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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1998
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BEACON CAPITAL PARTNERS, INC.
(Exact name of registrant as specified in its charter)
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MARYLAND 04-3403281
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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ONE FEDERAL STREET, 26TH FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 457-0400
(Address and Telephone Number of Principal Executive Offices)
ALAN M. LEVENTHAL
CHIEF EXECUTIVE OFFICER
AND
WILLIAM A. BONN, ESQ.
GENERAL COUNSEL
BEACON CAPITAL PARTNERS, INC.
ONE FEDERAL STREET, 26TH FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 457-0400
(Name, Address and Telephone Number, Including Area Code, of Agent for Service)
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COPY TO:
GILBERT G. MENNA, P.C.
KATHRYN I. MURTAGH, ESQ.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
BOSTON, MA 02109
(617) 570-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after this registration statement becomes effective, as determined by the
Registering Stockholder.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED REGISTERED(1) SHARE(2) PRICE REGISTRATION FEE
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Common Stock................................ 20,394,843 $20.00 $407,896,860 $120,330
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(1) Plus such additional number of shares as may be required in the event of a
stock dividend, reverse stock split, split-up, recapitalization, or other
similar event.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act").
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFER TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
20,394,843 SHARES*
BEACON CAPITAL PARTNERS, INC.
COMMON STOCK
* THIS PROSPECTUS EXCLUDES 579,089 SHARES OF COMMON STOCK AND SHARES
UNDERLYING 225,201 OPERATING PARTNERSHIP UNITS SOLD BY BCP TO THE COMPANY'S
FOUNDERS, ALAN M. LEVENTHAL AND LIONEL P. FORTIN, IN CONNECTION WITH THE
FORMATION OF THE COMPANY AND THE CLOSING OF THE ORIGINAL OFFERING.
This Prospectus relates to the Common Stock, par value $.01 per share (the
"Common Stock"), of Beacon Capital Partners, Inc., a Maryland corporation
("BCP"). The Common Stock was issued and sold (the "Original Offering") on March
20, 1998 (the "Closing Date"), April 3, 1998 (the "Second Closing Date"), and
April 13, 1998 (the "Final Original Offering Closing Date") to the Initial
Purchaser (as defined herein) and was simultaneously resold by the Initial
Purchaser in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), to persons reasonably
believed by the initial purchaser to be Qualified Institutional Buyers as
defined in Rule 144A under the Securities Act, to a limited number of
institutional "Accredited Investors" (as defined in Rule 501(a)(1),(2),(3) or
(7) under the Securities Act) and to certain individual "Accredited Investors"
(as defined in Rule 501 (a)(4),(5) or (6) under the Securities Act).
The Common Stock offered hereby (the "Offered Securities") may be offered
and sold from time to time by the holders named herein or by their transferees,
pledgees, donees or their successors (collectively, the "Selling Stockholders")
pursuant to this Prospectus. The Offered Securities may be sold by the Selling
Stockholders from time to time directly to purchasers or through agents,
underwriters or dealers. See "Selling Stockholders" and "Plan of Distribution."
If required, the names of any such agents or underwriters involved in the sale
of the Offered Securities and the applicable agent's commission, dealer's
purchase price or underwriter's discount, if any, will be set forth in an
accompanying supplement to this Prospectus (the "Prospectus Supplement"). The
Selling Stockholders will receive all of the net proceeds from the sale of the
Offered Securities and will pay all underwriting discounts, selling commissions
and transfer taxes, if any, applicable to any such sale. The Company is
responsible for payment of all other expenses incident to the registration of
the Offered Securities. The Selling Stockholders and any broker-dealers, agents
or underwriters that participate in the distribution of the Offered Securities
may be deemed to be "Underwriters" within the meaning of the Securities Act, and
any commission received by them and any profit on the resale of the Offered
Securities purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
BCP is a recently-organized Maryland corporation established to continue the
real estate investment and development activities of certain senior management
from Beacon Properties Corporation ("Beacon Properties"), formerly a New York
Stock Exchange-listed real estate investment trust ("REIT") until its
acquisition by Equity Office Properties Trust in December 1997. The day-to-day
operations of BCP and its operating partnership, Beacon Capital Partners, L.P.
