execution and delivery of eight
substantially similar purchase and sales agreements.  The Company is herewith filing the form of
purchase and sale agreement and the exhibits thereto containing substantive
transaction terms.  Seven of the eight
Agreements contemplate the sale of limited liability equity interests, as
reflected in the attached form Agreement. 
The remaining Agreement, representing less than eight percent of the
total cash purchase price, contemplates the direct sale of properties, and
therefore certain of the provisions of such Agreement differ from the attached
form solely to reflect this difference.

LEXFORD

LLC
MEMBERSHIP INTEREST TRANSFER AGREEMENT – [#] 

THIS LEXFORD LLC MEMBERSHIP INTEREST TRANSFER AGREEMENT (“Agreement”) is entered into as of the 28th day
of June, 2006 (“Effective Date”),
by and among [Seller Entity] (“              ”
or the “Seller”) and [Buyer Entity], a Delaware limited liability company (“Buyer”).

RECITALS:

WHEREAS, [Seller Entity] is [or intends to be – see
Section 2.1] the indirect owner of 100% of the equity ownership interests in
the Properties described in Exhibit A;

WHEREAS, [Seller Entity] desires to sell and Buyer
agrees to purchase [Seller Entity]’s 100% membership interest (the “Interest”)
in [subsidiary of Seller Entity], a Delaware limited liability company (the “Owner
LLC”), which owns 100% of the equity interests in the Property Owners
(collectively, the “Property Owner Interests”) owning legal and equitable title
to the Properties described in Exhibit
A, including any related improvements, facilities, amenities, structures,
driveways and walkways constructed on such Properties.

NOW, THEREFORE, in consideration of the above
recitals, the mutual covenants and agreements contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:

Section
1.               DEFINITIONS AND
EXHIBITS.

1.1           Definitions.  For purposes of this Agreement, each of the
following terms, when used herein with an initial capital letter, shall have
the meaning ascribed to it as follows:

Affiliate.  Of any Person means another Person which,
directly or indirectly, controls or is controlled by that Person, or is under
common control with that Person.

Agreement.  This Lexford LLC Membership Interest Transfer
Agreement – [#].

 

 

Building(s).  The buildings located on the Land and having
the address shown on Exhibits A attached hereto and by this
reference made a part thereof.

Business Day.  Each day other than Saturday, Sunday and any
other day on which trading does not occur on the New York Stock Exchange and
any day that is a Jewish holiday on which work may not be performed in
accordance with Orthodox Jewish custom.

Buyer Disclosure Parties.  Buyer Parties together with their financial
advisors, lenders, partners, lawyers, consultants, employees, officers and
other agents.

Buyer Inspection Party.  As defined in Section 4.

Buyer’s Knowledge Parties.  Abe Miller and Mark Dean.

Buyer Parties.  Buyer and the Affiliates of Buyer that are
parties to the Lexford Property Agreements.

Closing.  As defined in Section 9.1.

Closing Date.
 September 27, 2006.

Closing Statement.  As defined in Section 2.3

Confidentiality Agreement.  That certain letter agreement dated March 23,
2006, executed by Buyer’s Affiliate, “Empire Group”, in favor of ERP concerning
the Properties and the transaction contemplated hereby.

Damages.  Any liabilities, obligations, losses,
damages, penalties, claims, demands, actions, judgments, suits, costs, expenses
and disbursements of whatever kind or nature, including but not limited to,
reasonable attorney’s fees and expenses.

Disclosures.  As defined in Section 6.1.

Effective Date.  The date upon which this Agreement shall be
deemed effective, which shall be the date first above written.

Delinquent Amounts.  As defined in Section 2.3.2.

Earnest Money.  As defined in the Earnest Money Escrow
Agreement.

Earnest Money Escrow
Agreement.  That
certain Escrow Agreement of even date herewith among Seller, Buyer’s Affiliate
and Escrowee substantially in the form attached hereto as Exhibit B.

Employment Matters
Agreement.  An agreement,
in the form attached hereto as Exhibit K, to be entered into at
Closing between Lexford Management Company and Empirian Management Company,
Inc.

 2
 

 

 

ERP.  ERP Operating Limited Partnership, an
Illinois limited partnership.

ERPM.  Equity Residential Properties Management
Corp., a Delaware corporation.

Escrowee.  First American Title Insurance Company.

Event of Buyer’s Default.  As defined in Section 10.2.

Event of Seller’s Default.  As defined in Section 10.1.

General Partners.  As defined in Section 5.1.8.

Improvements.  The Buildings and any other buildings,
structures and improvements located upon the Land, including the Property Owner’s
interest, if any, in all systems, facilities, fixtures, machinery, equipment
and conduits to provide fire protection, security, heat, exhaust, ventilation,
air conditioning, electrical power, light, plumbing, refrigeration, gas, sewer
and water thereto (including all replacements or additions thereto between the
date hereof and the Closing Date). 
Unless otherwise specifically provided herein, the terms, conditions,
representations, warranties and covenants of this Agreement, if any, relating
to the Improvements shall be applied separately to the portion of the
Improvements included in each Project.

Indemnification Agreement.  As defined in Section 9.2.4.

Interest.  As defined in the Recitals.

Land.  All that tract or parcel of land owned by
each Property Owner and described in the applicable Title Commitment and by
this reference made a part hereof and all privileges, rights, easements,
hereditaments and appurtenances thereto belonging, and all right, title and
interest of such Property Owner in and to any streets, alleys, passages and
other rights of way included therein or adjacent thereto (before or after the
vacation thereof).  Unless otherwise
specifically provided herein, the terms, conditions, representations,
warranties and covenants of this Agreement, if any, relating to the Land shall
be applied separately to the portion of the Land included in each Project.

Lease(s).  Each lease of space within the Improvements
and any amendments, renewals, extensions, expansions and guaranties thereof
(a) in force and effect as of the Effective Date, and/or (b) executed
by a Property Owner after the Effective Date in accordance with
Section 7.5, including all of the applicable Property Owner’s right, title
and interest in each such lease.  Unless
otherwise specifically provided herein, the terms, conditions, representations,
warranties and covenants of this Agreement, if any, relating to the Leases
shall be applied separately to the portion of the Leases related to each
Project.

Lexford Assets.  Collectively, all of the “Properties” - as
defined in the Lexford Property Agreements - that are subject to the Lexford
Property Agreements.

 3
 

 

Lexford Employees.  As defined in Exhibit K.

Lexford Management
Company.  Equity
Apartment Management LLC.

Lexford Property
Agreements. 
Collectively, (a) this Agreement, (b) those certain other
Lexford LLC Membership Interest Transfer Agreements 1S through 6 by and between
Seller and Buyer or an Affiliate or Affiliates of Buyer; (c) that certain Lexford LLC Membership Interest Transfer
Agreement between ERP and an Affiliate of Buyer and (d) that certain
Agreement for Sale of Real Estate and Related Property between Seller or Seller’s
Affiliates and an Affiliate of Buyer.

Loan Policies.  As defined in Section 3.1.

Management Property
Purchase Price.  As
defined in Section 2.1

Master Disclosure
Schedule.  That certain
Master Disclosure Schedule, of even date herewith, furnished by Seller or
Seller’s Affiliate, receipt of which has been acknowledged by Buyer or Buyer’s
Affiliate.

Material Adverse Effect.  Any changes, event, effect, or set of
circumstances that, when taken individually or together with all other adverse
changes, events, effects, or sets of circumstances that have occurred,
including any and all other defaults, breaches of representations and
warranties, or failures of condition precedent, is or is reasonably likely to
be materially adverse to the business, operations, improvements, or condition
(financial or otherwise), of the Lexford Assets taken as a whole, except
for any such change, event, effect or set of circumstances arising out of or
resulting from (a) changes in conditions (including changes in law or
generally accepted accounting principles) affecting the multifamily residential
or real estate industries generally, or the United States of America or global
economy, (b) the commencement, continuation or escalation of a war, material
armed hostilities or other material international or national calamity or act
of terrorism directly or indirectly involving or affecting the United States of
America or (c) earthquakes, hurricanes, other natural disasters or acts of
G-d.  Notwithstanding the foregoing or
anything to the contrary contained herein, a Material Adverse Effect shall be
deemed to arise if any one or more events, effects, or circumstances, when
taken individually or together with other events, effects, or circumstances,
including one or more defaults, breaches of representations and warranties, or
failures of conditions precedent, have resulted or are reasonably likely to
result in Damages exceeding $40 million

OFAC List.  As defined in Section 5.3.3.

Owner LLC.  As defined in the Recitals.

Owner’s Policies.  As defined in Section 3.1.

Permitted Title
Exceptions.  As defined
in Section 3.1.

 4
 

 

Person.  Any natural person, partnership, corporation,
limited liability company, trust, estate, association, unincorporated
organization or other entity or association.

Personal Property.  Each Property Owner’s right, title and
interest in any equipment, machinery, furnishings, supplies and other tangible
personal property owned by the applicable Property Owner located on the
Property as of the Effective Date and through the Closing Date and used in
connection with operation, ownership, management or maintenance of the
Improvements.  Unless otherwise
specifically provided herein, the terms, conditions, representations,
warranties and covenants of this Agreement, if any, relating to the Personal Property
shall be applied separately to the portion of Personal Property included in
each Project.

Project.  Each separate parcel or parcels of Land,
Improvements and Personal Property owned by a Property Owner.  Unless otherwise specifically provided
herein, the terms, conditions, representations, warranties and covenants of
this Agreement, if any, relating to the Property shall be applied separately to
each Project comprising the Property.  “Projects”
means and includes all of the Projects subject to this Agreement.

Property.  Each Property Owner’s right, title and
interest in, to and under the following property:  (i) its Project; and (ii) all
rights of way or use, trade names and marks (excluding any right to the name “Equity Residential”), Leases, Service
Contracts, tenements, hereditaments, appurtenances and easements now or
hereafter belonging or pertaining to any of the foregoing, except those, if
any, hereinafter expressly reserved to Seller in accordance with the terms of
this Agreement.  Property does not
include (i) cash or cash equivalent instruments in short term investment
accounts or receivables from any insurance companies for losses applicable to
the period prior to the Closing Date, all of which will be retained by Seller
(subject to the terms of Section 12.2 below), except for any security deposits
and interest thereon held by Property Owner in connection with any Lease, which
shall be treated in accordance with Section 2.3.3, or (ii) any cash,
assets or other interests excluded pursuant to Section 14.4.

Property Owner.  The legal entity owning fee simple title to
an applicable Property as disclosed in the applicable Title Commitment.  Any documents to be delivered by any Property
Owner or any representations and covenants, or warranties made by any Property
Owner in this Agreement shall apply to each Property Owner as it relates to the
Property owned by that Property Owner only.

Property Owner Interests.   As defined in the Recitals.

Purchase Price.  As defined in Section 2.1.

Reynoldsburg Lease.  As defined in Section 5.1.12.

SEC.  As defined in Section 15.9

Seller Deliveries.  To the extent in Seller’s and/or the Property
Owners’ possession or reasonable control as of the Effective Date, the
following items (it being agreed, however, that Seller shall have no obligation
to prepare or cause to be prepared 

 5
 

 

any of the following items, to the extent that they do
not already exist or would not be prepared in the ordinary course of Seller’s
business, and provided that Seller does not represent or warrant the accuracy
of any such items, except to the extent expressly set forth in Section 5.1 of
this Agreement): Seller’s or any Property Owner’s existing plans and
specifications for the Buildings, if any; any environmental, site assessment,
soils, engineering, architectural, termite, pest control, endangered species,
ADA and Fair Housing Act compliance, handicapped access reports or studies and
data prepared by third parties and in Seller’s or any Property Owner’s
possession or reasonable control with respect to the Property; Seller’s or any
Property Owner’s existing surveys of the Projects, if any; the Leases; lease
correspondence files; the Service Contracts; a copy of each Property Owner’s
standard form lease; copies of ad valorem tax statements relating to each
Project for the lesser of the prior two (2) years or Property Owner’s period of
ownership; operating statements and summaries of capital expenditures for each
Project for the lesser of the prior two (2) years or Property Owner’s period of
ownership; a list of Personal Property at each Project; a schedule of all
insurance policies relating to each Project, together with a schedule of the
loss claim history (prepared by Seller or a Property Owner, as opposed to a “loss
run” from an insurer) for the lesser of the prior two (2) years or Property
Owner’s period of ownership; all current reports from the Property Owner’s
on-site management and accounting systems located at each Project; a list of all
pending or threatened litigation against any Property Owner, management company
or Seller with respect to claims regarding or relating to the Property or any
Property Owner; copies of the organizational documents for each Property Owner
and all amendments thereto; a list, together with copies, of all license
agreements; and those other materials delivered to or made available to Buyer
by Seller as may be posted on the Merrill Corp. Datasite-Project Blackbird
website for this transaction, to which website Buyer has been provided access.

Seller.  [Seller Entity].

Seller Parties.  Seller, ERP and each other Affiliate of
Seller that are parties to the Lexford Property Agreements.

Seller’s Advisor.  J.P. 
Morgan Securities Inc.

Service Contracts.  All of the service, operating, construction
or management contracts, supply and equipment rental, labor or material
contracts, maintenance or repair contracts or other agreements that are in
force and effect, to the extent they affect the operation, ownership or management
of any of the Projects, but only to the extent assignable, without cost to
Buyer and the applicable Property Owner’s obligations thereunder are expressly
assumed by Buyer pursuant to this Agreement.

Tax Appeals.  As defined in Section 14.8.

Tenant(s).  Each tenant that has executed a Lease.

Tenant Receivables.  As defined in Section 2.3.2.

 6
 

 

Title Commitment.  Commitment(s) issued by the Title Insurer for
an owner’s policy of title insurance (in the form most recently adopted by
ALTA) for each Property, covering title to the Land and Improvements included
in such Property, and showing applicable Property Owner as owner of said Land
and Improvements and made available to Buyer through the Title Insurer’s Fast
Closer electronic system.

Updated Rent Roll.  As defined in Section 9.2.11.

Title Insurer.  First American Title Insurance Company, 30
N.  LaSalle St., Chicago, IL 60602, with
assistance from the New York office of First American Title Insurance Company.

Vendor(s).  Each vendor with whom any Property Owner or
affiliated entity has executed a Service Contract.

1.2           EXHIBITS.  Attached hereto and forming an integral part
of this Agreement are the following exhibits, all of which are incorporated
into this Agreement as fully as if the contents thereof were set out in full
herein at each point of reference thereto:

	
  Exhibit A

  	
   

  	
  List of Properties

  
	
  Exhibit B

  	
   

  	
  Earnest Money Escrow Agreement

  
	
  Exhibit C

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit D

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit E

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit F

  	
   

  	
  Notice to Tenants

  
	
  Exhibit G

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit H

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit I

  	
   

  	
  Notice to Vendors

  
	
  Exhibit J

  	
   

  	
  Management Property Bill of Sale

  
	
  Exhibit K

  	
   

  	
  Employment Matters Agreement

  
	
  Exhibit L

  	
   

  	
  Assignment and Acceptance of Membership Interest

  
	
  Exhibit M

  	
   

  	
  Indemnification Agreement

  
	
  Exhibit N

  	
   

  	
  Intentionally Omitted

  
	
  Exhibit O

  	
   

  	
  Non-Foreign Certificate

  
	
  Exhibit P

  	
   

  	
  Assignment and Assumption of Service Contracts

  
	
  Exhibit Q

  	
   

  	
  Assignment and Assumption of Reynoldsburg Lease

  

 

Section
2.               PURCHASE
PRICE.

2.1           Purchase Price.  The total consideration to be paid by Buyer
to Seller for the Interest (the “Purchase Price”) is set forth on Exhibit A
and shall be allocated among all of the Properties as set forth on Exhibit A.  Notwithstanding the foregoing, Buyer may, by
written notice to Seller no later than fifteen (15) days prior to the Closing
Date, reallocate the Purchase Price among the Properties (which reallocation
right may be exercised one time only), provided that such reallocation (i) is
reasonable, in Seller’s reasonable judgment, (ii) does not change the overall
aggregate Purchase Price set forth on Exhibit A, and (iii) does not
change the allocated Purchase Price of a Property after such Property has been
excluded from the Properties to be 

 7
 

 

conveyed pursuant to the terms of this Agreement, or
with respect to which there is or has been an occurrence or Permitted Title
Exception that could lead to such exclusion.  
The Purchase Price shall be paid in accordance with the terms of
Section 2.2.  In addition to the
Purchase Price, Buyer’s Affiliate shall purchase all of the tangible personal
property of Lexford Management Company, and any intangible personal property of
Lexford Management Company that is exclusively used by same, including without
limitation goodwill, for $3,000,000 (the “Management Property Purchase Price”)
concurrently with the Closing, as set forth in Section 9.2.13 hereinbelow.

Lexford OP is in the process of acquiring certain
third party limited partner interests in those Properties identified as
Syndicated Properties on Exhibit A or obtaining required consents
sufficient to authorize the transaction contemplated hereunder.  If prior to the Closing Date, Lexford OP is
unable to acquire sufficient third party limited partner interests or consents
to authorize the transaction contemplated hereby, and if Buyer and Seller are
unable to mutually agree upon a mutually satisfactory arrangement for
conveyance of the affected Property or Properties, then the applicable Property
or Properties shall not be conveyed to Buyer hereunder and, accordingly, the
Purchase Price shall be reduced by the applicable amount set forth on Exhibit A.  In the event a Property or Properties are
excluded from the conveyance hereunder as provided above, then at the election
of Seller, made by written notice given to Buyer prior to the Closing Date,
Buyer shall manage such excluded Property or Properties for up to one (1) year
following the Closing Date, as elected by the Seller pursuant to a management
agreement to be mutually agreed upon by Buyer and Seller; provided, however,
that Seller shall have the right to terminate such management at any time upon
30 days notice given to Buyer.  The fee
payable to Buyer for such post-closing management shall be a commercially
reasonable market management fee. [The language in this paragraph is contained
in one purchase and sale agreement (the “Syndicated Agreement”).  As of July 31, 2006, this language remains
potentially applicable to three properties with an aggregate purchase price of
approximately $8.4 million]

2.2           Earnest Money; Cash at Closing

2.2.1        Concurrently herewith: (i) Seller, Buyer’s
Affiliate and a duly authorized representative of the Chicago Office of
Escrowee shall execute the Earnest Money Escrow Agreement, in the form attached
hereto as Exhibit B, and (ii) Buyer shall deposit or cause to be
deposited the Earnest Money with the Escrowee. The Earnest Money shall be
invested as Seller and Buyer’s Affiliate, as agent for Buyer, shall jointly
direct in accordance with the Earnest Money Escrow Agreement.  Any and all interest earned on the Earnest
Money shall be for Buyer’s account and shall be reported to Buyer’s federal tax
identification number.

2.2.2        If the transaction closes in accordance
with the terms of this Agreement, at Closing, the Earnest Money shall be
delivered by Escrowee to Seller as part payment of the Purchase Price.  If the transaction fails to close due to a
default on the part of Buyer, Seller shall have the remedy options provided for
in Section 10.2 below.  If the transaction fails to close due to a
failure of a condition precedent to Buyer’s performance as more fully provided
and set forth in Section 8.1, then Buyer shall be entitled to cancel this transaction
and receive a refund of the Earnest Money, and upon the occurrence of a Seller’s
Event of Default, Buyer shall have the remedy options provided for in Section 

 8
 

 

10.1
below.  If the transaction fails
to close due to a default on the part of Seller, Buyer shall have the remedy
options provided for in Section 10.1 below.

2.2.3        At Closing, Buyer shall pay to Seller,
with current, federal funds wire transferred to an account designated by Seller
in writing at least one (1) Business Day prior to Closing, an amount equal to
the Purchase Price, minus the sum of the Earnest Money which Seller shall
receive at Closing from the Escrowee, and plus or minus, as the case may
require, the closing prorations and adjustments to be made pursuant to
Section 2.3 below.

2.2.4        Buyer hereby acknowledges and agrees
that Buyer’s Affiliate is acting as its agent with respect to the Earnest
Money, and that Escrowee is authorized to return Earnest Money to its
attorneys, Dreier LLP, in trust in the event that the Earnest Money is to be
returned to Buyer pursuant to the terms of this Agreement in accordance with
the terms of this Agreement.

2.3           Closing Prorations and Adjustments.  Seller shall prepare or cause Escrowee to
prepare the closing statement (the “Closing Statement”) of the prorations and
adjustments required by this Agreement and submit it to Buyer at least three
(3) Business Days prior to the Closing Date.  The Closing Statement shall be subject to the mutual review and comment by
Buyer and Seller.  Buyer and Seller shall
consult in good faith regarding the preparation of a final Closing Statement
with the objective of accurately reflecting all items to be prorated as of the
Closing Date.  The following items
are to be prorated, adjusted or credited (as appropriate) as of the close of
business on the Closing Date, on the basis of a 365 day year, it being
understood that for purposes of prorations and adjustments, Seller shall be
deemed to be the beneficial owner of the Property on the day prior to the
Closing Date and Buyer shall be deemed to be the beneficial owner of the
Property as of the Closing Date:

2.3.1        Real estate and personal property taxes
and assessments shall be prorated between Buyer and Seller on the basis of the
current tax bill (or, the most recent ascertainable tax bill, if the current
bill is not then available).  Any taxes relating to the tax period (or
portion thereof) after Closing shall be assumed by Buyer effective as of
Closing and paid by Buyer when due and payable, provided that Seller shall be
responsible for the prorated portion thereof relating to the period prior to
Closing.  If Seller or any Property Owner
files (or has previously filed) an action for an adjustment of Taxes affecting
any tax year prior to the year of Closing, any tax savings or refunds resulting
from such action shall be solely the property of Seller.  If Seller, the Property Owners or Buyer
should file such an action affecting the tax year in which the Closing occurs,
and if as a result thereof taxes for said tax year are reduced, then any tax
savings or refunds and the third party costs incurred to achieve the tax
savings or refunds shall be prorated between Seller and Buyer effective as of
the Closing Date.  The provisions of this
paragraph shall survive until the first anniversary of the Closing.  The following provisions shall control for
Properties located in Florida and Ohio:

(a)           Florida Properties:  real estate and personal property taxes and
assessments (on the basis of the most recent ascertainable tax bill if the current
bill is not then available, and in any case, calculated taking into account the
4% 

 9
 

 

discount available for payment of real estate taxes
prior to December; provided, however, in the event the Closing takes place
after the period of time for the 4% discount has expired, the discount shall be
applied only in the event Property Owner took advantage of such discount when
it paid the real estate taxes);

(b)           Ohio Properties:  real
estate and personal property taxes and assessments (on the basis of the most
recent ascertainable tax bill if the current bill is not then available).  Any real estate or personal property tax
proration applicable to a fiscal time period for which a tax bill has not yet
been issued shall be based on 103% of the most recently issued tax bill;

2.3.2        the rent and all other sums payable by
Tenants under the Leases (collectively, “Tenant Receivables”) shall be prorated
between Seller and Buyer; provided, however, that rent and all other sums which
are due and payable to Property Owner by any Tenant but uncollected as of the
Closing (collectively, the “Delinquent Amounts”) shall not be adjusted, but
shall be apportioned as follows:   All
Tenant Receivables collected by Buyer or Seller after Closing shall be
allocated (i) first, to Tenant Receivables due for the month during which
the Closing occurs (and shall be allocated between Seller and Buyer as if same
had been prorated at Closing), (ii) second, to Tenant Receivables then
currently due and payable for periods of time after Closing and
(iii) third, to Tenant Receivables due and payable for any periods of time
before the month in which the Closing occurs. 
In the event Buyer receives Tenant Receivables after Closing to which
Seller is entitled as provided above, Buyer agrees to promptly remit said funds
to Seller.  In the event Seller receives
Tenant Receivables after Closing to which Buyer is entitled as provide above,
Seller agrees to promptly remit said funds to Buyer.  At Closing, Seller shall deliver to Buyer a
schedule of all such Delinquent Amounts. 
In the event any Delinquent Amount is inadvertently omitted from such
schedule, Seller shall not be deemed to have waived its rights to such
Delinquent Amount.  Buyer shall include
any and all Delinquent Amounts in the first bills submitted to the tenants in
question after the Closing and, so long as such tenants remain in occupancy,
shall continue to do so for twelve (12) months thereafter.  Buyer shall promptly remit to Seller any
Delinquent Amounts so collected.  The
provisions of this Section 2.3.2 shall survive until the first anniversary of
the Closing.

2.3.3        the amount of unapplied security
deposits held by the Property Owners under the Leases (and interest thereon, to
the extent required by law or the Leases) shall be credited in full to Buyer
and applied against the Purchase Price at Closing;

2.3.4        water, electric, telephone and all other
utility and fuel charges, fuel on hand (at cost plus sales tax) shall be
prorated between Buyer and Seller; provided, further, that (i) any deposits
with utility companies shall remain the property of the applicable Property
Owner (for the benefit of Buyer, and not Seller, after the Closing and shall be
credited to Seller by way of an increase to the Purchase Price and (ii) to
the extent possible, meter readings will be obtained by Seller and provided to Buyer on the Business Day
immediately preceding the Closing Date, or as reasonably practical prior to the
Closing Date, and Seller shall bear the charges for utility services based on
such readings and Buyer shall bear charges for all such utility services
thereafter (with an 

 10
 

 

appropriate
credit to Buyer for the estimated utility charges incurred between the date of
reading to the Closing Date);

2.3.5        amounts payable to or by Property Owners
under the Service Contracts shall be prorated between Buyer and Seller, but
shall exclude any lump sum or up-front payments paid to Property Owner
with respect thereto prior to the Effective Date;

2.3.6        license and permit fees shall be
prorated between Buyer and Seller; and

2.3.7        any credits to which Buyer or Seller is
entitled pursuant to Section 12.2 or Section 14.9;

2.3.8        Rent and additional rent pursuant to the
Reynoldsburg Lease;

2.3.9        Property Owners’ share of maintenance costs pursuant to reciprocal
roadway easements and other agreements with neighboring landowners covering
costs to maintain and repair shared driveways, roadways, sewers and other  common facilities; and

2.3.10      other similar items of income and expenses
of operation of the Property shall be prorated between Buyer and Seller.

Except with respect to general real estate and
personal property taxes (which shall be reprorated upon the issuance of the
actual bills, if necessary other than for Properties located in Ohio, for which
any such prorations shall be final), any proration which must be estimated at
Closing shall be reprorated and finally adjusted as soon as practicable after
the Closing Date and in any event within six (6) months thereafter;
otherwise, subject to the provisions of Section 2.3.2 above, all
prorations shall be final.  Payments in
connection with the final adjustment shall be due within thirty (30) days of
written notice.  All such rights and
obligations shall survive until the first anniversary of the Closing Date.

2.4           Closing Costs.  Buyer shall pay the costs of the Owner’s
Policies and/or Loan Policies, search charges, if any, beyond those necessary
for the preparation of the Title Commitments, costs for extended coverage,
coinsurance, reinsurance and any endorsements to any policy of title insurance,
all escrow or closing agent charges (the aforesaid costs being collectively
referred to as, “Title Costs”), costs for recording any deed, state, county and
municipal transfer taxes and documentary stamps (“Transfer Taxes”), the cost of
any updated surveys, all costs associated with any encumbrance Buyer places on
the Properties at Closing, all costs of Buyer’s due diligence (except as
otherwise specifically provided in this Agreement), and any other costs not
expressly required to be paid by Seller pursuant to this Agreement.  Notwithstanding the foregoing agreements of
Buyer, at Closing, Seller shall pay $1,000,000 in the aggregate for Title Costs
payable under the Lexford Property Agreements and $1,000,000 in the aggregate
for Transfer Taxes payable under the Lexford Property Agreements.  In the event that either the Title Costs or
Transfer Taxes are less than $1,000,000, Seller shall give Buyer a credit
against the Purchase Price at Closing in an amount equal to the difference between
the actual cost of the Title Costs and/or the Transfer Taxes, as applicable,
and $1,000,000.  Additionally,
notwithstanding the foregoing, in the event that Buyer obtains a quote for
Title Costs from a reputable national title insurance company other than Title
Insurer that is less than 

 11
 

 

Title Insurer’s quote for Title Costs, Seller shall
provide Buyer at Closing a credit against the Purchase Price in an amount equal
to the difference between said quotes. 
Seller shall pay all costs incurred in connection with the Seller
Deliveries and in order to pay and discharge any indebtedness encumbering the
Properties as of the date of this Agreement and to render title as required
hereunder.  Each party shall pay its own
attorneys.  Brokerage commissions shall
be paid as set forth in Section 13. 
The obligations of the parties to pay applicable escrow or closing
charges shall survive the termination of this Agreement.  Notwithstanding anything to the contrary
contained herein, Seller agrees, at the request of Buyer, to cooperate in all
reasonable respects at no additional cost to Seller, in coordinating with those
mortgagee(s) that are Affiliates of Seller to effectuate the assignment of any
outstanding mortgage or deeds of trust encumbering the applicable Properties to
Buyer’s or Buyer’s Affiliates’ lender(s) in lieu of such Affiliate mortgagees
issuing satisfactions of said mortgages and/or deeds of trust.  Buyer acknowledges and agrees that the
consummation of any such assignment shall not be a condition to the closing of
the transaction contemplated hereby or permit any delay or extension of the
Closing Date.  Empire Group Holdings LLC
(“Empire Holdings”) agrees to indemnify and hold harmless all Seller Parties
from and against any and all losses, risks, liabilities, costs (including legal
fees) and expenses, including, without limitation, any taxes, penalties or
fines imposed by any governmental entities, incurred or imposed as a result of
such mortgage assignment.

2.5           Property Debt.  At or prior to Closing, each Property Owner
will have paid and discharged or defeased all unpaid indebtedness for borrowed
money and other monetary liens encumbering its Property.

2.6           Employees.  If there are any suits brought by pre-Closing
employees of any Property Owner, Owner LLC, Seller or Lexford Management
Company for causes of action relating to such pre-Closing employment
(including, without limitation, wage and hour, unlawful discrimination,
harassment, ERISA, immigration, collective bargaining, payment of social security
and similar taxes, federal contracting, workers’ compensation and occupational
safety, WARN and any health continuation coverage under COBRA) and for damages
accruing prior to the Closing, which suits are not herein specifically referred
to, Seller shall pay and discharge any settlement or judgment which may be
obtained against, and reimburse for reasonable attorneys’ fees and
disbursements and court costs incurred in the defense of same by, Buyer (and
its Affiliates), any Property Owner, Owner LLC and/or Lexford Management
Company by reason thereof, provided that 
Seller has been afforded adequate notice of such suit and a reasonable
opportunity to defend.  Buyer (and its
Affiliates), at Seller’s expense, shall cooperate with Seller in the defense of
any such claim.  Seller shall remain
liable for any failure to withhold on account of wages payable
pre-Closing.  This Section shall survive
Closing.

Section
3.               EVIDENCE
OF TITLE.

3.1           Title Insurance.  Seller has previously delivered to Buyer the
Title Commitments, covering all of the Projects, issued by Title Insurer.  Buyer acknowledges and agrees that it has
reviewed the Title Commitments and all exceptions noted therein (except for
(a) liens for unpaid indebtedness for borrowed money, mechanics liens of
an ascertainable amount and any other lien or matter encumbering any Property
of a liquidated amount curable by the payment of money, which shall be
discharged by Seller or insured over by Title Insurer at or prior to Closing,
it being acknowledged and understood by Buyer that Seller may contest any such
mechanic liens 

 12
 

 

so long as Seller is able to induce Title Insurer to
remove or insure over same at or prior to Closing and (b) options to
purchase the applicable Project, which Seller shall either cause to be released
or otherwise waived or insured over by the Title Insurer at or prior to
Closing) are permitted title exceptions (“Permitted Title Exceptions”).

Notwithstanding the foregoing, Seller represents and
warrants to Buyer that none of the Permitted Title Exceptions materially
adversely affects or could reasonably adversely affect the ownership, operation
or maintenance of the applicable Project as a multi-family property as
historically operated by Seller or Property Owner.  If, however, Seller’s foregoing
representation is inaccurate and there is a Permitted Title Exception which
materially adversely affects or could reasonably adversely affect the
ownership, operation or maintenance of the Property as a multi-family
property (specifically including as examples of such exceptions that are deemed
to have such a material adverse effect are the following: (i) any option to
purchase, right of reverter or reversion, (ii) any superior lease, or (iii) any
lis pendens or the like not filed to secure satisfaction of a monetary
judgment, not relating to litigation disclosed on the Master Disclosure
Schedule, and not relating to any claim similar in nature to litigation
disclosed on the Master Disclosure Schedule that is based on a set of facts of
a substantially similar nature), then Seller shall elect to either cause such
Permitted Title Exception to be removed or insured over the by the Title
Insurer at or prior to Closing or exclude such Project from the Properties to
be conveyed to Buyer hereunder, in which event the Purchase Price shall be
reduced appropriately by the amount of the Purchase Price allocated to the
excluded Project as set forth on Exhibit A attached hereto.  In the event a Project or Projects are
excluded from the conveyance hereunder as provided above, at the election of
Seller, made by written notice given to Buyer prior to the Closing Date, Buyer
shall manage such excluded Project or Projects for up to one (1) year following
the Closing Date, as elected by Seller, pursuant to the terms of a management
agreement mutually agreed upon by Buyer and Seller; provided, however, that
Seller shall have the right to terminate such management at any time upon 30
days notice given to Buyer.  The fee
payable to Buyer for such post-closing management shall be a commercially
reasonable market management fee.

Buyer shall request that the Title Insurer issue, but
Seller shall have no obligation to pay for or to cause the Title Company to
issue, updated ALTA Standard Coverage Owner’s Policies of Title Insurance for the
Projects (the “Owner’s Policies”), dated as of the Closing Date, in the amount
of the Purchase Price allocable to each Project and insuring good and
indefeasible fee simple title to the Projects to be in the applicable Property
Owner as well as ALTA Standard Coverage Loan Policies of Title Insurance for
some or all of the Projects (the “Loan Policies”) and/or any available
endorsements to the Owner’s Policies and/or Loan Policies, excepting from
coverage only the general exceptions (unless Buyer obtains coverage over the
general exceptions), Permitted Title Exceptions and such other exceptions
resulting from or arising out of the acts of Buyer or those of any party
claiming by, through or under Buyer. 
Notwithstanding the foregoing, Seller shall cause Title Insurer at
Closing to omit from the Owner’s Policies and Loan Policies as an exception any
printed “gap” exception, modify any tenancy exception to read as follows: “the
rights of tenants shown in the attached Rent Roll as tenants only”, and omit
any mechanic’s lien exception.

 13

 

Section
4.               BUYER’S
ACCESS TO PROJECTS.

4.1           Buyer’s Access.  As soon as reasonably practicable after the
Effective Date, Seller shall furnish to Buyer (or make available to Buyer at
Seller’s management offices) the Seller Deliveries, provided that Seller
shall deliver to Buyer or its designee those items that Buyer reasonably
requests to be delivered (specifically including, without limitation,
organizational documents, together with all amendments, for each Property
Owner, surveys for each Property, internal property review reports relating to
ADA and FHA compliance and insurance and benefits data).  Subject to the Leases, any restrictions under
any restrictions of record and applicable laws, Buyer, any lender to Buyer and
their respective employees, contractors and agents (collectively, the “Buyer
Inspection Parties”) shall have the right, from time to time prior to the
Closing during normal business hours, to enter upon the Projects to examine the
same and the condition thereof and inspect and photocopy the books and records
thereof and all reports, studies, correspondence, files, permits,
authorizations and certificates relating thereto (whether in printed or
electronic form), whether at any Project or at the office of Lexford Management
Company, and to conduct such surveys and to make such engineering,
architectural, geotechnical and other inspections, tests and studies as Buyer
shall determine to be reasonably necessary, all at Buyer’s sole cost and
expense, including, without limitation, a Phase I environmental report and an
engineering survey and report.  Buyer
acknowledges that it has previously conducted all desired due diligence with
respect to the Properties, that any further inspection of the Properties shall
be solely for the purpose of facilitating Buyer’s transition to owning the
Properties, and that it shall not be a condition to Buyer’s obligation to
proceed to Closing under this Agreement that any lender or prospective lender
to Buyer be satisfied with the results of any inspection of the Properties
conducted by said lender. 
Notwithstanding the foregoing, Buyer shall not conduct or allow any
physically intrusive testing of, on or under any Project without Seller’s prior
written consent, which consent shall not be unreasonably withheld, conditioned
or delayed.  Buyer agrees to give Seller
reasonable advance notice of such examinations or surveys and to conduct such
examinations or surveys during normal business hours to the extent practicable.  Buyer agrees to conduct all examinations and
surveys of the Project in accordance with all applicable laws and in a manner
that will not materially interfere with the operations of Property Owners or
Tenants thereon and will not materially harm or damage any Project or cause any
claim adverse to Property Owners or any Tenant, and agrees to restore the
Project to substantially the same condition that existed prior to any such
examinations or surveys immediately after conducting the same.  No Buyer Inspection Party will contact any
Tenants or governmental or quasi governmental authorities concerning the
Properties without Seller’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed, and Seller shall have the right
to be present during any such contacts, except that no consent shall be
required to inquire with any governmental or quasi-governmental authority as to
the compliance of any Project with applicable legal and regulatory requirements
enforced by such authority.  Prior to and
as a condition to any entry on any Project by any Buyer Inspection Party in the
case of intrusive inspections or tests, Buyer shall deliver to Seller a
certificate of insurance evidencing comprehensive general liability (including
coverage for contractual indemnities) with a combined single limit of at least
$2,000,000.00, in a form reasonably acceptable to Seller, covering any accident
or damage arising in connection with any Buyer Inspection Parties on the
Property, and naming Seller as additional insured.  Within 30 days after any termination of this Agreement, upon Seller’
written request therefor and Seller’s payment of one-half the out of
pocket costs incurred by Buyer with respect to such items, Buyer will provide
to Seller a copy of

 14
 

 

any written inspection,
test, report or summary of the results of any physical inspection of the
Properties.