(the "Operating Partnership," and collectively with BCP, the "Company") are
managed internally by the senior management of BCP. BCP is the sole general
partner of the Operating Partnership, through which the investments of the
Company are made.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK (AS DEFINED BELOW) INCLUDING, AMONG OTHERS:
- The Company relies upon, and its success is dependent upon, key personnel
of BCP, including Alan M. Leventhal and Lionel P. Fortin.
- Management's track record while employed at Beacon Properties, and the
performance of Beacon Properties under such management's leadership, does
not guarantee or predict the performance of the Company or its management.
- The Company has a limited operating history.
- Certain of the Company's investments in Assets (as defined below) will
require significant management resources, will be illiquid, and may
decrease in value because of changes in economic conditions.
- Management of the Company may earn substantial compensation from the
Long-Term Incentive Plan (as defined below) which, if paid, could
substantially reduce cash available for distribution to stockholders.
- Conflicts of interest may arise between the Company and the BCP Affiliate
(as defined below), including in connection with the Company's Long-Term
Incentive Plan.
- The Company is subject to competition from numerous competitors, including
other REITs and private real estate opportunity funds.
- The Company intends to leverage the Company's Assets, which can compound
losses.
- Certain assets may be acquired through a sister company (as described
herein), which will not qualify as a REIT and which may be subject to
income tax at regular corporate rates, which may have the effect of
reducing cash available for distribution to the stockholders.
- BCP may be subject to income tax at regular corporate rates if it fails to
qualify as a REIT, which would substantially reduce the amount of cash
available for distribution to stockholders.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
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NOTE REGARDING MANAGEMENT'S EXPERIENCE
The Company's senior management consists of certain members of former senior
management of Beacon Properties Corporation ("Beacon Properties"), formerly a
New York Stock Exchange-listed real estate investment trust ("REIT"), until its
merger with and into Equity Office Properties Trust in December 1997.
Information regarding the performance of Beacon Properties presented herein has
been obtained from documents previously made public by Beacon Properties. Such
information is presented herein solely to describe certain of the prior
experience of certain of the Company's senior management and to provide certain
statistics respecting Beacon Properties while managed by such senior management.
No assurance can be made that the Company will achieve results comparable to
those achieved by Beacon Properties. See "Risk Factors--Economic and Business
Risks--Past Performance Not a Predictor of Future Results."
BCP intends to qualify as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"), commencing with its taxable year ending December 31, 1998.
The charter of BCP, as may be amended or restated from time to time (the
"Charter"), contains various restrictions on the ownership and transfer of the
Common Stock in order to preserve BCP's status as a REIT and for other purposes.
See "Description of Securities--Transfer Restrictions" and "Certain Provisions
of Maryland Law and of BCP's Charter and Bylaws."
CAUTIONARY STATEMENTS FOR PURPOSES OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain statements in this Prospectus under the captions "Offering Summary,"
"Risk Factors," "Investment Strategies and Experience," "Management's Discussion
and Analysis of Liquidity and Capital Resources" and elsewhere constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). When used in
this Prospectus, the words "anticipate," "believe," "estimate," "expect" and
similar expressions are generally intended to identify forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
important factors include, among others: general economic and business
conditions; industry trends; competition; changes in business strategy or
development plans; availability, terms and deployment of capital; availability
of qualified personnel; changes in, or the failure or inability to comply with,
government regulation; and other factors referenced in this Prospectus. See
"Risk Factors." These forward-looking statements speak only as of the date of
this Prospectus. The Company expressly disclaims any obligation or undertaking
to disseminate any updates or revisions to any forward-looking statement
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
i
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-11 (as amended, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document are summaries of the material terms
of such contract, agreement or other document. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved. The Registration Statement (including the exhibits thereto)
filed by the Company with the Commission may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be available
for inspection and copying at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street, (Suite 1400), Chicago, Illinois 60661. Copies
of such material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a website that contains reports, proxy and
information statements and other information. The website address is
http://www.sec.gov.
Upon the effectiveness of the Registration Statement, the Company will be
subject to the informational requirements of the Exchange Act and, in accordance
therewith, will file reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information can be inspected and copied at the addresses set forth
above. The Company reports its financial statements on a year ended December 31.