Section
5.               REPRESENTATIONS
AND WARRANTIES.

5.1           Seller’s Representations.  Seller, and where expressly indicated, each Property Owner with respect to
its Property and Owner LLC, represent and warrant to Buyer as of the
Effective Date that except as may otherwise be disclosed on the Master
Disclosure Schedule:

5.1.1        To Seller’s, Owner LLC’s and Property
Owners’ knowledge, the Master Disclosure Schedule lists all of the Service
Contracts entered into by Seller or a Property Owner that affect the
Properties, but only to the extent that such Service Contract (i) may
reasonably be expected to require payments of more than Fifty Thousand Dollars
($50,000) per annum, or (ii) is essential to the management and operation
of the Properties as a whole.  To Seller’s,
Owner LLC’s and Property Owner’s knowledge, the Service Contracts that Seller
has made available for Buyer’s review are accurate copies of the originals in
Seller’s possession.  Notwithstanding
anything in this Agreement to the contrary, Seller does not covenant or
represent that any particular Service Contract will be in force or effect as of
the Closing or the parties to the Service Contracts will not be in default
under their respective Service Contracts, and the existence of any default by
any party under any Service Contract shall not affect the obligations of Buyer
hereunder.

5.1.2        To Seller’s, Owner LLC’s and Property Owners’ knowledge, each of the Leases affecting the
Properties as of the date thereon is identified in the rent roll posted on
Merrill data web site as of June 1, 2006 (“Rent Roll”), such Leases are in
full force and effect, and the following information concerning each Lease is
true, correct, and complete: 
(a) unit number, (b) name of tenant, (c) amount of
security deposit; (d) monthly rental amount; (e) number of months
prepaid rent; (f) the term of the Lease; and (g) the existence of any
default in payments of rent or additional rent and Delinquent Amounts with
respect thereto pursuant to Section 2.3.2. 
Seller makes no representation with respect to any information provided
or made available regarding the Leases that is not described in the preceding
sentence.  To Seller’s knowledge, the copies
of Leases that Seller has made available for Buyer’s review are accurate copies
of the originals in Seller’s possession. 
Notwithstanding anything in this Agreement to the contrary, Seller does
not covenant or represent that Tenants under Leases will not be in default
under their respective Leases, and the existence of any default by any Tenant
under its Lease shall not affect the obligations of Buyer hereunder.  To Seller’s knowledge, except as
otherwise specifically set forth in the Rent Roll or elsewhere in the
Agreement:

(a)           no leasing or brokerage commission
shall be due for any period subsequent to the Closing Date other than for
tenants who have executed a Lease prior to the Closing Date but do not move in
until after the Closing Date, which commissions shall be paid by Buyer;

(b)           as of the Effective Date, no tenant
is entitled to rental concessions or abatements for any period subsequent to
the Closing Date, except as shown on

 15
 

 

the Rent Roll or
reflected in written financial information previously disclosed to the Buyer;

(c)           as of the Effective Date, there are
no deposits by any tenant other than the security deposits set forth in the
Rent Roll;

(d)           fewer than one percent (1%) of the
Leases existing on the Effective Date contain any extension options on the part
of the tenant.

5.1.3        To Seller’s knowledge, no Property Owner
has received from any governmental authority having the power of eminent domain
any written notice of any condemnation of its Property or any part thereof.

5.1.4        None of the Property Owners, Lexford
Management Company and ERPM has received written notice of any material pending
or threatened (in writing) litigation, action or proceeding initiated against a
Property Owner, the Property, Owner LLC or Seller which would affect the
Property, Owner LLC or any Property Owner after Closing or any Property Owner’s,
Owner LLC’s or Seller’s ability to execute or perform its obligations under
this Agreement.

5.1.5        Seller, Owner LLC and each general
partner of a Property Owner that is a limited partnership and each Property
Owner is duly organized, validly existing and in good standing, under the laws
of the State of its formation.

5.1.6        None of Seller, Owner LLC or any
Property Owner is a “foreign person” as that term is defined in the Internal
Revenue Code of 1986, as amended and the regulations promulgated pursuant
thereto.

5.1.7        The execution, delivery of and
performance under this Agreement are pursuant to authority validly and duly
conferred upon Seller and the signatories hereto.  The consummation of the transactions herein
contemplated and the compliance by Seller with the terms of this Agreement do
not and will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the organizational or governing
entity documents of Seller, Owner LLC or any Property Owner or any agreement,
decree or order by which any of them are bound.

5.1.8        Exhibit A lists the Property
Owner of each of the Properties and describes the equity ownership of the
Seller, the Owner LLC, each general partner of a Property Owner that is a
limited partnership (the “General Partners”) and each of the Property Owners.

5.1.9        Seller is the sole legal and beneficial
owner of title to the Interest free and clear of all liens, claims,
encumbrances or adverse interests of any kind. 
Owner LLC is the sole legal and beneficial owner of title to the equity
interests in each of the Property Owners free and clear of all liens, claims,
encumbrances or adverse interests of any kind.

5.1.10      None of the Property Owners or the Owner
LLC has any employees.

 16
 

 

5.1.11      To Seller’s knowledge, neither Seller,
Owner LLC nor Property Owners has received from any governmental entity or
insurance underwriter, written notice of any currently existing violation of
any zoning, building or fire code, any environmental law, other law or
insurance requirements applicable (or alleged to be applicable) to said
Property, any part thereof, Seller, Owner LLC or any Property Owner that has
not been corrected.

5.1.12      With respect to
that certain Lease dated February 24, 1998 between ERP, as successor to
Lexford, Inc., as tenant and Americana Investment Company, as landlord, as
amended on June 18, 2004 and March 23, 2006 (the “Reynoldsburg Lease”),
ERP (or any Affiliate thereof) has not received any notices from the landlord
of any defaults by ERP that have not been cured and there are no monetary
defaults by the tenant under the Reynoldsburg Lease.  The
Reynoldsburg Lease is in full force and effect and has not been modified.  All construction of the premises demised
under the Reynoldsburg Lease that is the obligation of ERP (or any Affiliate
thereof) pursuant to the terms of the Reynoldsburg Lease has been completed and
the “Allowance Amount” (as such term is defined in the Reynoldsburg Lease) has
been fully disbursed.

5.1.13      The Owner LLC and the Property Owners do not have any liability or
obligation (and, to Sellers’ Knowledge, there is no reasonable basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Owner Parties giving rise to any
liability or obligation) relating to any oral or written contract or lease, to
which the Owner LLC or the Property Owners are parties or by which they are
bound, except for liabilities or obligations (i) set forth on in the
Master Disclosure Schedule, (ii) disclosed in the Financial Statements,
(iii) described or disclosed in the Title Commitments, (iv) of the
Property Owners under the Leases or the Service Contracts scheduled in the
Master Disclosure Schedule.

5.1.14      Owner LLC and
Property Owner Organization and Authority.

(a)           Owner LLC and each Property Owner is
organized and governed by an operating agreement or partnership agreement,
true, accurate and complete copies of which will be delivered to Buyer in accordance
with Section 4.1.

(b)           The Interest and the Property Owner
Interests were validly issued and are fully paid and non-assessable.

(c)           Owner LLC’s sole assets are the
Property Owners, and each Property Owner is a single purpose entity whose sole
real estate asset is the applicable Property owned by such Property Owner.  Seller has not sold, transferred, or
encumbered the Interest or any portion thereof and Owner LLC has not sold,
transferred or encumbered any of the Property Owner Interests other than
pledges or collateral assignments in connection with financing that Seller will
cause to be paid in full at or prior to Closing.  Seller has (or, upon payment of any financing
referred to in the preceding sentence shall have) the right to assign and transfer
the Interest to Buyer or its assignee in accordance with the provisions

 17
 

 

of this Agreement, free
and clear of any and all right, title, or interest therein of any other person
whatsoever.

(d)           There are outstanding no options,
warrants, or rights to acquire the Interest or any portion thereof or any of
the Property Owner Interests.

(e)           Neither the Interest nor any of the
Property Owner Interests nor any portion thereof is the subject of any voting
trust agreement or other agreement relating to the ownership of the Interest or
any of the rights held by the holder thereof, or restricting in any way the
sale or other transfer thereof which will survive Closing.

(f)            Neither the Interest nor any of the
Property Owner Interests is evidenced by any certificate and neither Owner LLC
nor any Property Owner has “opted in” to Article 8 of the Uniform
Commercial Code.

(g)           The Interest constitutes 100% of the
membership interests of Owner LLC.

When used in this
Agreement, the term “to Seller’s knowledge” shall mean and be limited to the
actual (and not imputed, implied or constructive) current knowledge of Cheryl O’Bryan,
Executive Vice President-Property Operations of Lexford Management
Company, Matthew L. Wakenight, First Vice President-Asset Management
of Equity Residential and Tamra Potts, Vice President of Accounting and
Controller of Lexford Management Company, whom Seller represents as having
day-to-day oversight responsibilities for the management of the Interest and
the operation of the Properties (collectively, “Seller’s Knowledge Parties”).  Notwithstanding anything to the contrary set
forth in this Agreement, none of the foregoing individuals shall have any
personal liability or liability whatsoever with respect to any matters set
forth in this Agreement or any of Seller’s representations and/or warranties
herein being or becoming untrue, inaccurate or incomplete.

5.1.15      Except for the representation and warranty
set forth in Section 5.1.2 above (which shall be applied with full force
and effect to the updated Rent Roll, and thereupon supersede all previous Rent
Rolls), the representations and warranties of Seller set forth in this
Section 5.1 shall be deemed to be remade by Seller as of Closing, and
together with the Updated Rent Roll, shall survive the Closing for a period of
twelve (12) months following the Closing Date.  Notice of any claim as to a breach of any
representation or warranty must be made to Seller prior to the expiration of
such twelve (12) month period, and a claim brought against Seller in a legal
proceeding with respect thereto within three (3) months after the
expiration of said twelve (12) month period, or it shall be deemed a
waiver of Buyer’s right to assert such claim. 
The provisions of this Section shall survive the Closing.

5.1.16      Owner LLC, each Property Owner and each other entity, if any, through
which Owner LLC holds its interest in a Property Owner are each, as of the date
of this Agreement, treated as a disregarded entity for federal, state and local
income tax

 18
 

 

purposes,
and, prior to Closing, neither Seller nor any of the foregoing entities will
make any election to treat any of the foregoing entities as other than a
disregarded entity for federal, state or local income tax purposes. Owner
LLC, each Property Owner and each other entity through which Owner LLC directly
or indirectly holds its interest in a Property Owner, has timely filed or will
timely file any and all required federal, state and local income, estimated
income, excise, property, franchise, license and other tax returns that each of
such entities is or has been required by law to file prior to the Closing Date,
and all such returns are or will be true, correct and complete in all material
respects.  Owner LLC, each Property Owner
and each other entity through which Owner LLC directly or indirectly holds its
interest in a Property Owner has paid or will pay prior to the date then due
any and all taxes, interest, penalties, or other sums required to be paid by
each of them to any taxing authority prior to the Closing Date, whether in
connection with such tax returns or otherwise. 
[This Section 5.1.16 was not included in the Syndicated Agreement]

5.1.17      There is not pending
any case, proceeding or other action voluntarily commenced by Seller, Owner LLC
or any Property Owner or any affiliate thereof seeking reorganization,
arrangement, adjustment, liquidation, dissolution or recomposition of Seller,
Owner LLC  or any Property Owner, or the
debts of Seller, Owner LLC or any Property Owner, under any law relating to
bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the
appointment of a receiver, trustee, custodian or other similar official for
Seller, Owner LLC or any Property Owner or any Property, nor to Seller’s
knowledge, have any third parties commenced involuntary proceedings with
respect to any of the foregoing.

5.1.18      Except as provided in
the Master Disclosure Schedule, and subject to Section 8.1(d), any permission,
approval, joinder or consent by any applicable third parties (excluding Seller’s
direct or indirect constituent partners or members, whose consent is addressed
in Section 5.1.14(b)) required in order for Seller to consummate its
obligations under this Agreement has been obtained from said third parties,  except where the failure to obtain such
permission, approval, joinder or consent would not or could not have a material
adverse effect on the continued ownership, operation or maintenance of any
Project as a multi-family property.

5.1.19      The continued
maintenance, occupancy and operation of the Properties is not now and will not
on the Closing Date be dependent on private facilities located at any other
property other than Lexford Assets, and no building or other improvement not
part of the Lexford Assets is dependent on private facilities located on any
Property.

5.1.20      To Seller’s knowledge, the Merrill Data
Site contains a complete set of all environmental reports and assessments
relating to the Properties in the possession or reasonable control of Seller,
Owner LLC, any of the Property Owners and/or Lexford Management Company.

5.1.21      Employee
Matters.

 19
 

 

(a)           (i) Neither ERP, ERPM, Owner LLC,
Seller, Lexford Management Company nor any Property Owner is a party to any
collective bargaining or other labor union contract applicable to the Lexford
Employees, no collective bargaining agreement is being negotiated by ERP or
ERPM with respect to the Lexford Employees, and neither ERP or ERPM knows of
any activities or proceedings of any labor union to organize any of the Lexford
Employees; (ii) there has not been since January 1, 2005, and there is not
presently pending or existing, and to the knowledge of Seller, ERP, Owner LLC,
Lexford Management Company any Property Owner or ERPM, there is not threatened
any strike, slowdown, picketing, work stoppage, or material employee grievance
process generally, any proceeding against or affecting ERP, ERPM, Owner LLC,
Seller, Lexford Management Company or any Property Owner relating to an alleged
violation of the National Labor Relations Act, or any application for
certification of a collective bargaining agent relating to the Lexford
Employees; (iii) there is no lockout of any Lexford Employees and, no such
action is threatened by ERP, ERPM, Owner LLC, Seller or any Property Owner;
(iv) ERP, ERPM, Owner LLC, Seller, Lexford Management Company and each Property
Owner have materially complied with and each is in material compliance with all
laws relating to employment and employment practices (including, without
limitation, Workers Adjustment and Retraining Notification Act), terms and
conditions of employment, employment of aliens, employment of employees with
disabilities (including, without limitation, the requirements of the Americans
With Disabilities Act), equal employment opportunity, nondiscrimination,
harassment, immigration, wages, hours, benefits, collective bargaining, the
payment of social security and similar payroll taxes, occupational health and
safety, and plant closings as those laws relate to the Lexford Employees; and
(v) to the knowledge of Seller, ERP, ERPM, Owner LLC, Lexford Management
Company and Property Owners, in all material respects any and all sums due for
employee compensation and benefits, including pension and severance benefits
and all vacation time owing to any Lexford Employees, have been duly and
adequately accrued on ERPM’s accounting records.

(b)           Seller, ERP, Owner LLC, Property
Owners, Lexford Management Company and ERPM have delivered to Buyer the
following agreements governing the employment of the Lexford Employees:  (i) all employment, consulting, termination,
profit sharing, severance, change of control, individual compensation or
indemnification agreements; and (ii) all bonus or other incentive compensation,
salary continuation, disability, severance, educational assistance, legal
assistance, club membership, employee discount, employee loan, credit union or
vacation agreements, policies or arrangements under which ERP, Seller, Owner
LLC, Property Owners, Lexford Management Company or ERPM has any obligation or liability
(contingent or otherwise) in respect of any current or former Lexford Employee.

(c)           ERP and ERPM have delivered to
Empirian a true and correct list of the following for each Lexford
Employee:  base salary, any bonus
obligations, hire date and pay rate.

 20
 

 

5.2           Modification of Representations,
Warranties and/or Certifications. 
During the period from and after the date hereof and prior to Closing,
as and to the extent that (i) it can be established by clear and
convincing evidence that Buyer has obtained actual knowledge of facts, or
(ii) Buyer receives (or Seller receives and delivers to Buyer) any
Disclosures (as hereinafter defined) with respect to matters addressed in this
Section 5.2, which contain information or facts that are inconsistent with
or different from any or all of the representations, warranties and
certifications made in Section 5.1 above (or in the Updated Rent Roll),
and the Closing occurs even though said fact or Disclosure afforded Buyer the
right not to Close, then such inconsistent portion of such representation,
warranty or certification made in Section 5.1 shall be deemed to be
modified and superseded by such fact or Disclosure (and, in such event, subject
to Buyer’s rights pursuant to Section 8.1 hereof, Seller shall no longer have
any liability hereunder with respect to that portion of the representation,
warranty or certification superseded herein, as applicable; provided, however,
that if said fact or Disclosure did not afford Buyer the right not to Close,
Seller’s and ERP’s liability shall remain, subject to the terms of this
Agreement).  When used in this Agreement,
the term “to Buyer’s knowledge” or similar term shall mean and be limited to
the actual (and not imputed, implied or constructive) current knowledge of
Buyer’s Knowledge Party.

5.3           Buyer’s Representations.  Buyer hereby represents and warrants to
Seller as of the Effective Date as follows:

5.3.1        Buyer is a limited liability company,
duly organized, validly existing and in good standing under the laws of the
State of Delaware.

5.3.2        Buyer has full power, right and
authority to enter into and perform its obligations under this Agreement.  The execution, delivery and performance of
this Agreement by Buyer have been duly and properly authorized by proper action
in accordance with applicable law and with the operating agreement of Buyer.

5.3.3        Neither Buyer nor, to Buyer’s knowledge,
any direct or indirect owner of Buyer is (a) identified on the OFAC List
(as hereinafter defined) or (b) a person with whom a citizen of the United
States is prohibited to engage in transactions by any trade embargo, economic
sanction, or other prohibition of United States law, rule, regulation or
Executive Order of the President of the United States.  The term “OFAC List”
shall mean the list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained by the U.S.  Treasury Department, Office of Foreign Assets
Control and any other similar list maintained by the U.S.  Treasury Department, Office of Foreign Assets
Control pursuant to any law, rule, regulation or Executive Order of the
President of the United States, including, without limitation, trade embargo,
economic sanctions, or other prohibitions imposed by Executive Order of the
President of the United States.

5.3.4        Buyer is capable, financially, of paying
the Purchase Price (and the Buyer Parties are capable, financially, of paying
the aggregate purchase prices under the Lexford Property Agreements) on the
Closing Date.

 21
 

 

5.3.5        Empire Holdings owns, directly or
indirectly, at least 51% of the equity ownership interests in Buyer and the
Buyer Parties (other than Empirian Property Management, Inc.), and will
continue to own, directly or indirectly, at least 51% of the equity ownership
interests in the Property Owners upon the Closing, notwithstanding any
assignment of the rights afforded pursuant to Section 15.2.

5.3.6        Survival of Buyer’s Representations
and Warranties.  The representations
and warranties of Buyer set forth in this Section (other than Section
5.3.4 above) shall be deemed to be remade by Buyer as of Closing and shall
survive the Closing.

Section
6.               AS-IS

6.1           AS-IS CONDITION.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS SECTION 6.1, ALL ACKNOWLEDGEMENTS IN THIS SECTION ARE SUBJECT
TO SELLER’S REPRESENTATIONS AND WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH
IN THIS AGREEMENT AND THE VARIOUS EXHIBITS REFERENCED HEREIN, IN ANY
CERTIFICATE, OTHER INSTRUMENT OR DOCUMENT THAT SELLER OR LEXFORD MANAGEMENT
COMPANY IS OBLIGATED HEREUNDER TO DELIVER AT CLOSING AND IN THE OTHER LEXFORD
PROPERTY AGREEMENTS, AND BUYER RETAINS ALL RIGHTS AND REMEDIES OTHERWISE
CONTEMPLATED IN THIS AGREEMENT WITH RESPECT TO ANY BREACH OR DEFAULT OF SUCH
REPRESENTATIONS AND WARRANTIES. 
ACKNOWLEDGING THE PRIOR USE OF THE PROPERTIES AND BUYER’S OPPORTUNITY TO
INSPECT THE PROPERTIES TO ITS SATISFACTION PRIOR TO SIGNING THIS AGREEMENT,
BUYER AGREES TO PURCHASE THE INTEREST (AND INDIRECTLY, THE PROPERTIES) “AS IS”,
“WHERE IS”, WITH ALL FAULTS AND CONDITIONS THEREON.  ANY WRITTEN OR ORAL INFORMATION, REPORTS,
STATEMENTS, DOCUMENTS OR RECORDS CONCERNING THE PROPERTIES (“DISCLOSURES”)
PROVIDED OR MADE AVAILABLE TO BUYER OR ITS AGENTS BY SELLER, SELLER’S AGENTS,
EMPLOYEES OR THIRD PARTIES REPRESENTING OR PURPORTING TO REPRESENT SELLER,
SHALL NOT BE REPRESENTATIONS OR WARRANTIES, UNLESS SPECIFICALLY SET FORTH IN
SECTION 5.1 OF THIS AGREEMENT OR IN ANY CERTIFICATE THAT SELLER IS OBLIGATED
HEREUNDER TO DELIVER AT CLOSING.  IN PURCHASING
THE INTEREST OR TAKING OTHER ACTION HEREUNDER, BUYER HAS NOT AND SHALL NOT RELY
ON ANY SUCH DISCLOSURES, BUT RATHER, BUYER SHALL RELY ONLY ON BUYER’S OWN
INSPECTION OF THE PROPERTIES AND INTEREST. 
BUYER ACKNOWLEDGES THAT THE PURCHASE PRICE REFLECTS AND TAKES INTO
ACCOUNT THAT THE PROPERTIES ARE BEING SOLD “AS IS.”

6.2           NO ADDITIONAL
REPRESENTATIONS. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
SECTION 6.2, ALL ACKNOWLEDGEMENTS IN THIS SECTION ARE SUBJECT TO SELLER’S
REPRESENTATIONS AND WARRANTIES AND INDEMNITIES EXPRESSLY SET FORTH IN THIS
AGREEMENT AND THE VARIOUS EXHIBITS REFERENCED HEREIN, IN ANY CERTIFICATE,
INSTRUMENT OR OTHER DOCUMENT THAT

 22
 

 

SELLER OR LEXFORD MANAGEMENT COMPANY IS OBLIGATED
HEREUNDER TO DELIVER AT CLOSING AND IN THE OTHER LEXFORD PROPERTY AGREEMENTS,
AND BUYER RETAINS ALL RIGHTS AND REMEDIES OTHERWISE CONTEMPLATED IN THIS
AGREEMENT WITH RESPECT TO ANY BREACH OR DEFAULT OF SUCH REPRESENTATIONS AND
WARRANTIES.  BUYER ACKNOWLEDGES AND
AGREES THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN,
PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE
PROPERTIES INCLUDING, WITHOUT LIMITATION, (A) THE NATURE, QUALITY OR
PHYSICAL CONDITION OF THE PROPERTIES, (B) THE CONSTRUCTION OF THE
IMPROVEMENTS AND WHETHER THERE EXISTS ANY CONSTRUCTION DEFECT THEREIN,
(B) THE WATER, SOIL AND GEOLOGICAL CONDITIONS OF THE PROPERTIES,
(C) THE INCOME TO BE DERIVED FROM THE PROPERTIES, (D) THE SUITABILITY
OF THE PROPERTIES FOR ANY AND ALL ACTIVITIES AND USES WHICH BUYER MAY CONDUCT
OR CAUSE TO BE CONDUCTED THEREON, (E) THE COMPLIANCE OF OR BY THE
PROPERTIES OR THE OPERATION THEREOF WITH ANY LAWS, RULES, ORDINANCES OR
REGULATIONS OF ANY GOVERNMENTAL AUTHORITY OR BODY HAVING JURISDICTION
THEREOVER, (F) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY OR FITNESS
OF THE PROPERTIES FOR A PARTICULAR PURPOSE, (G) THE STATUS OR CONDITION OF
ENTITLEMENTS PERTAINING TO THE PROPERTIES, (H) ANY MATTER REGARDING
TERMITES, AND (I) ANY MATTER REGARDING HAZARDOUS MATERIALS, AS HEREINAFTER
DEFINED.  BUYER FURTHER ACKNOWLEDGES AND
AGREES THAT SELLER, UNLESS OTHERWISE REQUIRED BY LAW OR PURSUANT TO SECTION 5.1
OF THIS AGREEMENT, IS UNDER NO DUTY TO MAKE ANY AFFIRMATIVE DISCLOSURES
REGARDING ANY MATTER WHICH MAY BE KNOWN TO SELLER.

6.3           RELEASE.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS SECTION 6.3, ALL ACKNOWLEDGEMENTS IN THIS SECTION ARE
SUBJECT TO SELLER’S REPRESENTATIONS AND WARRANTIES AND INDEMNITIES EXPRESSLY
SET FORTH IN THIS AGREEMENT AND THE VARIOUS EXHIBITS REFERENCED HEREIN, IN ANY
CERTIFICATE, INSTRUMENT OR OTHER DOCUMENT THAT SELLER OR LEXFORD MANAGEMENT
COMPANY IS OBLIGATED HEREUNDER TO DELIVER AT CLOSING AND IN THE OTHER LEXFORD
PROPERTY AGREEMENTS, AND BUYER RETAINS ALL RIGHTS AND REMEDIES OTHERWISE
CONTEMPLATED IN THIS AGREEMENT WITH RESPECT TO ANY BREACH OR DEFAULT OF SUCH
REPRESENTATIONS AND WARRANTIES.  BUYER
REPRESENTS TO SELLER THAT BUYER HAS CONDUCTED, OR WILL CONDUCT PRIOR TO
CLOSING, SUCH INVESTIGATIONS OF THE PROPERTIES, AS BUYER DEEMS NECESSARY OR
DESIRABLE TO SATISFY ITSELF AS TO ANY MATTER RELATING TO THE PROPERTIES, AND
WILL RELY SOLELY UPON SAME AND NOT UPON ANY INFORMATION PROVIDED BY OR ON
BEHALF OF SELLER, SELLER’S AGENTS,

 23
 

 

EMPLOYEES OR THIRD PARTIES REPRESENTING OR
PURPORTING TO REPRESENT SELLER, WITH RESPECT THERETO.  UPON CLOSING, BUYER SHALL ASSUME THE RISK
THAT ADVERSE MATTERS REGARDING THE PROPERTIES MAY NOT HAVE BEEN REVEALED BY
BUYER’S INVESTIGATIONS, AND BUYER, UPON CLOSING, SHALL BE DEEMED, ON BEHALF OF
ITSELF AND ON BEHALF OF ITS TRANSFEREES AND THEIR RESPECTIVE SUCCESSORS AND
ASSIGNS, TO WAIVE, RELINQUISH, RELEASE AND FOREVER DISCHARGE SELLER AND SELLER’S
AFFILIATES FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, CAUSES OF ACTION,
LOSSES, DAMAGES, LIABILITIES, COSTS AND EXPENSES (INCLUDING ATTORNEYS’ FEES) OF
ANY AND EVERY KIND OR CHARACTER, KNOWN OR UNKNOWN, BY REASON OF OR ARISING OUT
OF THE PROPERTIES, INCLUDING, WITHOUT LIMITATION, ANY LATENT OR PATENT
CONSTRUCTION DEFECT OR OTHER PHYSICAL CONDITION (INCLUDING, WITHOUT LIMITATION,
FUNGI, MOLD OR MILDEW) WHETHER PURSUANT TO ANY OTHER
FEDERAL, STATE, OR LOCAL ENVIRONMENTAL OR HEALTH AND SAFETY LAW OR REGULATION;
THE EXISTENCE OF ANY HAZARDOUS MATERIAL WHATSOEVER, ON, AT, TO, IN, ABOVE,
ABOUT, UNDER, FROM OR IN THE VICINITY OF THE PROPERTIES; AND ANY AND ALL OTHER
ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS WHATSOEVER REGARDING THE
PROPERTIES.  THIS RELEASE INCLUDES CLAIMS
OF WHICH BUYER IS PRESENTLY UNAWARE AND OF WHICH BUYER DOES NOT PRESENTLY
SUSPECT TO EXIST WHICH, IF KNOWN BY BUYER, WOULD MATERIALLY AFFECT BUYER’S
RELEASE OF SELLER.

BUYER UNDERSTANDS AND ACKNOWLEDGES THAT GIVEN THE
CLIMATE AND HUMID CONDITIONS IN THE STATES OF FLORIDA, GEORGIA, AND/OR ONE OR
MORE OF THE OTHER STATES IN WHICH THE PROPERTIES ARE LOCATED, FUNGI, MOLD AND
MILDEW MAY EXIST OR DEVELOP WITHIN THE PROPERTIES LOCATED IN THOSE STATES.  BUYER HEREBY AGREES THAT UPON CLOSING BUYER
SHALL ASSUME ALL RISK, KNOWN AND UNKNOWN, ASSOCIATED WITH THE EXISTENCE OF
FUNGI, MOLD OR MILDEW ON, AT, IN, ABOUT OR THROUGHOUT THE PROPERTIES.

IN THIS REGARD AND TO THE EXTENT PERMITTED BY LAW,
BUYER HEREBY AGREES, REPRESENTS AND WARRANTS THAT BUYER REALIZES AND
ACKNOWLEDGES THAT FACTUAL MATTERS NOW UNKNOWN TO BUYER MAY HAVE GIVEN OR MAY
HEREAFTER GIVE RISE TO CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES,
DAMAGES, COSTS, LOSSES AND EXPENSES WHICH ARE PRESENTLY UNKNOWN, UNANTICIPATED
AND UNSUSPECTED, AND BUYER FURTHER AGREES, REPRESENTS AND WARRANTS THAT THE
WAIVERS AND RELEASES CONTAINED HEREIN HAVE BEEN NEGOTIATED AND AGREED UPON BY
BUYER IN LIGHT OF THAT REALIZATION AND THAT BUYER NEVERTHELESS HEREBY INTENDS
TO RELEASE, DISCHARGE AND ACQUIT SELLER AND SELLER’S AFFILIATES FROM ANY SUCH
UNKNOWN CAUSES OF ACTION, CLAIMS, DEMANDS, DEBTS, CONTROVERSIES, DAMAGES,
COSTS, LOSSES AND EXPENSES.

 

 24

“Hazardous Materials” shall mean
(i) hazardous wastes, hazardous materials, hazardous substances, hazardous
constituents, toxic substances or related materials, whether solids, liquids or
gases, including, but not limited to, substances defined as “hazardous wastes,”
“hazardous materials,” “hazardous substances,” “toxic substances,” “pollutants,”
“contaminants,” “radioactive materials,” “toxic pollutants,” or other similar
designations in, or otherwise subject to regulation under, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”),
42 U.S.C.  § 9601 et seq.;
the Toxic Substance Control Act (“TSCA”), 15 U.S.C.  § 2601 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. 
§ 1802; the Resource Conservation and Recovery Act (“RCRA”), 42
U.S.C.  § 9601, et seq.; the
Clean Water Act (“CWA”), 33 U.S.C. 
§ 1251 et seq.; the Safe Drinking Water Act, 42
U.S.C.  § 300f et seq.; the
Clean Air Act (“CAA”), 42 U.S.C. 
§ 7401 et seq.; and in any permits, licenses, approvals,
plans, rules, regulations or ordinances adopted, or other criteria and
guidelines promulgated pursuant to the preceding laws or other similar federal,
state or local laws, regulations, rules or ordinance now or hereafter in effect
relating to environmental matters; and (ii) any other substances,
constituents or wastes subject to any applicable federal, state or local law,
regulation or ordinance, including any environmental law, now or hereafter in
effect, including but not limited to (A) petroleum,
(B) refined petroleum products, (C) waste oil, (D) waste
aviation or motor vehicle fuel and their byproducts, (E) asbestos,
(F) lead in water, paint or elsewhere, (G) radon,
(H) Polychlorinated Biphenyls (PCB’s), (I) ureaformaldehyde,
(J) volatile organic compounds (VOC), (K) total petroleum
hydrocarbons (TPH), (L) benzine derivative (BTEX), and (M) petroleum
byproducts.

The provisions of this Section 6.3 shall survive
the Closing.  Buyer and Seller
acknowledge and agree that the disclaimers, indemnifications and other
agreements set forth herein are an integral part of this Agreement and that
Seller would not have agreed to sell the Properties to Buyer for the Purchase
Price and Seller would not have agreed to enter into the transaction contemplated
by this Agreement without such disclaimers, indemnifications and other
agreements set forth above.

6.4           RADON GAS – FLORIDA.  Pursuant to Section 404.05618, Florida
Statues (1988), the following notification regarding radon gas is hereby
made, and all parties executing this Agreement acknowledge receipt of this
notification:

“Radon is a
naturally occurring radioactive gas that, when it has accumulated in a building
in sufficient quantities, may present health risks to persons who are exposed
to it over time.  Levels of radon that
exceed federal and state guidelines have been found in buildings in
Florida.  Additional information
regarding radon and radon testing may be obtained from your county public health
unit.”

Section
7.               OPERATIONS
OF THE PROPERTIES

From and after the date hereof until the Closing Date
or earlier termination of this Agreement:

7.1           Ordinary Course of Business.  Seller shall cause each Property Owner to
operate the Property in its ordinary course of business and shall not sell,
further pledge, or otherwise transfer or dispose of all or any part of any
Property (except for such items of Personal Property

 25
 

as become obsolete or are disposed of in the ordinary
course and are replaced with items of substantially equivalent value, utility
and quantity), subject to the provisions of Section 12 below, and shall not
make application for or otherwise consent to a change in a zoning or other land
use classification, right or entitlement.

7.2           Service Contracts.  Seller shall not enter, nor permit any Property
Owner to enter, into any new written service contract with respect to the
Property that will not be cancelable by Buyer without penalty upon no greater
than thirty (30) days notice, without the prior written consent of Buyer, which
shall not be unreasonably withheld or delayed, except for contracts relating to
emergency repairs, for example following a casualty, or where there is a threat
of imminent harm to persons or damage to property, in which case Seller shall deliver to Buyer
written notice of such contracts and copies thereof within two (2) Business
Days of entering into such contract.

7.3           Property/General and Excess
Liability Insurance.  Seller shall
maintain or cause to be maintained in full force and effect property and
commercial general and excess liability insurance on the Properties consistent
with its ordinary course of business. Seller represents that such property
insurance and commercial general liability insurance is issued on an ‘occurrence,’
rather than a ‘claims-made,’ basis and shall survive Closing.

7.4           Maintenance of Improvements.  Subject to Section 12, Seller shall
cause Property Owners, as applicable, to maintain all Improvements in a manner
consistent with Property Owners’ maintenance of the Improvements during
Property Owners’ period of ownership.

7.5           Leases.  Seller will cause Property Owners to perform
their material obligations under the Leases. 
Seller shall not enter
into, amend, renew or extend any new Leases or other occupancy agreements with
respect to the Property without Buyer’s prior written consent, which shall not
be unreasonably withheld or delayed, except for Leases satisfying each of the
following conditions (which shall not require Buyer’s consent):   (1) such Lease is entered into,
amended, renewed or extended in the ordinary course of the applicable Property
Owner’s business, consistent with Seller’s historic practices; (2) the
Lease is in substantially the same form as the form lease provided to Buyer
prior to the Effective Date; and (3) the Tenant is not an affiliate of the
Seller and ERP.  Seller shall not
terminate any Lease except by reason of a default by the tenant thereunder.

7.6           Notice of Violations.  Seller shall furnish Buyer with copies of any
notices that Seller or any Property Owner receives from any governmental
authority or insurance underwriter with respect to any violation of any laws or
insurance requirement applicable to the Properties within five (5) Business
Days of Seller’s or Property Owner’s receipt thereof, provided that any such violation
would or could have, if not properly remedied, a material adverse effect on the
ownership, operation or maintenance of any Project as a multi-family property.

Section
8.               CONDITIONS
TO CLOSING.