The Company intends to furnish its stockholders with annual reports containing
consolidated financial statements audited by its independent certified public
accountants and make available quarterly reports containing unaudited condensed
consolidated financial statements for each of the first three quarters of each
fiscal year.
ii
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TABLE OF CONTENTS
<TABLE>
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NOTE REGARDING MANAGEMENT'S EXPERIENCE................................................ i
CAUTIONARY STATEMENTS FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995................................................................................ i
AVAILABLE INFORMATION................................................................. ii
OFFERING SUMMARY...................................................................... 1
The Company......................................................................... 1
Investment Strategy................................................................. 1
Advantages of the Company Structure................................................. 3
The BCP Sister Corp. ............................................................... 3
Risk Factors........................................................................ 3
Recent and Pending Acquisitions..................................................... 5
Management and Long-Term Incentive Plan............................................. 6
Restrictions on Ownership of Stock.................................................. 7
Use of Proceeds..................................................................... 7
Distribution Policy................................................................. 7
Tax Status of the Company........................................................... 8
Organization and Relationships...................................................... 9
RISK FACTORS.......................................................................... 10
Economic and Business Risks......................................................... 10
Investment Activity Risks........................................................... 15
Legal and Tax Risks................................................................. 17
Other Risks......................................................................... 21
INVESTMENT STRATEGIES AND EXPERIENCE.................................................. 22
Investment Strategies and Experience................................................ 22
Investment Management............................................................... 24
The BCP Sister Corp. ............................................................... 25
THE COMPANY........................................................................... 27
Recent and Pending Acquisitions..................................................... 27
Directors and Executive Officers.................................................... 33
Other Professionals................................................................. 36
Board of Directors and Indemnification of Officers and Directors.................... 37
Management Compensation............................................................. 39
Long-Term Incentive Plan............................................................ 39
Stock Incentive Plan................................................................ 41
Employment Agreements; Covenants Not to Compete..................................... 42
Credit Facility..................................................................... 42
Certain Relationships; Conflicts of Interest........................................ 42
USE OF PROCEEDS....................................................................... 44
DISTRIBUTION POLICY................................................................... 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 45
PRICE RANGE OF COMMON STOCK........................................................... 47
CAPITALIZATION........................................................................ 47
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iii
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA............................ 48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 49
DESCRIPTION OF SECURITIES............................................................. 50
General............................................................................. 50
Common Stock........................................................................ 50
Preferred Stock..................................................................... 50
Power to Issue Additional Shares of Common Stock and Preferred Stock................ 51
Dividend Reinvestment Plan.......................................................... 51
Transfer Agent and Registrar........................................................ 51
Transfer Restrictions............................................................... 51
Registration Rights................................................................. 53
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
BCP'S CHARTER AND BYLAWS............................................................ 55
Amendment of Charter and Bylaws..................................................... 55
Dissolution of the Company.......................................................... 55
Meetings of Stockholders............................................................ 55
The Board of Directors.............................................................. 55
Limitation of Liability and Indemnification......................................... 56
Indemnification Agreements.......................................................... 57
Business Combinations............................................................... 57
Control Share Acquisitions.......................................................... 58
COMMON STOCK AVAILABLE FOR FUTURE SALE................................................ 59
OPERATING PARTNERSHIP AGREEMENT....................................................... 60
Classes of Units.................................................................... 60
Management.......................................................................... 60
Removal of the General Partner; Transfer of the General Partner's Interest.......... 60
Amendments of the Operating Partnership Agreement................................... 61
Transfer of Units; Substitute Limited Partners...................................... 61
Redemption of OP Units.............................................................. 61
Operations.......................................................................... 62
Issuance of Additional Limited Partnership Interests................................ 62
Extraordinary Transactions.......................................................... 62
Exculpation and Indemnification of the General Partner.............................. 62
Tax Matters......................................................................... 63
FEDERAL INCOME TAX CONSIDERATIONS..................................................... 64
Taxation of the Company............................................................. 64
Requirements for Qualification...................................................... 65
Impact of Proposed Legislation...................................................... 71
Failure to Qualify.................................................................. 71
Taxation of Taxable U.S. Stockholders............................................... 71
Taxation of Stockholders on the Disposition of the Common Stock..................... 73
Information Reporting Requirements and Backup Withholding........................... 73
Taxation of Tax-Exempt Stockholders................................................. 73
Taxation of Non-U.S. Stockholders................................................... 74
Other Tax Consequences.............................................................. 76
BCP Sister Corp..................................................................... 76
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ERISA CONSIDERATIONS.................................................................. 77
The Treatment of the Company's Underlying Assets Under ERISA........................ 77
SELLING STOCKHOLDERS.................................................................. 78
PLAN OF DISTRIBUTION.................................................................. 79
LEGAL MATTERS......................................................................... 80
EXPERTS............................................................................... 80
INDEX TO FINANCIAL STATEMENT AND SCHEDULES............................................ F-1
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v
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OFFERING SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION INCLUDED ELSEWHERE
IN THIS PROSPECTUS. UNLESS THE CONTEXT REQUIRES OTHERWISE, ALL REFERENCES IN
THIS PROSPECTUS TO THE "COMPANY" SHALL MEAN BCP AND THE OPERATING PARTNERSHIP.