8.1           Buyer’s Conditions Precedent.  Buyer’s obligation to proceed to Closing
under this Agreement is subject to the following conditions precedent (any or
all of which Buyer may elect, in its sole discretion, to waive) but only if the
cumulative effect of the failure to satisfy said

 26
 

conditions precedent when compared to the status of
the Lexford Assets (which does not include any Properties which are excluded
from the Properties to be conveyed to Buyer for any reason in accordance with
the provisions hereof), taken as a whole, if such conditions precedent had been
satisfied, represents a Material Adverse Effect (in which event Buyer may
elect, by written notice given to Seller prior to the Closing Date, to
terminate this Agreement, in which event the Earnest Money shall be returned to
Buyer):

(a)           Seller Parties shall have performed
and satisfied each and all of their respective obligations under the Lexford
Property Agreements in all material respects.

(b)           Each and all of the representations
and warranties of the Seller Parties set forth in the Lexford Property Agreements
shall be true and correct in all material respects at the Effective Date and at
the Closing Date.

(c)           The Title Insurer shall later-date
the Title Commitments to cover the Closing, as to each Property and shall issue
the Owner’s Policies (or pro forma owner’s policies or a so-called “marked-up”
Title Commitment) to Buyer, naming Buyer or the applicable Property Owner as
the insured and providing insurance on Land and Improvements included in the
Property, in the amount of the Purchase Price allocated to the Property, and
subject only to the Permitted Title Exceptions, all in accordance with
Section 3 of this Agreement (the “Title
Policies”).

(d)           Seller shall have endeavored to
obtain any required third-party consents in connection with the assignment
of the Service Contracts to Buyer at the Closing, provided that if any
necessary third-party consents are not obtained with respect to a given
Service Contract, then said Service Contract shall not be assigned and Seller
shall pay any resulting termination payments (and the assignment of said
Service Contract shall not be a condition precedent to Buyer’s obligation to
proceed to Closing).

(e)           The transactions contemplated under
the Lexford Property Agreements shall have been consummated, or shall be consummated
concurrently with the Closing under this Agreement except to the extent the
transactions contemplated by any such Lexford Property Agreement are not
consummated as a result of a breach or default by a Buyer Party (it being
understood and agreed that the failure of this condition shall be deemed to
represent a Material Adverse Effect).

(f)            Seller shall have tendered all deliveries to
be made at Closing pursuant to Section 9.2 herein or otherwise.  In the event that the condition
precedent listed in this Section 8.1(f) fails to be satisfied and such failure
does not result in a Material Adverse Effect but has a material adverse effect
on the ownership, operation or maintenance of any Project as a multi-family
property, then Buyer may notify Seller prior to Closing of its election to
exclude such Project from the Properties to be conveyed to Buyer in accordance
herewith, and Seller shall have until Closing (as such time period may be
extended pursuant to Section 9.1) to cure such material adverse effect to the
reasonable satisfaction of Buyer.  If
Seller fails to so cure such material adverse effect, then the Project shall be
excluded from the Properties conveyed at Closing, and the Purchase Price shall
be reduced appropriately by the amount of the Purchase Price allocated to the

 27
 

excluded Project as set
forth on Exhibit A attached hereto.  In
the event a Project or Projects are excluded from the conveyance hereunder as
provided above, at the election of Buyer, made by written notice given to Seller
prior to the Closing Date, Buyer shall manage such excluded Project or Projects
for up to one (1) year following the Closing Date pursuant to the terms of a
management agreement mutually agreed to by Buyer and Seller; provided, however
that Seller shall have the right to terminate such management at any time upon
thirty (30) days’ notice given to Buyer.

8.2           Sellers Conditions Precedent.  Sellers’ obligations to proceed to Closing
under this Agreement are subject to the following conditions precedent:

(a)           Buyer Parties shall have performed
and satisfied each and all of their respective obligations under the Lexford
Property Agreements in all material respects.

(b)           The transactions contemplated under
the Lexford Property Agreements shall have been consummated, or shall be
consummated concurrently with the Closing under this Agreement, except to the
extent the transactions contemplated by any such Lexford Property Agreement are
not consummated as a result of a breach or default by a Seller Party.

Notwithstanding the foregoing, nothing contained
herein shall waive or diminish any right or remedy Seller or Buyer may have for
the other’s default or breach of this Agreement as may otherwise be expressly
provided in this Agreement.  If any of
the conditions set forth in this Section 8.2 is not satisfied on or before
the Closing Date, then without limitation of Seller’s rights under
Section 10.2, if applicable, Seller shall have no obligation to proceed to
Closing and shall have the right, by written notice furnished to Buyer, to
terminate this Agreement, in which event the Earnest Money shall be returned to
Dreier LLP in trust for Buyer and Buyer’s Affiliates unless an Event of Buyer’s
Default has occurred.

8.3           No Finance Contingency.  Buyer acknowledges and agrees that Buyer’s
obligations under this Agreement are not in any manner contingent or
conditioned upon Buyer obtaining financing in order to purchase the
Interest.  It is expressly understood
that if any Buyer Party is unable to close the transaction contemplated by any
Lexford Property Agreement as a result of its failure to obtain financing, an
Event of Buyer’s Default shall have occurred under all of the Lexford Property
Agreements and Seller shall have the remedies provided in Section 10.2
below.  In no event shall Seller be
obligated to comply with any requirements of Buyer’s lender or otherwise incur
any cost, expense or liability solely in connection with Buyer’s financing of
the Property, except, however, that Seller shall cooperate as provided in
Section 4.1 above and with reasonable routine requests to execute standard
closing documents required by Buyer’s lender(s) so long as such closing
documents do not impose any additional costs or liabilities upon Seller.

 28
 

Section 9.               CLOSING.

9.1           Closing Date.  The “Closing” of the transaction contemplated
by this Agreement (that is, the payment of the Purchase Price pursuant to a so-called
“New York style” closing, the transfer of title to the Interest, and the
satisfaction of all other terms and conditions of this Agreement) shall occur
at 11:00 a.m. (Chicago time) on the Closing Date at the Chicago and New York
offices of the Title Insurer, or at such other time and place as Seller and
Buyer shall agree in writing.  The “Closing
Date” shall be the date of Closing.  To
facilitate the Closing, upon request of either Buyer or Seller, representatives
of Buyer and Seller shall meet to commence pre-Closing activities starting on
the second Business Day prior to the Closing Date. Notwithstanding the
foregoing, if any or all of Buyer’s conditions precedent under Section 8.1
above or Seller’s conditions precedent under Section 8.2 above are not
satisfied by the other party for any cause, then the party not satisfying the
Closing condition precedent shall have the right to extend the Closing Date by
up to an aggregate of twenty (20) Business Days by written notice given to the
other party at least three (3) days prior to the then scheduled Closing
Date.  Upon satisfaction or completion of all
closing conditions and deliveries, the parties shall direct Escrowee to
immediately record and deliver the closing documents to the appropriate parties
and make disbursements according to the Closing Statements and escrow letters
executed by Seller and Buyer.

9.2           Seller’s Closing Deliveries.  At Closing, Seller shall execute and deliver,
or cause the applicable Property Owners or Seller Affiliates to execute and
deliver, to Buyer the following:

9.2.1        An Assignment and Acceptance of
Membership Interest in the form attached hereto as Exhibit L.

9.2.2        A copy of the limited partnership
resolutions of the Owner Parties, as applicable, authorizing the sale of the
Interest, the transactions contemplated herein and the execution of each of the
applicable documents executed at or in connection with the Closing; a
certificate of good standing for the Seller, Owner LLC and each of the Property
Owners in their state of formation and a certificate of good standing for each
Property Owner in the state of the applicable Property; and a certified copy of
the applicable organizational documents for Owner LLC and each of the Property
Owners.

9.2.3        A certificate in the form attached
hereto as Exhibit O stating under penalty of perjury, Seller’s U.S.  taxpayer identification number and that
Seller is not a “foreign person” within the meaning of Section 1445 of the
Internal Revenue Code;

9.2.4        The Indemnification Agreement (“Indemnification
Agreement”) in the form attached hereto as Exhibit M, pursuant to
which ERP guarantees the indemnification obligations of Seller hereunder and
Empire Group Holdings LLC, a Delaware limited liability company, guarantees the
indemnification obligations of Buyer hereunder.

9.2.5        Counterpart originals of the Closing
Statement setting forth the prorations and adjustments to the Purchase Price as
required hereunder.

 29
 

9.2.6        An ALTA Statement or other certification
or affidavit, in customary form, to the extent required of Seller by the Title
Insurer to remove the standard “gap”, mechanics’ liens and parties in
possession exceptions from the Owners Policies which are capable of being
removed by such a statement and to issue a non-imputation endorsement.

9.2.7        Such transfer tax, certificate of value
or other similar documents customarily required of Seller in the county and/or
municipality in which the Property is located.

9.2.8        Evidence of cancellation of all
management agreements and intracompany indebtedness, if any, affecting the
Properties.

9.2.9        A letter advising tenants under the
leases of the change in the indirect ownership and the management of the
Property in the form attached hereto as Exhibit F.

9.2.10      A notice to send to all Vendors
substantially in the form attached hereto as Exhibit I.

9.2.11      An update of the Rent Roll, dated no
earlier than five (5) Business Days prior to the Closing Date, certified
by Seller to be to Seller’s knowledge, true and correct in all material
respects, and subject to the limitations on survival and liability provided in
Section 5, Section 10 and Section 12 herein (“Updated Rent Roll”)
and schedule of Delinquent Amounts.

9.2.12      Evidence of resignation of all managers
and officers of the Owner LLC, each of the Property Owners, and each of the
General Partners, which shall include a full release, in form and substance
reasonably satisfactory to Buyer, of any claims that such manager or officer
may have against all said entities.

9.2.13      A Bill of Sale, in the form attached
hereto as Exhibit J, by Lexford Management Company, in favor of
Buyer’s Affiliate of all tangible and intangible personal property used by Lexford
Management Company in connection with the management of the Properties.

9.2.14      If necessary, subject to
Section 8.1(d), counterpart originals of an Assignment and Assumption of
Service Contracts, in the form attached hereto as Exhibit P (the “Service
Contract Assignment”).

9.2.15      Counterpart originals of an Assignment and
Assumption of Lease, in the form attached hereto as Exhibit Q, with
respect to the Reynoldsburg Lease (the “Reynoldsburg Lease Assignment”).

9.2.16      All certificates, if any, evidencing the
Interest and the Property Owner Interests, if any.

9.2.17      Any additional documents that Escrowee may
reasonably require for the proper consummation of the transactions contemplated
by this Agreement (provided,

 30
 

however, that no such
additional document shall expand any obligation, covenant, representation or
warranty of Seller or result in any new or additional obligation, covenant,
representation or warranty of Seller under this Agreement beyond those
expressly set forth in this Agreement).

9.2.18      Possession of the Properties, subject only
to the Permitted Exceptions.

9.2.19      Lease files, license agreements,
maintenance records and warranties, plans and specifications, licenses,
permits, certificates of occupancy, books and records of account, contracts,
correspondence with tenants and suppliers, receipts for deposits, unpaid bills,
advertising materials, booklets, keys, codes and other items, if any, in Seller’s
possession or reasonable control used in the operation of the Properties.

9.2.20      Counterpart originals
of the Employment Matters Agreement.

9.2.21      To the extent that any personal property
of Lexford Management Company is not transferable merely by signing the Bill of
Sale attached as Exhibit J, an endorsement to a certificate of title or the
equivalent (e.g., an endorsement to the certificate of title for any motor
vehicle necessary to transfer title thereto to Buyer).

9.3           Buyer’s Closing Deliveries.  At Closing, Buyer or the appropriate Buyer
Party shall deliver, or execute and deliver to Seller or Seller’s qualified
intermediary designee, as applicable, the following:

9.3.1        The funds required pursuant to
Section 2 above (Buyer shall direct the Escrowee to disburse the Earnest
Money to Seller, and cause Buyer’s Affiliate to pay the Management Property
Purchase Price to Lexford Management Company).

9.3.2        Counterpart originals of the Assignment
and Assumption and Acceptance of Membership Interest.

9.3.3        Counterpart originals of the Closing
Statement.

9.3.4        Such transfer tax, certificate of value
or other similar documents, if any, customarily required of Buyers in the
county in which each Property is located.

9.3.5        Counterpart originals of the
Indemnification Agreement.

9.3.6        Such other documents or instruments that
are reasonably necessary to consummate the Closing.

9.3.7        Subject to Section 8.1(d),
counterpart originals of the Service Contract Assignment.

9.3.8        Counterpart originals of the
Reynoldsburg Lease Assignment.

9.3.9        Counterpart originals of the Employment
Matters Agreement.

 31
 

9.4           Reasonable Cooperation.  In addition to the foregoing closing
documents, Buyer and Seller each agree to execute such reasonable and customary
closing documents not materially contrary to the terms and conditions of this
Agreement as may be reasonably necessary to consummate the Closing.

Section
10.             DEFAULT
AND REMEDIES.

10.1         Buyer’s Pre-Closing Remedies.  If Seller or Seller Parties fail to perform
in accordance with the terms of this Agreement or any of the Lexford Property
Agreements in any material respect at or prior to Closing, said failure would
have a Material Adverse Effect, and said failure is not cured within five
(5) Business Days following notice to Seller from Buyer identifying said
failure (or, in the case of a failure under any of the Lexford Property Agreements,
if said failure is not cured within any applicable cure period under said
Lexford Property Agreement) then an “Event of Seller’s Default” shall be deemed
to have occurred under this Agreement. 
Notwithstanding anything to the contrary contained in this Agreement,
upon the occurrence of an Event of Seller’s Default, as Buyer’s sole and
exclusive remedy hereunder and at Buyer’s option, either (i) the Earnest
Money shall be returned to Dreier LLP in trust for Buyer and Buyer’s
Affiliates, in which event this Agreement shall terminate, and neither party
shall have any further rights or obligations under this Agreement except those
which expressly survive termination, (ii) upon notice to Seller not more
than ten (10) days after the expiration of any such cure period, and
provided an action is filed within thirty (30) days following the scheduled Closing Date, Buyer
may seek specific performance of this Agreement, but not damages (except that
damages shall be a remedy available to Buyer if and to the extent the remedy of
specific performance is unavailable to Buyer as a matter of law or equity due
to the Interest itself being a general intangible and not real property) or
(iii) waive said Event of Seller’s Default and proceed to Closing.  Seller agrees and acknowledges that due to
the limitations on Buyer’s recovery of damages as provided herein, Buyer does
not have an adequate remedy at law, and therefore specific performance is an
appropriate remedy for an Event of Seller’s Default.  Buyer’s failure to seek specific performance
as aforesaid shall constitute its election to proceed under
clause (i) above.  If Buyer
elects to proceed under said clause (i), Seller shall be obligated,
promptly on demand from Buyer, to deliver any directions to Escrowee necessary
or desirable to cause Escrowee to deliver the Earnest Money to Dreier LLP in
trust for Buyer and Buyer’s Affiliates, which obligation shall be enforceable
by injunction, declaratory judgment or other equitable relief.  Buyer and Seller acknowledge and agree that
all Buyer Parties shall be required to elect the same remedy (i.e., either
termination, with return of the applicable earnest money plus interest, waiver
or specific performance and related relief) under this Agreement as under all
of the Lexford Property Agreements, and that Buyer may not pursue specific
performance under this Agreement unless all Buyer Parties are closing or
pursuing specific performance under the Lexford Property Agreements, or
terminate this Agreement unless all Buyer Parties are concurrently terminating
the Lexford Property Agreements. 
Notwithstanding the foregoing, nothing in this Section shall limit any
indemnification obligation of ERP and Seller under this Agreement and the
Indemnification Agreement.  In the event
that pursuant to Section 8.1 above Buyer is not obligated to close hereunder,
then Buyer at its option shall have the remedy described in clause (i) above
unless the reason that Buyer is not so obligated is due to a Seller’s Event of
Default, in which case Buyer shall be entitled to elect the remedy described in
clause (ii) above.

 32
 

10.2         Sellers Pre-Closing Remedies.  If Buyer or Buyer Parties fail to perform in
accordance with the terms of this Agreement or any of the Lexford Property
Agreements in any material respect relating to the Lexford Property Agreements
taken as a whole, and said failure is not cured within five (5) Business
Days following notice to Buyer from Seller identifying said failure (or, in the
case of a failure under any of the Lexford Property Agreements, if said failure
is not cured within any applicable cure period under said Lexford Property
Agreement), then an “Event of Buyer’s Default” shall be deemed to have occurred
under this Agreement.  Notwithstanding
anything to the contrary in this Agreement, upon the occurrence of an Event of
Buyer’s Default, as Seller’s sole and exclusive remedy hereunder and at Seller’s option, either (i) the
Earnest Money shall be delivered to Seller as full and complete liquidated
damages with respect to Buyer’s failure to perform its obligations under this
Agreement (in which case, as provided in the Lexford Property Agreements,
Seller shall also be entitled to retain the earnest money thereunder as
liquidated damages under the Lexford Property Agreements), (ii) upon notice to
Buyer not more than ten (10) days after the expiration of any such cure period,
and provided an action is filed within thirty (30) days thereafter, Seller may
seek specific performance of this Agreement, but not damages, or (iii) waive
said Event of Buyer’s Default and proceed to Closing.  Seller’s failure to seek specific performance
as aforesaid shall constitute its election to proceed under clause (i)
above.  If Seller elects, or is deemed to
have elected, to proceed under clause (i) above, Buyer shall be obligated,
promptly on demand from Seller, to deliver any directions to Escrowee necessary
or desirable to cause Escrowee to deliver the Earnest Money to Seller, which
obligation shall be enforceable by injunction, declaratory judgment, or other
equitable relief.  Buyer and Seller
acknowledge and agree that the actual damages to Seller from an Event of Buyer’s
Default are impractical to ascertain and the amount of the Earnest Money under
this Agreement is a reasonable estimate of Seller’s damages in connection with
the failure to consummate the transactions under this Agreement and shall be
and constitute valid liquidated damages, upon the payment of which this
Agreement shall be null and void and neither party shall have any rights or obligations
under this Agreement. Buyer and Seller acknowledge and agree that Seller (and
Seller’s Affiliates) shall be required to elect the same remedy (i.e., either
liquidated damages or specific performance) under this Agreement as under all
of the Lexford Property Agreements, and that Seller may not pursue specific
performance under this Agreement unless Seller or Seller’s Affiliates are
closing or pursuing specific performance under each of the Lexford Property
Agreements, or elect to receive liquidated damages under this Agreement unless
Seller or Seller’s Affiliates elect to receive liquidated damages under each of
the Lexford Property Agreements. 
Notwithstanding the foregoing, nothing in this Section shall limit any
indemnification obligation of Buyer under this Agreement.