THE COMPANY
BCP is a recently-organized Maryland corporation which intends to qualify as
a REIT. BCP was established to continue the real estate investment and
development activities of senior management from Beacon Properties, a former New
York Stock Exchange-listed REIT until its merger with and into Equity Office
Properties Trust in December 1997 in a transaction valued at approximately $4.0
billion. The day-to-day operations of BCP and the Operating Partnership are
managed internally by the senior management of BCP. BCP is the sole general
partner of the Operating Partnership. The Company believes that it has developed
an organization of investment and investment management professionals that is
well-positioned to take advantage of today's real estate and capital markets
environment.
The Company's management combines real estate, capital markets and corporate
expertise, which the Company believes will uniquely position it to capitalize on
market and industry trends in complex real estate-related transactions across
product, geographic and industry lines. BCP is led by Alan M. Leventhal, former
President, Chief Executive Officer and Director of Beacon Properties and Lionel
P. Fortin, former Executive Vice President, Chief Operating Officer and Director
of Beacon Properties. Beacon Properties' predecessor entity was originally
founded over 50 years ago and has been engaged in a wide range of real estate
activities throughout its tenure. Although most recently Beacon Properties was
known as one of the nation's leading office REITs, Beacon Properties'
predecessor entity also has been active in the development, acquisition and
management of hotels, apartments and retail, industrial and mixed-use
properties. During Beacon Properties' three and a half year existence as a
public company, Messrs. Leventhal and Fortin successfully led Beacon Properties
to become one of the top performing office REITs in the nation. Performance
highlights of Beacon Properties include:
- total return on equity to stockholders (between May 1994 and December
1997) of 245% (an annual compounded return of 42%)
- increase in market capitalization (between May 1994 and December 1997)
from approximately $400 million to $4.0 billion
- average annual growth in Funds from Operations (as defined below) of
approximately 14%
- growth in the portfolio of properties from 15 properties to 126 properties
- expansion into key national markets including Chicago, Washington, D.C.,
Atlanta, Los Angeles and San Francisco
See "Note Regarding Management's Experience" and "Risk Factors--Economic and
Business Risks--Past Performance Not a Predictor of Future Results."
The founders of the Company, Messrs. Leventhal and Fortin, are joined by
seven senior executives, six formerly affiliated with Beacon Properties and one
formerly affiliated with Harvard Private Capital Group. The eight senior
managers (including Messrs. Leventhal and Fortin) formerly affiliated with
Beacon Properties have an average of over 20 years experience in the real estate
business. See "The Company-- Directors and Executive Officers" and "Investment
Strategies and Experience."
INVESTMENT STRATEGY
BCP's investment strategy (the "Investment Strategy") is driven by the
unique perspective of the senior management of the Company, including
management's experience with public and private real
1
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estate companies. As the capitalization of the real estate industry continues to
evolve toward a publicly-held format, BCP believes that numerous investment
opportunities will continue to emerge that reflect several primary shifts in the
real estate industry. These shifts include:
- rapid recovery of the real estate markets
- extraordinary growth of the public capital markets for real estate
companies
- continued consolidation of the ownership of real estate
- alignment of interests between investors and management
- recognition of real estate companies as operating businesses
These factors have resulted in significant investment opportunities in real
estate, including arbitrage between public and private market pricing. It is
BCP's belief that as the real estate industry continues its transformation (and
recognizing that real estate is still fundamentally a cyclical business),
disparities in pricing and capital availability, as well as ineffective
management of real estate assets by others, will provide opportunities for
skilled and experienced management teams such as the Company's management team.