10.3         Pre-Closing Knowledge.  If at any time after the execution of this
Agreement, it can be established by clear and convincing evidence that either
Buyer’s Knowledge Parties or Seller’s Knowledge Parties become aware of any
fact which makes a representation and warranty contained in this Agreement to
become untrue in any material respect, said party shall promptly disclose such
fact in writing to the other party hereto. 
Provided that the party making the representation has taken no willful
act which is not permitted under this Agreement to cause the representation to
become untrue, said party shall not be in default under this Agreement and,
subject to the terms of Section 8.1, the sole remedy of the other party shall
be to either (i) terminate this Agreement by written notice (provided,
however, that Buyer may not terminate this Agreement unless such facts create a
Material Adverse Effect) within five (5) Business Days

 33
 

of the date on which the non-breaching party
becomes aware of such fact (“Notice Date”), in which event the Earnest Money
shall be returned to Dreier LLP in trust for Buyer and Buyer’s Affiliates and
this Agreement, without further action of the parties, shall terminate such
that neither party shall have any further rights or obligations under this
Agreement except for those rights and obligations which by their terms
expressly survive any such termination, or (ii) elect to proceed to
Closing, in which case such party shall be deemed to have waived its rights
with respect to any such breach of representation or warranty.  In the event the non-breaching party
fails to deliver such termination notice to the breaching party on or before
the Notice Date, then the non-breaching party shall conclusively deemed
to have elected to proceed under clause (ii) of the preceding
sentence. 
Neither party may terminate this Agreement unless its
Affiliates concurrently terminate each other Lexford Property Agreement.  Notwithstanding anything to the contrary set
forth in this Agreement and without limitation to anything in Section 10.4
below or in the Indemnification Agreement, Buyer and Seller are prohibited from
making any claims against the other party hereto after the Closing with respect
to any breaches of the other party’s representations and warranties contained
in this Agreement to the extent that it can be established by clear and
convincing evidence that the claiming party had actual knowledge of such breach
prior to the Closing.

10.4         Post-Closing Remedies.  From and after the Closing, Seller and Buyer
shall, subject to the terms and conditions of this Agreement including, without
limitation, the terms of Section 10.5 below, have such rights and remedies
as are available in this Agreement, the Indemnification Agreement, the Confidentiality
Agreement and at law or in equity, except that neither Seller nor Buyer shall
be entitled to recover from the other consequential, punitive or special
damages and the Indemnification Agreement shall control in the event of any
conflict with this Agreement or the Confidentiality Agreement.

10.5         Limitation of Liability.  Notwithstanding anything to the contrary
contained herein, if the Closing shall have occurred (and Buyer shall not have
waived, relinquished or released any applicable rights in further limitation),
the aggregate liability of Seller Parties under this Agreement and all of the
Lexford Property Agreements, in the aggregate (or any documents executed or
delivered in connection herewith or therewith), shall be as set forth in, and
all claims will be made pursuant to, and will be governed by the
Indemnification Agreement.

10.6         No Personal Liability of Seller’s
Directors and Employees.  No
constituent partner in or agent of Seller, nor any advisor, trustee, director,
officer, employee, beneficiary, shareholder, participant, representative or
agent of any corporation or trust that is or becomes a constituent partner in
Seller (including, but not limited to, ERP and Equity Residential, except for
the respective liability under the Indemnity Agreement) shall have any personal
liability, directly or indirectly, under or in connection with this Agreement
or any agreement made or entered into under or pursuant to the provisions of
this Agreement, or any amendment or amendments to any of the foregoing made at
any time or times, heretofore or hereafter, and Buyer and its successors and
assigns and, without limitation, all other persons and entities, shall look
solely to Seller’s assets for the payment of any claim or for any performance,
and Buyer, on behalf of itself and (subject to any applicable terms of this
Agreement or the Indemnification Agreement providing for indemnification by
ERP) its successors and assigns, hereby waives any and all such personal
liability.  The provisions of this
Section shall survive the Closing or any termination of this Agreement.

 34
 

10.7         No Personal Liability of Buyer’s Directors
and Employees.  No
constituent partner in or agent of Buyer, nor any advisor, trustee, director,
officer, employee, beneficiary, shareholder, participant, representative or
agent of any corporation or trust that is or becomes a constituent partner in
Buyer shall have any personal liability, directly or indirectly, under or in
connection with this Agreement or any agreement made or entered into under or
pursuant to the provisions of this Agreement, or any amendment or amendments to
any of the foregoing made at any time or times, heretofore or hereafter, and
Seller and its successors and assigns and, without limitation, all other
persons and entities, shall look solely to Buyer’s assets for the payment of
any claim or for any performance, and Buyer, on behalf of itself and (subject
to any applicable terms of this Agreement or the Indemnification Agreement
providing for several and not joint liability) its successors and assigns,
hereby waives any and all such personal liability.  The provisions of this Section shall
survive the Closing or any termination of this Agreement.

Section
11.             INDEMNIFICATION

11.1         Sellers’ Indemnity.  Seller’s indemnification obligations shall be
contained in the Indemnification Agreement.

11.2         Buyer’s Indemnity.  Buyer’s indemnification obligations shall be
contained in the Indemnification Agreement.

Section
12.             CONDEMNATION
OR DESTRUCTION.

12.1         Prior to Closing, the risk of loss
shall remain with Seller.  If, prior to
Closing, one or more Properties or parts thereof shall be condemned, or
destroyed or damaged by fire or other casualty, Seller shall promptly so notify
Buyer in writing.  If one or more of the
Properties or the Lexford Assets or parts thereof shall be condemned such that
damages are in excess of Forty Million and No/100ths Dollars ($40,000,000.00)
in the aggregate with respect to the Properties and the Lexford Assets (as
reasonably determined by the insurance adjuster designated by Seller’s
insurance company) or if one or more of the
Properties or the Lexford Assets or any part thereof shall be destroyed or
damaged by fire or other casualty the repair of which would cost in excess of
Forty Million and No/100th Dollars ($40,000,000.00) in the aggregate with
respect to the Properties and the Lexford Assets (as reasonably determined by
the insurance adjuster designated by Seller’s insurance company), then, at the
option of either Seller or Buyer, which option shall be exercisable, if at all,
by written notice thereof to the other party within five (5) Business Days
after Buyer receives written notice of such fire, earthquake or other casualty
or condemnation and the determination of the insurance adjuster as described
above, this Agreement may be terminated; provided however, that Buyer may not
terminate this Agreement pursuant to this Section 12.1 unless all Buyer
Parties shall simultaneously terminate all of the Lexford Property Agreements
pursuant to the equivalent terms contained in each Lexford Property Agreement,
and Seller may not terminate this Agreement pursuant this Section 12.1
unless all Seller Parties simultaneously terminate all of the Lexford Property
Agreements pursuant to the equivalent terms contained in each Lexford Property
Agreement.

12.2         If either Buyer or Seller elect to
terminate this Agreement pursuant to Section 12.1, the Earnest Money shall
be returned to Dreier LLP in trust for Buyer and Buyer’s Affiliates by
Escrowee, in which event this Agreement shall, without further action of the

 35
 

parties, terminate and neither party shall have any
further rights or obligations under this Agreement, except those which expressly survive termination.  In the event that neither Buyer nor Seller
exercise the option to terminate this Agreement set forth above, or if the
condemnation or casualty is below the thresholds described above, then the
Closing shall take place on the Closing Date and Buyer shall be entitled to
receive:   (a) with respect to a
condemnation, an assignment of all of each applicable Property Owner’s right,
title and interest in and to the condemnation proceeds received or to be
awarded to such Property Owner as a result of such condemnation, and
(b) with respect to a casualty, a credit against the Purchase Price
payable at Closing in the total amount of (i) the greater of (x) the
proceeds of Seller’s insurance policies covering such loss plus an amount equal
to Seller’s deductible amount and/or self-insured retention under such
policies; and (y) either (A) in the case of a Project with non-conforming
Improvements, the allocated value of the Project less the fair market value of
the Land included thereunder, or (B) in all other cases the estimated cost of
repair plus the estimated amount of lost rental income subsequent to the
Closing Date not to exceed 1 year, all as reasonably determined by Seller’s
insurance representatives; minus (ii) any sums reasonably expended
by Seller in repairs or restoration prior to Closing.  In addition, in the event of the foregoing,
Buyer shall deliver to Seller at Closing a release in form reasonably
satisfactory to Seller whereby Buyer releases Seller from all ongoing liability
and/or claims in connection with such condemnation or casualty.

Section
13.             BROKER/ADVISORS
AND BROKER/ADVISORS’ COMMISSIONS.

13.1         Buyer and Seller each warrant and
represent to the other that, other than Seller’s
Advisor, neither party has employed any other real estate broker,
broker/advisor or agent in connection with the transaction contemplated
hereby.  In the event the Closing is
consummated, Seller shall pay a commission to Seller’s Advisor pursuant to a
separate agreement.  Each party agrees to
indemnify and hold the other harmless from any loss or cost suffered or
incurred by it as a result of the other’s representation herein being
untrue.  This Section shall
expressly survive the Closing hereunder.

Section
14.             OTHER
AGREEMENTS.

14.1         Section 1031 Exchange.  Seller and/or Buyer may structure the
disposition/acquisition of the Properties as one or more like-kind
exchanges under Internal Revenue Code Section 1031 at their respective
sole cost and expense.  Buyer and Seller
shall reasonably cooperate therein, including executing documents reasonably
requested by each other in connection with such exchanges, provided that
neither Seller nor Buyer shall incur any material costs, expenses or
liabilities in connection with the other’s exchanges.  If either party uses one or more qualified
intermediaries to effectuate the exchanges, any assignment of the rights or
obligations of Seller or Buyer hereunder shall not relieve, release or absolve
such party of its obligations to the other.

14.2         [Intentionally Omitted]

14.3         [Intentionally Omitted]

 

 36

 

14.4         Excluded Assets.  The following rights, assets and interests
are intended to be retained by Seller and are not intended to be transferred,
directly or indirectly, to Buyer.  Upon
request by Seller at any time from and after Closing, Buyer shall reasonably
cooperate in causing any Property Owner to quitclaim, assign and transfer such
rights, assets and interests to Seller or Seller’s designee.

14.4.1      Insurance Proceeds.  Subject to Section 12 above, Seller
retains all right, title and interest in and to all proceeds and potential
recoveries under all policies of insurance applicable to the Properties (not
including the Title Policies) and to the period prior to the Closing, including
any rights to any proceeds derived from any subrogation claims arising from or
related to occurrences on or before the Closing Date.  Buyer understands that all insurance policies
relating to the Properties shall be cancelled at Closing and that Buyer is
responsible for obtaining all insurance for the Properties following the
closing.

14.4.2      Property Owner Cash.  Immediately prior to Closing, Seller will
cause all Property Owners to transfer any and all cash and cash equivalent
instruments to Seller or its designee and close all deposit accounts in the
name of any Property Owner.  Except for
the credit to Buyer in respect of security deposits and the other pro-rations
contemplated under Section 2.3, no cash, cash equivalent instruments or
deposit accounts will be transferred to Buyer hereunder, except for security
deposits in accordance with Section 2.3 above.

14.4.3      Employee Benefit Plans.  Buyer understands that all employee benefit
plans currently covering the Lexford Employees are not being sold or otherwise
transferred to Buyer as part of this transaction, that the Lexford Employees
will cease to participate in such employee benefit plans as of the Closing in
accordance with the terms of those plans, and that Buyer is responsible for the
establishment of any employee benefit plans under which it intends to offer
benefits to the Lexford Employees following the Closing, subject to the
Employee Matters Agreement.

14.4.4      Miscellaneous.  Subject to the terms of this Agreement and
any prorations or adjustments made at Closing. 
Seller retains the right to all (i) tax refunds attributable to any
period prior to Closing, (ii) cash on hand in any cash management system,
exclusive of any Tenant security deposits (iii) monies returned from any
escrows maintained by Seller or any Property Owner with respect to the
Properties, (iv) accounts receivable referred to ERP’s collections
department or any third-party agency for collection, and (v) any
monies (not including, however, Tenant security deposits, if any) subsequently
returned by the lenders or their agents in connection with the defeasance,
prior to Closing, of any loan secured by a Property.

14.5          Tax Returns.  Seller shall be responsible for filing all
federal, state and local tax returns (including, without limitation, all
federal, state and local returns for income, sales, use, property, intangible
and franchise taxes) filed or required to be filed on or prior to the Closing
Date with respect to Owner LLC, each Property Owner and each other entity, if
any, through which Owner LLC holds its interest in a Property Owner, and Buyer
shall be responsible for filing all such returns required to be filed after the
Closing Date.  Subject to the other
provisions

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of this Agreement and the Indemnification Agreement,
Seller and Buyer each shall be responsible for making any required payments with
respect to returns required to be filed by them, respectively, including any
deficiencies, and interest and penalties thereon.  Seller will effect any election or take any
action legally available to enable the Property Owners to file short year tax
returns for the period ending on the Closing Date employing the “closing of the
books” method as of the Closing Date and Seller will be responsible for
preparing all such short year returns, subject to the approval of Buyer, which
approval shall not be unreasonably withheld. 
Each other return shall be prepared by the party responsible for the
filing thereof.  Prior to the last date
on which said payments may be made without penalty, Seller shall make (or,
where direct payment by Seller is not possible, pay to Buyer, in immediately
available funds, an amount equal to the amount of) any payments, including any
deficiencies, and interest and penalties thereon (including payments resulting
from subsequent adjustments by taxing authorities), relating to any taxable period
(or portion thereof) preceding the Closing Date; provided, however, that in the
event any return prepared by Buyer would include a period prior to the Closing
Date, prior to filing any such return, Buyer shall provide Seller a copy of the
proposed return and the opportunity to reasonably comment on such return prior
to the due date for filing thereof, unless otherwise waived by Seller.  This Section 14.5 shall not apply to taxes
prorated pursuant to Section 2.3.

14.6          Conduct of
Tax Audits; Tax Records.  Seller and
Buyer agree to cooperate with each other in connection with any official tax
inquiry, tax determination or tax-related legal proceeding affecting a
tax liability of any of the Property Owners (whether before or after the
Closing Date) or in connection with a determination of any tax liability or
treatment (including the preparation of any tax liability or treatment relating
to Seller or ERP) and to make available to each other party a reasonable amount
of time, at no cost to such party, of its employees and officers, together with
documents, correspondence, reports and other materials bearing on such tax
inquiry, examination, proceeding or determination of tax liability or treatment
(including the determination of any tax liability or treatment relating to
Seller or ERP), provided that each party shall be reimbursed for any out-of-pocket
expenses it reasonably incurs in assisting another party hereunder.  The parties will promptly notify each other
in writing in the event any of them (or any of their Affiliates, including in
the case of Buyer following the Closing Date, the Property Owners) receive
written notice of any pending or threatened federal, state or local tax audits
or assessments which relate or may relate to any tax liability for any tax
period for which the other party or any Affiliate has retained or assumed
liability hereunder.  From and after the
Closing Date, Buyer, on the one hand, and Seller, on the other hand, shall make
available to the other, as reasonably requested, all information, records or
documents now or hereafter coming into their possession relating to tax
liabilities or potential tax liabilities of any of the Property Owners (as well
as any such information regarding the Property Owners that may have a bearing
upon such party’s consolidated tax liabilities) for all periods prior to and
including the Closing Date and shall preserve all such information, records and
documents until the expiration of any applicable statute of limitations or
extensions thereof made known by the extending party to the other party.

14.7         Access to Property Records,
Generally.

(a)           Buyer acknowledges that Seller will
require, and Buyer agrees to provide Seller on reasonable request at mutually
convenient times with, continued access to all files, models and personnel
relating to or involved with those

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properties commonly known
as the Guilford portfolio in connection with Seller’s reporting requirements
relative to those properties.

(b)           Seller has advised Buyer that,
currently, the JD Edwards accounting system used by Lexford Management Company
is also used by Seller and its affiliates in connection with Equity Corporate
Housing Holding Co.  (“ECH”), an entity
not involved in the transaction contemplated by the Lexford Property
Agreements, in addition to being used in connection with the Properties.  Subject to any legal or regulatory
requirement or court order or decree to the contrary, Buyer agrees on behalf of
itself and its Affiliates, to keep confidential all information in the JD
Edwards system that does not relate to the Properties or the Interest or the
transactions contemplated hereunder, and to provide Seller, on reasonable
request at mutually convenient times up to twelve (12) months following
the Closing Date, with continued access to files, models and personnel relating
to ECH records on the JD Edwards system. 
Seller agrees on behalf of itself and its Affiliates to keep
confidential all information in the JD Edwards system relating to the Properties,
the Interest and the transactions contemplated hereunder.

(c)           Notwithstanding anything to the
contrary set forth in this Agreement, Buyer hereby agrees that following
Closing, Seller shall have, upon reasonable prior written notice to Buyer,
access during reasonable business hours to all files at the Property that
relate to a dispute or a set of facts that could lead to a dispute (a “Dispute”)
between Seller or any Property Owner and a third party including, without
limitation, a tenant of the Property, with respect to Seller’s period of beneficial
ownership thereof; provided, however, all rights, defenses, causes of action
and claims relating to a Dispute and arising from matters and events following
the Closing Date shall belong to Buyer. 
In addition, and subject to Section 2.3.2, all files at a Property that
relate to tenants who have vacated their units at a Property (the “Former
Tenant Lease Files”) and with whom there exists a Dispute regarding the payment
of Delinquent Amounts, together with any and all rights, defenses, causes of action
and claims relating thereto, shall remain the property of Seller.  Former Tenant Lease Files may be removed from
the Property by Seller on or before Closing, provided that Seller shall afford Buyer
access thereto upon reasonable notice during reasonable business hours if a
claim is brought against any Property Owner by a former tenant to which any
such Former Tenant Lease Files pertain.