Initially, the Company expects to focus primarily on opportunities in the office
sector. As the real estate market cycle advances, the Company expects additional
opportunities to emerge in non-office market sectors, including opportunities in
the hotel, residential and industrial sectors. See "Risk Factors-- Investment
Activity Risks--Multi-Sector Investment Strategy." Increasingly, management
expertise and creative real estate solutions will be required for successful
real estate companies. BCP's management team has a proven track record in this
regard in office as well as other property types. Based on these observations,
BCP intends to identify, create and realize value for the Company in its
investment in Real Estate-Related Assets (as defined below). Several themes
underlie this strategy:
- RELATIONSHIPS--BCP's management will draw upon its extensive network of
domestic and foreign institutional relationships established over the past
twenty years in the public and private company sectors. These
relationships have provided, and are expected to continue to provide,
early and sometimes exclusive access to negotiated transactions and
avoidance of competitive auctions.
- OPERATING COMPANY EXPERTISE--BCP will identify opportunities where its
expertise in actively managing both public and private real estate
companies can be applied to under-performing Real Estate-Related Assets or
real estate companies.
- INDUSTRY TRENDS--BCP will identify and capitalize on industry trends that
emerge as the real estate industry continues its transformation and
maturation process.
The Company's investments are expected to target the following principal
real estate areas listed below (the "Real Estate-Related Assets"). For specific
examples of management's prior experience in these areas, see "Investment
Strategies and Experience."
- VALUE-ADDED REPOSITIONINGS AND DISCOUNTED PURCHASES--repositioning and
recapitalization of under-utilized or poorly capitalized real property
through purchases of debt or equity at a discount to replacement cost;
- DEVELOPMENT AND RE-DEVELOPMENT--strategic ground-up development or
re-development of existing properties that can benefit from repositioning;
- MULTIPLE PROPERTY PORTFOLIOS--acquisition of portfolios of real property
owned by financial institutions, corporations and other non-strategic
owners of real estate, as well as liquidating closed-end commingled funds
and other large holders of real estate portfolios;
- JOINT VENTURES AND STRATEGIC PARTNERSHIPS--formation of, or acquisition of
interests in, joint ventures or strategic partnerships as a way to
leverage both capital and management expertise; and
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- REAL ESTATE COMPANIES AND REAL ESTATE-RELATED BUSINESSES--investment in
companies primarily engaged in the business of real estate ownership, real
estate services or other real estate intensive operating businesses as
well as related companies that serve the changing needs of the real estate
industry.
In addition to investments in Real Estate-Related Assets, the Company may
also invest in other areas related to the real estate industry which it deems
attractive (the "Other Assets", and together with Real Estate-Related Assets,
"Assets"). The Company believes that it will have distinct advantages over other
real estate investment companies because the Company's senior management team
has extensive experience in the acquisition, development, financing, management
and disposition of Assets. Furthermore, as the capitalization of the real estate
industry continues to evolve toward a publicly-held format, BCP's management
believes that its prior success in managing a publicly-held REIT will provide
the Company with an additional competitive advantage. See "Risk
Factors--Economic and Business Risks--Past Performance Not a Predictor of Future
Results."
ADVANTAGES OF THE COMPANY STRUCTURE
The Company believes that by managing its day-to-day operations internally,
the Company will offer competitive advantages to its stockholders in comparison
to externally managed REITs as a result of the alignment of interests between
management and stockholders. The Company also believes that it has a competitive
advantage over certain other real estate investment entities due to its ability
to use Units of the Operating Partnership as acquisition currency for potential
acquisitions that may provide sellers of property with certain tax advantages.
See "Federal Income Tax Considerations."
THE BCP SISTER CORP.