14.8         Tax Refunds.  As of the Effective Date, one or more
Property Owners may be seeking adjustments to real estate, ad valorem and/or
personal property rates imposed upon and/or assessed values ascribed to their
Properties for periods prior to or in which the Closing Date occurs (any such
actions being collectively referred to as “Tax Appeals”).  Seller retains the right to cause additional
Property Owners to take similar actions prior to the Closing Date, provided however that any such actions
undertaken after the Effective Date, Seller shall provide Buyer with prior
written notice thereof and consult with Buyer regarding any actions which may
potentially impact taxes imposed on the Properties after the Closing Date (and
shall not take any actions that could reasonably be expected to affect any such
post-Closing Date Taxes). 
Seller

 39
 

 

reserves the right to meet with government officials
and to contest any assessment or reassessment governing or affecting any
Property Owner’s real estate ad valorem and/or personal property taxes for any
period prior to or in which the Closing Date occurs and to attempt to retain a
refund for any taxes previously paid. 
Subject to Section 2.3.1 above, Seller will retain all rights with
respect to the portion of any refund of any Property Owner’s taxes applicable
to the period prior to the Closing Date, but shall promptly pay over to Buyer
the portion of any such refund applicable to the period following the Closing
Date.  From and after the Closing Date,
subject to the forgoing qualifications, Buyer will take all actions and execute
and deliver all documents Seller reasonably request in order to enable Seller
to continue to pursue the Tax Appeals at no out of pocket expense to
Buyer.  Subject to the foregoing
qualifications, Buyer hereby agrees to execute all consents, receipts,
instruments and documents which may reasonably be requested in order to
facilitate settling any tax appeal proceeding commenced by any Property Owner
prior to the Closing Date and collecting the amount of any Tax Refund.  The provisions of this Section shall
survive the Closing and shall not merge into any documentation delivered at
Closing.

14.9         Building Improvements/Replacements.

14.9.1      “Building Improvements” is defined as
capital improvements generally covering new capital expenditures outside the
apartment units for roof replacement, paving, building mechanical equipment,
exterior painting and siding and major landscaping.  Seller has provided Buyer with a schedule detailing 2006 Building
Improvements work under contract as of June 14, 2006 for all Lexford Assets,
including projects with an approved purchase order as shown on Seller’s JD
Edwards tracking system (“PTW”), which schedule is part of the Master Disclosure
Schedule as Exhibit F thereof (the “Exhibit F Improvements”).  Seller has budgeted $10,646,572 for the
Building Improvements for all of 2006. 
As of June 14, 2006, Seller has completed approximately $3,259,762.00 of
the Exhibit F Improvements and expects to complete the balance of the Exhibit F
Improvements (approximately $2,901,537.00) (the “BI Amount”) prior to
Closing.    Seller shall cause all
Exhibit F Improvements work relating to the Properties subject to this
Agreement to be completed in the normal course of business prior to Closing in
a  workmanlike manner and in compliance
with all applicable legal and regulatory requirements, or if there is unfinished
work under any such contracts, at Closing Seller shall assign such contracts to
Buyer and Seller Parties will give Buyer a total credit under the Lexford
Property Agreements for the cost of all such unfinished work; provided that the
credit, together with the cost of all such finished work, shall not exceed the
BI Amount.  Seller at Closing
shall deliver in connection with all finished Building Improvements Work (a)
full lien waivers duly executed and acknowledged by all contactors,
subcontractors and materialmen, (b) all warranties issued in connection
therewith in the name of the applicable Property Owner and (c) to the extent a
permit was necessary to commence any such work, a certificate of completion or
occupancy or other municipal “sign off,” as applicable and if available, and in
connection with any unfinished work, partial lien waivers executed if available
by all contractors, subcontractors and materialmen as to the amount paid by or
on behalf of Seller through the Closing.  
Seller shall provide Buyer with a bi-weekly capital update via the
PTW, which provides details of all outstanding capital projects.  In addition, any individual capital project
commencing after the Effective Date with projected costs in excess of

 40
 

 

$50,000 will be discussed
in advance with Buyer and will be subject to Buyer’s prior written approval,
such approval not to be unreasonably conditioned, delayed or withheld.

14.9.2       “Replacements”
is defined as capital improvements generally covering new expenditures inside the
apartment units such as carpets, appliances, mechanical equipment, fixtures and
vinyl flooring.  Seller will continue to
cause all such Replacements work relating to the Properties subject to this
Agreement to be completed in the normal course of business (the “Replacements
Program”) and in accordance with the guidelines of the 2006 Schedule of Replacements & Capital
(2000-2006B) evidencing a total replacements budget for 2006 of
$10,924,697  (the “Replacements Budgeted
Amount”) prior to Closing, it being understood, however, that said budget is a
budget for all of 2006, and that not all of said work is expected to be
completed by Closing. Seller shall cause all such Replacement work relating to
the Properties subject to this Agreement to be completed in the normal course
of business (i.e., upon tenant move-outs and otherwise upon obsolescence) prior
to Closing in a  workmanlike manner and
in compliance with all applicable legal and regulatory requirements, or if
there is unfinished work under any such contracts, at Closing Seller shall
assign such contracts to Buyer and Seller Parties will give Buyer a total
credit under the Lexford Property Agreements for the cost of all such
unfinished work; provided that the credit, together with the cost of all such
finished work, shall not exceed the Replacements Budgeted Amount.

14.9.3      On or before ten (10) Business Days prior to
Closing, Seller shall deliver to Buyer documentation reasonably satisfactory to
Buyer with respect to the completion of the Exhibit F Improvements (except as
provided in Section 14.9.1) and evidencing that the Replacements Program was
fully implemented as required hereunder, a detail of the work approved and an
accounting of the costs estimated or invoiced.

14.9.4      In addition to the
foregoing obligations of Seller, at Closing, Seller will credit a total of
$4,000,000 against the aggregate Purchase Price payable under all of the
Lexford Property Agreements.

Section
15.             MISCELLANEOUS.

15.1         Entire Agreement.  Except for the Confidentiality Agreement and all
other agreements expressly referenced in this Agreement, all understandings and
agreements heretofore had between Seller and Buyer with respect to the
Properties are merged in this Agreement and the exhibits attached hereto, which
alone fully and completely expresses the agreement of the parties.

15.2         Assignment.  Neither this Agreement nor any interest
hereunder shall be assigned or transferred by Buyer, except to a Buyer
Affiliate or Buyer Affiliates or any entity directly or indirectly controlled
by Ezra Beyman and/or Samuel Weiss. 
Buyer shall provide Seller prior written notice of any such permitted
assignment or transfer and no such permitted assignment or transfer shall in
any event release Buyer from any of its obligations under this Agreement.  Subject to the foregoing, this Agreement
shall inure to the benefit of and shall be binding upon Seller and Buyer and
their respective successors and assigns.

 41
 

 

15.3         No Modification.  This Agreement shall not be modified or
amended except in a written document signed by Seller and Buyer.

15.4         Time of the Essence.  Time is of the essence of this Agreement.

15.5         Governing Law.  This Agreement shall be governed and
interpreted in accordance with the laws of the State of Illinois, without
regard to the principles thereof relating to conflicts of laws.  Each party hereby irrevocably:   (a) submits to the exclusive
jurisdiction of any Illinois or Federal Court sitting in the County of Cook in
any action or proceeding arising out of or relating to this Agreement, the
relations between the parties and any matter, action or transaction
contemplated hereby; (b) agrees that any such courts in which a proceeding
arising out of or relating to this Agreement, the relations between the parties
or any matter, action or transaction contemplated hereunder “first commenced”
shall have exclusive jurisdiction over such actions or proceedings;
(c) waives the defense of inconvenient forum to the maintenance and
continuation of such action or proceedings; (d) consents to the service of
any and all process in any such action or proceedings by the mailing of copies
(certified mail, return receipt requested and postage prepaid) of such process
to them at their addresses specified in Section 15.6; and (e) agrees
that a final and non-appealable judgment rendered by a court of competent
jurisdiction in any such action or proceedings shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by the law of the jurisdiction in which a Project is located.

15.6         Notice.  All notices, requests, demands or other
communications required or permitted under this Agreement shall be in writing
and delivered personally, by certified mail, return receipt requested, postage
prepaid, by overnight courier (such as Federal Express), or by facsimile
transmission with a copy to follow by certified mail, return receipt requested,
postage paid or by overnight courier, addressed as follows:

 42
 

 

If to Seller:

c/o Equity
Residential

Two North
Riverside Plaza—Suite 400

Chicago, Illinois
6060

Telephone:   (312) 928-1172

Facsimile:  (312) 526-0680

Attention:   Bruce C. Strohm

With a copy to:

DLA PIPER RUDNICK
GRAY CARY US LLP

Attn:  Ross Green, Esq.

203 N.  LaSalle Street

Suite 1900

Chicago, IL 60601

Phone:  (312) 368-2132

Fax:  (312) 630-5307

If to Buyer:

EMPIRE ASSET GROUP
LLC

c/o Empire Asset
Group LLC

25 Philips Parkway

Montvale, New
Jersey 07645

Telephone:  (201) 326-1932

Facsimile:  (201) 326-1634

Attention: Mr. Abe
Miller

With a copy to:

DREIER LLP

499 Park Avenue

New York, New York
10022

Telephone:  (212) 328-6110

Facsimile:  (212) 652-3701

Attention: Mark S.
Fawer, Esq.

All notices given
in accordance with the terms hereof shall be deemed received on the next
Business Day if sent by overnight courier, on the same day if sent by facsimile
before 5:00 p.m. (Chicago time) on a Business Day (if sent after
5:00 p.m. Chicago time on a Business Day, shall be deemed received on the
next Business Day), on the third (3rd) Business Day following deposit with the
United States Postal Service as a registered or

 43
 

 

certified mail
with postage prepaid, or when delivered personally or otherwise received or
refused.  Either party hereto may change
the address for receiving notices, requests, demands or other communication by
notice sent in accordance with the terms of this Section 15.6.  All respective attorneys for Buyer and Seller
may give and receive notices on their behalf.

15.7         Waiver
of Trial by Jury.  IN ANY LAWSUIT OR OTHER PROCEEDING
INITIATED BY BUYER UNDER OR WITH RESPECT TO THIS AGREEMENT, EACH OF SELLER AND
BUYER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY.  IN ADDITION, EACH OF SELLER AND BUYER WAIVES
ANY RIGHT TO SEEK RESCISSION OF THE TRANSACTION PROVIDED FOR IN THE AGREEMENT.

15.8         Confidentiality.  Except that which is in the public domain by
virtue of Seller’s reporting or press releases, neither party shall, without
the prior written consent of the other party, unilaterally issue a press
release or other media publicity of any kind whatsoever with respect to Seller,
Buyer or this Agreement or disclose to any third party (other than the Buyer
Disclosure Parties) the existence of this Agreement or any term or condition of
this Agreement (including, without limitation, the Purchase Price) or the
results of any inspections or studies undertaken in connection herewith;
provided, however, if disclosure is required by law, by SEC rules or
regulations, or by the rules or regulations of any stock exchange on which the
shares of Equity Residential are traded, such disclosure shall not be subject
to the other party’s approval.  Buyer
agrees to keep confidential any of the documents, material or information
regarding the Properties supplied to Buyer by Seller or by any third party at
the request of Seller, including, without limitation, any environmental site
assessment reports furnished to Buyer, except Buyer may share such documents,
material and information with Buyer Disclosure Parties on a “need to know”
basis, unless Buyer is compelled to disclose such documents, material or
information by law or regulation or by subpoena or court order or decree.  Buyer agrees to indemnify and hold harmless
Seller from and against any and all losses, damages, claims and liabilities of
any kind (including, without limitation, reasonable attorney’s fees) arising
out of a breach by Buyer or Buyer Disclosure Parties of the provisions of this
Section 15.8.  In the event that the
Closing does not occur in accordance with the terms of this Agreement, Buyer shall
promptly return to Seller all of the documents, materials and information
regarding the Property supplied to Buyer by Seller or at the request of
Seller.  The provisions of this Section 15.8
shall survive the Closing or the earlier termination of this Agreement; provided, however, that (i) Buyer may
retain one copy of any such documents, materials and information for its legal
files, subject to the confidentiality obligations set forth herein; and
(ii) internal notes, analyses and other proprietary materials may be
retained by Buyer and do not need to be provided to Seller (but shall also be
subject to the confidentiality restrictions above).

15.9         Publicity.  Between the Effective Date and
the Closing, Seller and Buyer shall discuss and coordinate with respect to any
public filing or announcement concerning the purchase and sale as contemplated
hereunder; provided that Buyer acknowledges ERP and its general partner, Equity
Residential, are subject to the public company reporting requirements of the
Securities Act of 1933 as amended, the Securities Exchange Act of 1934, as
amended, and the Rules and Regulations of the U.S.  Securities and Exchange Commission (the “SEC”),
promulgated thereunder, which may obligate the Seller to effect public filings
or announcements concerning this Agreement and the transactions contemplated
hereby.  Buyer understands and

 44
 

 

acknowledges that ERP and
its general partner, Equity Residential, are required to file this Agreement,
or a form hereof, under cover of Form 8-K with the SEC.

15.10       No Memorandum of Agreement.  This Agreement or any notice or memorandum
hereof shall not be recorded in any public record except if a claim is brought
for specific performance and a lis pendens or
similar instrument is filed in connection therewith.  A violation of this prohibition shall
constitute a material breach by Buyer, entitling Seller to terminate this
Agreement.

15.11       Counterpart Signatures.  This Agreement may be signed in any number of
counterparts each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.

15.12       Designation of Escrowee as
Reporting Person.  Seller and Buyer
hereby designate Escrowee to act as and perform the duties and obligations of
the “reporting person” with respect to the transaction contemplated by this
Agreement for purposes of 26 C.F.R. 
Section 1.6045-4(e)(5) relating to the requirements for
information reporting on real estate transaction closed on or after
January 1, 1991.  In this regard,
Seller and Buyer each agree to execute at Closing, and to cause the Escrowee to
execute at Closing, a designation agreement, designating Escrowee as the
reporting person with respect to the transaction contemplated by this
Agreement.

15.13       Weekends and Legal Holidays.  Whenever the time for performance of a
covenant or condition required to be performed pursuant to the terms of this
Agreement falls upon a day that is not a Business Day, such time for
performance shall be extended to the next Business Day.  Otherwise all references herein to “days”
shall mean calendar days.

15.14       Facsimile Signatures.  Signatures to this Agreement transmitted
electronically shall be valid and effective to bind the party so signing.  Each party hereto agrees to promptly deliver
to the other party an executed original to this Agreement with its actual signature, but a failure to do so
shall not affect the enforceability of this Agreement, it being expressly
agreed that each party to this Agreement shall be bound by its own telecopied
signature and shall accept the telecopied signature of the other party to this
Agreement.

15.15       Legal Representation.  Each party hereto has been represented by
legal counsel in connection with the negotiation of the transactions herein
contemplated and the drafting and negotiation of this Agreement.  Each party hereto and its counsel has had an
opportunity to review and suggest revisions to the language of this
Agreement.  Accordingly, no provision of
this Agreement shall be construed for or against or interpreted to the benefit
or disadvantage of any party by reason of any party having or being deemed to
have structured or drafted such provision.

15.16       Prevailing Party Attorney Fees.  If either Seller or Buyer files suit to
enforce the obligations of the other party under this Agreement, the prevailing
party shall be entitled to recover the reasonable fees and expenses of its
attorneys from the non-prevailing party. 
If this Agreement is
terminated due to the default of a party, then the defaulting party shall pay
any fees

 45
 

 

or charges due to Escrowee
for holding the Earnest Money as well as any escrow cancellation fees.

15.17       Post-Closing Survival, Generally.  Subject to any provisions of this Agreement
expressly governing the survival of specific obligations after Closing, if the
Closing occurs, any obligations in this Agreement or in any instrument
delivered pursuant to this Agreement which, by their nature, are contemplated
to be performed subsequent to Closing, shall be deemed to survive Closing.

15.18       Headings.  The article,
section, subsection, paragraph and/or other headings of this Agreement are for
convenience only and in no way limit or enlarge the scope or meaning of the
language hereof.

15.19       Invalidity and Waiver.  If any portion of this Agreement is held
invalid or inoperative, then so far as is reasonable and possible the remainder
of this Agreement shall be deemed valid and operative, and, to the greatest
extent legally possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative.  The
failure by either party to enforce against the other any term or provision of
this Agreement shall not be deemed to be a waiver of such party’s right to
enforce against the other party the same or any other such term or provision in
the future.

15.20       Further Assurances.  In
addition to the acts and deeds recited herein and contemplated to be performed,
executed and/or delivered by either party at Closing, each party agrees to
perform, execute and deliver, but without any obligation to incur any
additional liability or material expense, on or after the Closing any further
deliveries and assurances as may be reasonably necessary to consummate the
transactions contemplated hereby or to further perfect the conveyance, transfer
and assignment of the Interest to Buyer.

[SIGNATURE PAGE FOLLOWS]

 46
 

 

IN WITNESS
WHEREOF, each of the parties hereto has caused this Agreement to be executed by
its duly authorized signatory, effective as of the day and year first above
written.

	
  

  	
   

  	
  SELLER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [SELLER ENTITY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [BUYER ENTITY]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEXFORD MANAGEMENT COMPANY:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Equity Apartment Management LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
											

 

 47

 

EXHIBIT
K

EMPLOYMENT MATTERS AGREEMENT

This EMPLOYMENT MATTERS AGREEMENT (“Agreement”) is
entered into as of the       day of           ,
2006 by and among ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership (“ERP”), and EMPIRIAN PROPERTY MANAGEMENT, INC., a Delaware
corporation (the “Empirian”).

WHEREAS, Seller (or
its Affiliates) and Buyer have concurrently entered into the Purchase
Agreements (as defined herein), which provides that ERP agrees to sell its sole
membership interest in ERP/Lexford, LLC and Lexford OP agrees to (i) sell
its sole membership interests in the Lexford OP LLCs (as defined therein); and
(ii) cause certain owners of multifamily residential real estate projects
to convey title to such projects to Buyer or its affiliates pursuant to the
terms and conditions thereof; and

WHEREAS, the
Purchase Agreements require the execution and delivery of this Agreement on the
Closing Date.  Capitalized terms not
otherwise defined herein shall have the meanings employed in the Purchase
Agreements.

NOW THEREFORE, in
consideration of the promises and mutual undertakings set forth herein, and for
other good and valuable consideration, the parties agree as follows:

Section 1.  Employment Matters

1.1           Employment
Matters:   Retention and Severance
Programs.

1.1.1        Retention and Severance Programs.  ERP has adopted and provided Buyer with a
copy of the Summary of Lexford Retention/Severance Program (the “Retention/Severance
Program”), for all Lexford employees of its affiliate, Equity Residential
Properties Management Corp, (“ERPM”) who are employed at the Properties, at the
premises subject to the Reynoldsburg Lease or otherwise dedicated to the
Lexford Assets (such as regional and district managers) as of the Closing Date
(collectively the “Lexford Employees”). 
ERP shall cause ERPM to terminate the employment of all Lexford
Employees employed by it as of the Closing Date.  At Closing, Empirian shall offer employment
to all the Lexford Employees on substantially similar terms and conditions as
their current employment (subject to the eligibility requirements of Empirian’s
employee benefit plans’ terms and conditions, and excluding any programs for
long-term compensation of stock and options, deferred compensation and employee
stock ownership) based on
the Lexford Employees current compensation as set forth in the schedule
provided to Buyer on June 19, 2006 and the terms and conditions set forth in
the summary plan descriptions that Seller provided to Buyer on the Merrill
Corp. Datasite-Project Blackbird website for this transaction.

1.1.2        ERP shall maintain full responsibility,
without any prorations, for payment of the following benefits due to any of the
Lexford Employees on or after the Closing Date: 
(i) all salaries, compensation, unused sick time and

 K-1
 

 

personal time, workers
compensation claims and any other employment related claims of any nature (specifically including claims arising out of
the failure to follow any “group termination” requirements under the Older
Worker Benefits Protection Act (“OWBPA”)), allocable to the period prior
to the Closing Date; (ii) a prorated performance bonus and the cash
equivalent of a prorated long-term compensation, if applicable, in the
amounts determined by ERP, for the period the Lexford Employee worked during
2006 through the Closing Date (it being understood that said proration shall be
performed by Seller solely for the purpose of determining the amounts to be
paid by Seller to said employees for the period through the Closing Date, is
not intended as a proration between Buyer and Seller, and shall not obligate
Buyer (or any Affiliate thereof) to pay any portion of said performance bonuses
or long-term compensation that is not paid by Seller); (iii) vesting of
the unvested stock options and restricted shares held by the Lexford Employee
as of the Closing Date, subject to the terms and conditions of any applicable
employee benefit plans; and (iv) the Retention Benefits, as defined in the
Retention/Severance Program (collectively the “Seller Retained Employee
Liabilities”).  ERP will issue checks for
any amounts required under this Section 1.1.2 to all eligible employees,
less appropriate withholdings and deductions. 
The Retention/Severance Program provides that Retention Benefits to be
paid to each Lexford Employee by Seller are contingent, in addition to other
conditions, upon the employee’s continued employment through a date to be
determined by ERP and Empirian, which date will be no later than the last day
of the sixth month following the Closing (the “Retention Benefits Date”).

1.1.3        Empirian shall assume full
responsibility, without any prorations, for payment of the Severance Benefits,
as defined in (and subject to the contingencies in) the Retention/Severance
Program, due to any of the Lexford Employees on or after the Closing Date (but
in no event after the Retention Benefits Date), subject to a maximum total cap of Four
Million and No/100 Dollars ($4,000,000) in severance payments to be allocated
to the employees entitled to such payments on a first come/first serve
basis.  Empirian will issue checks
for any amounts required under this Section 1.1.3 to all eligible
employees, less appropriate withholdings and deductions.

1.1.4        As
a condition to receiving any benefit from ERP or Empirian under the Retention/Severance
Program, each Lexford Employee shall execute and deliver to ERP and Empirian a
Release releasing ERP, Buyer, Empirian and their Affiliates from any claims
arising out of or relating to their employment and/or termination of employment
with ERP, Buyer, Empirian and/or their Affiliates in the form attached hereto
as Attachment K-1 as same shall be appropriately modified to
reference each such entity and to include, where appropriate, language (to be
reasonably agreed upon by counsel to ERP and Empirian) which will be effective
to release claims by workers over 40 and/or claims by workers terminated
pursuant to a “group termination,” in each case under the OWBPA and any similar
state or local legislation. 
Notwithstanding anything to the contrary set forth in the
Retention/Severance Benefits Program, neither ERP nor Empirian shall be
obligated to make any payment of Retention Benefits or Severance Benefits until
the expiration of any waiting period or

 K-2
 

 

rescission
period required by statute or reasonably recommended by counsel to ERP and/or
Empirian.  Without limitation of the
Retention/Severance Program, neither ERP nor Empirian shall be obligated to
make any payment of Retention Benefits or Severance Benefits to an employee
terminated by Empirian for cause (as defined in the Retention/Severance
Benefits Program).

1.1.5        ERP shall maintain the
Retention/Severance Program in accordance with the terms thereof as of the date
hereof.  In no event shall ERP amend,
modify or alter in any manner the Retention/Severance Program or adopt or agree
to any other severance programs, agreements or arrangements unless any such
changes are not binding upon Empirian, and ERP assumes full responsibility for
all costs and expenses relating to such changes.

1.2           Intentionally
Omitted. 

Section 2.  Miscellaneous

2.1           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

2.2           Counterparts.  This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be effective for purposes of
binding the parties hereto, but all of which shall together constitute one and
the same instrument.

2.3           Headings Descriptive.  The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.

2.4           Severability.  In case any provision in, or obligation
under, this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

2.5           Amendment, Waiver.  Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified except by
an instrument in writing signed by all parties hereto.

2.6           No Third Party Beneficiaries.  Except as may be specifically set forth in
this Agreement, nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Agreement
on any Persons other than the parties hereto and their respective permitted
successors and assigns, nor is anything in this Agreement intended to relieve
or discharge the obligation or liability of any third Persons to any party, nor
give any third Persons any right of subrogation or action against any Party.

2.7           Purchase
Agreements.  As used herein, “Purchase
Agreements” means, collectively, all of those certain (i) Lexford LLC
Membership Interest Transfer

 K-3
 

 

Agreements by and between
Lexford OP, as Seller, and one of the Buyer Parties, as Buyer; (ii) Lexford
LLC Membership Interest Transfer Agreement by and between ERP and an affiliate
of Buyer; and (iii) Agreement for Sale of Real Estate and Related
Property, each by and between the Property Owners, as Seller, and a Buyer
Party, as Buyer, each of even date herewith.

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first written above.

	
  ERP:

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
  ERP
  OPERATING LIMITED PARTNERSHIP, an Illinois limited
  partnership 

  	
   

  	
  EMPIRIAN PROPERTY MANAGEMENT, INC., a Delaware
  corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Equity Residential, a Maryland real estate 

  	
   

  	
  By:

  	
   

  
	
   

  	
  investment trust, its general partner 

  	
   

  	
  Name:

  	
  Henry Heinemann

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
						

 

 K-4

 

EXHIBIT
M

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION
AGREEMENT (“Agreement”) is entered into as of the      
day of                ,
2006 by and among ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership (“ERP”), and LEXFORD PROPERTIES, L.P., an Ohio limited partnership
(“Lexford OP”, and, together with ERP, the “Sellers”), and EMPIRE GROUP
HOLDINGS LLC, a Delaware limited liability company (the “Buyer”).

WHEREAS, Sellers
and Affiliates of Sellers, on the one hand, and Buyer and Affiliates of Buyer,
on the other hand, have concurrently entered into the Purchase Agreements (as
defined herein), which provides that ERP agrees to sell its sole membership
interest in ERP/Lexford, LLC and Lexford OP agrees to (i) sell its sole
membership interests in each Owner LLC (as defined therein and, together with
ERP/Lexford LLC, the “Owner LLCs”); and (ii) cause certain owners of
multifamily residential real estate projects to convey title to such projects
to Buyer or its affiliates pursuant to the terms and conditions thereof; and

WHEREAS, the
Purchase Agreements require the execution and delivery of this Agreement on the
closing date.  Capitalized terms not
otherwise defined herein shall have the meanings employed in the Purchase
Agreements or in the Employment Matters Agreement referred to therein.

NOW THEREFORE, in
consideration of the promises and mutual undertakings set forth herein, and for
other good and valuable consideration, the parties agree as follows:

Section 1.  INDEMNIFICATION.

1.1           Sellers’
Indemnity.

1.1.1        Sellers shall defend, indemnify and hold
harmless Buyer and its respective officers, directors, principals,
shareholders, employees, affiliates, successors and assigns (each a “Buyer
Indemnified Party” and, collectively, the “Buyer Indemnified Parties”)
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses and
disbursements of whatever kind or nature, including but not limited to,
reasonable attorney’s fees and expenses (collectively “Damages”) incurred or
required to be paid by any of them as a result of, or arising out of any of the
following (specifically excluding, however, any such amounts for which the
Buyer Parties received a credit at Closing): 
(a) a breach of Sections 5.1.9 and 5.1.14 of each Purchase
Agreement; (b) Sellers’ failure to timely pay the Seller Retained Employee
Liabilities and at or
before Closing, pay all secured and unsecured third party indebtedness for
borrowed money or otherwise of a liquidated amount encumbering or relating to
any of the Properties; (c) Sellers’ failure to pay when due  (or to reimburse Buyer promptly for the
payment of) all federal, state and local income, sales, use, property,
intangible and franchise taxes and any interest and penalties relating thereto
(collectively “Taxes”) of the Owner LLCs, any of the Property Owners or any
other entity through which any Owner

 M-1
 

 

LLC holds its interest in
a Property Owner applicable to any period or portion thereof ending on or prior
to the Closing Date; (d) the litigation disclosed on the Master Disclosure
Schedule; any claim by a third party that is not an Affiliate of Buyer for
Damages suffered by said third party prior to Closing, if said claim is similar
in nature to any litigation disclosed on the Master Disclosure Schedule and is
based on a set of facts of a substantially similar nature made by the other
plaintiffs; and any litigation arising out of a securities or related claim
brought by any limited partner of ERP or any trust unit owner of Equity
Residential (EQR); (e) a breach of any representation or warranty of any
of the Seller Parties or non-fulfillment of any covenant to be performed
or complied with by any of the Seller Parties prior to the Closing Date under
the Purchase Agreements (but only to the extent the liabilities and damages
attributable thereto in the aggregate exceed $1,000,000); (f) a non-fulfillment
of any covenant to be performed or complied with by any of the Seller Parties
from and after the Closing Date under the Purchase Agreements; or
(g) except for matters included in (d) above, liability to third parties
in connection with any Seller’s or Property Owner’s original acquisition of any
of the Properties or any Seller’s original acquisition of the Interest, as
applicable, or the operation and management of any of the Properties or Lexford
Management Company prior to the Closing Date (specifically excluding any
Damages relating in any way to Hazardous Materials or the physical condition of
the Properties, other than Damages of said nature suffered prior to Closing by
a third party that is not an Affiliate of Buyer), but only to the extent such
liabilities and Damages in this subsection 1.1.1(g) (except to the extent
related to the Reynoldsburg Lease, the Service Contracts or any obligations of
Seller that are subject to proration or reproration under Section 2.3) in the
aggregate exceed $250,000. 
Notwithstanding the foregoing, in no event shall Sellers’ liability
under subsection 1.1.1(e) in the aggregate, exceed $20,000,000.  If the Sellers fail to make any payment
otherwise required within fifteen (15) days after proper demand therefore,
the amount of such payment will accrue interest payable by the Sellers at the
rate of ten percent (10%) per annum, beginning with the 16th day after the date
of demand through and including the date actually paid to the Buyer Indemnified
Party entitled to payment.

1.1.2        Notwithstanding anything to the contrary
herein, promptly following the presentation or commencement of prosecution of a
claim, action or proceeding against a Buyer Indemnified Party in respect of
which indemnity may be sought hereunder, such Buyer Indemnified Party will
promptly notify the Sellers with respect thereto.  In addition, a Buyer Indemnified Party will
promptly notify the Sellers after any action is commenced (by way of service of
summons or other legal process giving information as to the nature and basis of
the claim) against such Buyer Indemnified Party in respect of which indemnity may
be sought hereunder.  In any event,
failure or delay to notify the Sellers will not relieve the Sellers from their
indemnification obligations hereunder, except to the extent the Sellers are
prejudiced or harmed by such failure or delay. 
The Sellers may choose to or will, if requested by a Buyer Indemnified
Party, assume the defense of any litigation or proceeding in respect of which
indemnity may be sought hereunder, including the employment of counsel
reasonably satisfactory to such Buyer Indemnified Party and the payment of the
fees and expenses of such counsel, in which event, except as provided below,
Sellers will not be liable for

 M-2
 

 

the fees and expenses of
any other counsel retained by any Buyer Indemnified Party in connection with
such litigation or proceeding.  Should
Sellers assume the defense of any litigation or proceeding, Buyer will make the
employees of it or any of its affiliates available to Sellers to provide
testimony and otherwise provide reasonable assistance to Sellers, and Buyer
will also preserve and make all documents and other items specified by Sellers
as evidentiary material available to Sellers for inspection, copying and
production in connection with any such litigation or proceeding.  Sellers will not be liable for any settlement
of any litigation or proceeding effected without their prior written consent,
which shall not be unreasonably withheld, conditioned or delayed.

1.2           Buyer’s
Indemnity.

1.2.1        Buyer shall defend, indemnify and hold
harmless Sellers and their respective officers, directors, partners,
principals, shareholders, employees, affiliates, successors and assigns (each a
“Seller Indemnified Party” and, collectively the “Seller Indemnified
Parties”) from and against any and all Damages incurred or required to be
paid by any of them as a result of, or arising out of any of the following
(specifically excluding, however, any such amounts for any of the Seller
Parties received a credit at Closing):  
(a) Buyer’s failure to timely pay the Buyer Assumed Employee
Liabilities; (b) Buyer’s failure to timely pay all Taxes of any Owner LLC,
any of the Property Owners or any other entity through which any Owner LLC
holds its interest in a Property Owner applicable to any period or portion
thereof after the Closing Date; (c) a breach of representation or warranty
of any of the Buyer Parties in any material respect under the Purchase
Agreement (but only to the extent that the damages and liabilities attributable
thereto in the aggregate exceed $1,000,000, but in no event shall such liabilities
exceed $20,000,000); (d) non-fulfillment of any material covenant in any
material request to be performed or complied with by any of the Buyer Parties
under the Purchase Agreements; (e) the operation and management of the
Lexford Assets prior to the Closing Date, not to exceed $250,000; provided that
Buyer shall not be responsible for any liabilities or obligations accruing
prior to Closing under the Reynoldsburg Lease, the Service Contracts, or any
obligations of Seller that are subject to proration or reproration under
Section 2.3, (f) Hazardous Materials or the physical condition of the
Properties first present post-Closing, or (g) the operation and management
of the Properties on or after the Closing Date. 
If the Buyer fails to make any payment otherwise required within fifteen
(15) days after proper demand therefore, the amount of such payment will
accrue interest payable by the Buyer at the rate of ten percent (10%) per
annum, beginning with the 16th day after the date of demand through and including
the date actually paid to the Seller Indemnified Party entitled to payment.

1.2.2        Notwithstanding anything to the contrary
herein, promptly following the presentation or commencement of prosecution of a
claim, action or proceeding against a Seller Indemnified Party in respect of
which indemnity may be sought hereunder, such Seller Indemnified Party will
promptly notify the Buyer with respect thereto. 
In addition, a Seller Indemnified Party will promptly notify the Buyer
after any action is commenced (by way of service of summons or

 M-3
 

 

other legal process
giving information as to the nature and basis of the claim) against such Seller
Indemnified Party in respect of which indemnity may be sought hereunder.  In any event, failure or delay to notify the
Buyer will not relieve the Buyer from its indemnification obligations
hereunder, except to the extent the Buyer is prejudiced or harmed by such
failure of delay.  The Buyer will, if
requested by a Seller Indemnified Party, assume the defense of any litigation
or proceeding in respect of which indemnity may be sought hereunder, including
the employment of counsel reasonably satisfactory to such Seller Indemnified
Party and the payment of the fees and expenses of such counsel, in which event,
Buyer will not be liable for the fees and expenses of any other counsel
retained by any Seller Indemnified Party in connection with such litigation or
proceeding.  Buyer will not be liable for
any settlement of any litigation or proceeding effected without its prior written
consent.

Section 2.  MISCELLANEOUS.

2.1           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

2.2           Counterparts.  This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be effective for purposes of
binding the parties hereto, but all of which shall together constitute one and
the same instrument.

2.3           Headings Descriptive.  The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.

2.4           Severability.  In case any provision in, or obligation
under, this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

2.5           Amendment, Waiver.  Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified except by
an instrument in writing signed by all parties hereto.

2.6           No
Third Party Beneficiaries.  Except as may be specifically set forth in
this Agreement, nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Agreement
on any Persons other than the Indemnifying and Indemnified Parties and their
respective permitted successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
Persons to any party, nor give any third Persons any right of subrogation or
action against any Party.

2.7           Purchase
Agreements.  As used herein, “Purchase
Agreements” means, collectively, all of those certain (i) Lexford LLC
Membership Interest Transfer Agreements by and between Lexford OP, as seller,
and one of the Buyer affiliates, as

 M-4
 

 

buyer; (ii) Lexford
LLC Membership Interest Transfer Agreement by and between ERP and Buyer; and
(iii) Agreement for the Purchase and Sale of Real Estate by and between
the Property Owners and a Buyer Party, each of even date herewith.

2.8           Prevailing Party Attorney Fees.  If either Seller or Buyer files suit to
enforce the obligations of the other party under this Agreement, the prevailing
party shall be entitled to recover the reasonable fees and expenses of its
attorneys from the non-prevailing party. 
If this Agreement is terminated due to the default of a party, then the
defaulting party shall pay any fees or charges due to Escrowee for holding the
Earnest Money as well as any escrow cancellation fees.

2.9           ERP Representations and Warranties.  ERP represents and warrants that (i) each of
ERP and its general partner was duly formed, is in good standing, is duly
authorized to execute and deliver this Agreement, (ii) there is no conflict
between this Agreement and either of ERP’s or its general partner’s performance
of ERP’s or its general partner’s obligations hereunder, and (iii) there is no
conflict between this Agreement and either of ERP’s or its general partner’s
organizational documents or any agreement, order or decree by which either ERP
or its general partner is bound.

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.

	
  SELLERS:

  	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
  ERP
  OPERATING LIMITED PARTNERSHIP,

  	
   

  	
  EMPIRE GROUP HOLDINGS LLC, 

  
	
  an Illinois limited
  partnership

  	
   

  	
  a Delaware limited liability company 

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Equity
  Residential, a Maryland real estate 

  	
   

  	
  By:

  	
   

  
	
   

  	
  investment
  trust, its general partner

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LEXFORD
  PROPERTIES, L.P., an Ohio
  limited partnership

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  Lexford
  Partners, L.L.C., its general partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Manager

  	
   

  	
   

  

 

 M-5

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