The Company anticipates that it may, from time to time, identify Assets
which it believes may be advantageous investments but which may be inappropriate
(whether for REIT qualification, tax or other reasons) for investment, in whole
or in part, by the Company. In order to permit stockholders to participate in
the economic benefits that may be associated with such non-qualifying REIT
Assets, the Company intends, from time to time, to utilize a structure (employed
by certain other REITs, such as Crescent Real Estate Equities Company) often
referred to as a "paper clip." This "paper clip" structure would involve
distributing to BCP's stockholders the equity interests of a newly-organized
sister company (each, a "BCP Sister Corp."), that would not elect to qualify as
a REIT, to make investments in certain non-qualifying REIT Assets. The Company
anticipates that the first such BCP Sister Corp. will be comprised of Beacon
Venture Partners, Inc. and its operating partnership, Beacon Venture Partners,
L.P. The BCP Sister Corp. is intended to function primarily as an operating
company, in contrast to the Company's principal focus on investment as a REIT in
the Real Estate-Related Assets. The BCP Sister Corp. structure is designed to
provide the Company's existing stockholders with the long-term benefits of
ownership in an entity devoted to the conduct of operating business activities
which would prevent the Company from qualifying as a REIT. The Company's ability
to fully utilize the BCP Sister Corp. structure could be adversely affected as a
result of proposed and future legislation. See "Risk Factors--Legal and Tax
Risks--Tax Risks."
RISK FACTORS
An investment in the Common Stock involves various risks, and prospective
investors should consider carefully the matters discussed under "Risk Factors"
prior to an investment in the Company. Such risks include, among others, the
following:
- The Company will rely upon, and its success is dependent upon, key
personnel of BCP, including Alan M. Leventhal and Lionel P. Fortin.
3
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- Management's track record while employed at Beacon Properties, and the
performance of Beacon Properties under such management's leadership, does
not guarantee or predict the performance of management or the Company.
- The Company has a limited operating history.
- Certain of the Company's investments in Assets will require significant
management resources, will be illiquid, and may decrease in value because
of changes in economic conditions.
- Management of the Company may earn substantial compensation from the
Long-Term Incentive Plan which, if paid, could substantially reduce cash
available for distribution to stockholders.
- Conflicts of interest may arise between the Company and the BCP Affiliate,
including in connection with the Company's Long-Term Incentive Plan.
- The Company is subject to competition from numerous competitors, including
other REITs and private real estate opportunity funds.
- The Company intends to leverage the Company's Assets, which can compound
losses.
- Certain Assets may be acquired through the BCP Sister Corp., which will
not qualify as a REIT and which may be subject to income tax at regular
corporate rates, which may have the effect of reducing cash available for
distribution to the stockholders.
- BCP may be subject to income tax at regular corporate rates if it fails to
qualify as a REIT, which would substantially reduce the amount of cash
available for distribution to stockholders.
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RECENT AND PENDING ACQUISITIONS
THE ATHENAEUM PORTFOLIO. On May 1, 1998 the Company purchased a portfolio
of eleven buildings in Cambridge, MA known as The Athenaeum Portfolio. The
mixed-use portfolio consists of approximately 970,000 square feet and contains
office, laboratory and retail uses as well as a 1,530 space parking garage. The
purchase price for the portfolio was $195 million, including the assumption of
approximately $69 million of first mortgage debt. The Company estimates that the
aggregate purchase price is approximately 80% of replacement cost. Subsequent to
the closing of the transaction, the Company completed the formation of a joint
venture with an affiliate of PaineWebber, in which both parties hold a 50%
equity interest in the properties.
The portfolio is comprised of two components: One Kendall Square and The
Athenaeum House (215 First Street), which are located within close proximity of
the Massachusetts Institute of Technology ("M.I.T."). Several of the buildings
were originally built as manufacturing buildings at the turn of the century and
were fully renovated in the mid-1980's for office and laboratory uses. A
nine-screen cinema was added to the complex in 1994. The buildings are currently
100% occupied. Major tenants which occupy more than 10% of the portfolio
include: Genzyme, CLAM Associates, Cambridge Neuroscience, and Mitotix.
The Athenaeum Portfolio is located in the East Cambridge office market. The
overall Cambridge office market includes approximately 10 million square feet.
According to Spaulding & Slye, the Cambridge office market had an overall
vacancy rate of 1.2% as of March 31, 1998.
TECHNOLOGY SQUARE & THE DRAPER BUILDING. On April 22, 1998 the Company
entered into a purchase and sale agreement with The Prudential Insurance Company
of America ("Prudential") to acquire a four-building complex known as Technology
Square and an adjacent building known as The Draper Building. The properties are
located in Cambridge, MA, adjacent to One Kendall Square (described above) and
M.I.T. and consist of 1,026,000 square feet. The purchase price for the
properties under the purchase and sale agreement is $123 million. The Company
and Prudential are currently negotiating the form of the consideration for the
properties.
Technology Square is currently 100% leased to two tenants: M.I.T. and
Polaroid Corporation. The leases with these tenants expire in mid-1999. Average
net lease rates in place are $6.53 per square foot, which the Company believes
to be substantially below current market. The Company intends to re-develop and
re-lease the property over the next 18-24 months and projects substantial
increases in net operating income as the property is stabilized at current
market net rents, which the Company believes to be approximately $24 per square
foot. The scope of the re-development is currently under review by the Company.
The Draper Building is 100% leased to Draper Labs on a long-term lease, with
extension options through October 2051, pursuant to which the tenant has an
option, under certain circumstances, to acquire The Draper Building.
Technology Square and The Draper Building are located in the East Cambridge
office market. The overall Cambridge office market includes approximately 10
million square feet. Upon completion of this acquisition, the Company will own
approximately 2 million square feet of office and commercial in the Cambridge
market, including both The Athenaeum Portfolio and Technology Square and The
Draper Building. According to Spaulding & Slye, the Cambridge office market had
an overall vacancy rate of 1.2% as of March 31, 1998.
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MANAGEMENT AND LONG-TERM INCENTIVE PLAN
The business and investment affairs of the Company are internally managed.
Messrs. Leventhal and Fortin are the founders of the Company and serve as
executive officers and Directors of BCP. The Company believes that it has
developed an organization of real estate investment and investment management
professionals that is well-positioned to take advantage of today's real estate
and capital markets environment. The Company's professionals combine real
estate, capital markets, and corporate expertise that the Company believes will
uniquely position it to assist the Company in capitalizing on market and
industry trends in complex investments in Real Estate-Related Assets across
product, geographic and industry lines. There can be no assurance, however, that
the experience of such individuals will result in attractive investments for the
Company. See "The Company--Directors and Executive Officers" and "Risk
Factors--Economic and Business Risks--Past Performance Not a Predictor of Future
Results."
Messrs. Leventhal and Fortin have formed the BCP Affiliate and have offered
equity interests in the BCP Affiliate to certain members of the Company's senior
management. In addition, Messrs. Leventhal and Fortin, individually and through
the BCP Affiliate, have purchased, directly from the Company and the Operating
Partnership, a combination of shares of Common Stock and Units for an aggregate
purchase price of $15 million, representing approximately 4% of the equity
interests in the Company on a fully diluted basis. In addition, the Company has
established a long-term incentive plan (the "Long-Term Incentive Plan") to align
the interests of management with the interests of the Company's stockholders,
pursuant to which the BCP Affiliate has been issued, for no additional
consideration, a Convertible Unit of the Operating Partnership. Provided that
the Incentive Return has, in fact, been earned, at the end of the three year
period following the completion of the first calendar year following the Closing
Date of the Original Offering, the Convertible Unit will convert into a certain
number of incentive units of limited partnership interests in the Operating
Partnership ("Incentive Units") with a fair market value equal to the Incentive
Return. See "The Company--Long-Term Incentive Plan" and "Risk Factors--Economic
and Business Risks--Conflicts of Interest." The BCP Affiliate has been granted
certain registration rights with respect to any Common Stock issuable upon an
exchange of Units and Incentive Units held by the BCP Affiliate. See
"Description of Securities--Registration Rights." BCP's senior management, by
holding equity interests in the BCP Affiliate, will be able to participate in
the Incentive Return subject to certain vesting restrictions. See "The
Company--Long-Term Incentive Plan" and "Risk Factors--Economic and Business
Risks--Conflicts of Interest."
As further incentive to the Company's management, the Company has (i)
adopted a stock option and incentive plan (the "Stock Incentive Plan") whereby a
number of the Company's employees will be eligible to receive options to acquire
shares of Common Stock and (ii) granted, pursuant to the Stock Incentive Plan,
to certain members of the Company's management on or about the Closing Date,
options to purchase at fair market value on the date of grant an aggregate of 6%
of the equity interests in the Company on a fully diluted basis. The Stock
Incentive Plan is administered by a compensation committee (the "Compensation
Committee") consisting solely of Directors who are not employees of the Company
(the "Independent Directors"). Persons eligible to participate in the Stock
Incentive Plan are generally those employees of the Company who are responsible
for, or contribute to, the management, growth or profitability of the Company as
selected from time to time by the Compensation Committee in its sole discretion.
See "The Company--Management Compensation" and "--Stock Incentive Plan." There
can be no assurance that the Incentive Return or the Stock Incentive Plan will
provide an incentive to the management of the Company to enhance the value of
the Common Stock or whether the value of the Common Stock will increase at all.
See "The Company--Certain Relationships; Conflicts of Interest" and "Risk
Factors--Economic and Business Risks--Conflicts of Interest."
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RESTRICTIONS ON OWNERSHIP OF STOCK
Due to limitations on the concentration of ownership of a REIT imposed by
the Code, and to otherwise address concerns relating to the concentration of
stock ownership, the Charter prohibits any single stockholder from owning,
directly or by virtue of the attribution provisions of the Code or the Exchange
Act, more than 9.8% of the aggregate value of the issued and outstanding shares
of Common Stock of BCP (the "Aggregate Stock Ownership Limit"). Additionally,
the Charter provides that certain mutual funds and certain other widely-held
entities (other than pension plans as described in Section 401(a) of the Code)
may actually and beneficially own up to 15% of the outstanding shares of Common
Stock (the "Look-Through Ownership Limit"). The Board of Directors may waive or
modify the Aggregate Stock Ownership Limit and the Look-Through Ownership Limit
with respect to one or more persons if it is satisfied, based upon the receipt
of a ruling from the Internal Revenue Service (the "Service") or the advice of
tax counsel, that ownership in excess of this limit will not jeopardize the
Company's status as a REIT for federal income tax purposes and will not cause
the Company to be a "pension-held" REIT for federal income tax purposes. See
"Description of Securities."
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds from the sale of
the Offered Securities offered hereby. The Company will not receive any of the
proceeds from the sale by the Selling Stockholders of the Offered Securities.
DISTRIBUTION POLICY
The Operating Partnership intends to make distributions to its partners,
including BCP. BCP intends to make distributions to its stockholders of all or
substantially all of its net taxable income each year (subject to certain
adjustments) so as to qualify for the tax benefits accorded to REITs under the
Code. See "Federal Income Tax Considerations--Requirements for Qualification."
The declaration and payment of dividends by the BCP Sister Corp. will be a
business decision to be made by the BCP Sister Corp.'s board of directors from
time to time based on such considerations as the BCP Sister Corp.'s board of
directors deems relevant, will be payable only out of funds legally available
therefor under the law of the state of the BCP Sister Corp.'s formation and will
be subject to any limitations which may be contained in any applicable debt
instruments of the BCP Sister Corp. See "Risk Factors--Economic and Business
Risks--Conflicts of Interest."
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TAX STATUS OF THE COMPANY
BCP intends to qualify and will elect to be taxed as a REIT under Sections
856 through 860 of the Code, commencing with its taxable year ending December
31, 1998. If BCP qualifies for taxation as a REIT, BCP generally will not be
subject to federal corporate income tax on its taxable income that is
distributed to its stockholders. A REIT is subject to a number of organizational
and operational requirements, including a requirement that it currently
distribute at least 95% of its annual taxable income. Although BCP does not
intend to request a ruling from the Internal Revenue Service (the "Service") as
to its REIT status, BCP has received, in connection with the Closing of the
Original Offering, an opinion of Goodwin, Procter & Hoar LLP that BCP will be
organized in conformity with the requirements for qualification as a REIT, and
that the proposed manner of operations of BCP will enable it to qualify as a
REIT, which opinion is based on certain assumptions and representations with
respect to BCP's past and expected ongoing businesses and investment activities
and other customary matters. No assurance can be given as to the accuracy of
such assumptions and representation or that BCP will be able to comply with them
in the future. Furthermore, such opinion is not binding on the Service or on any
court, and no assurance can be given that BCP will operate in a manner so as to
qualify or remain qualified as a REIT. Failure to qualify as a REIT would render
BCP subject to federal income tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates and distributions to BCP's
stockholders would not be deductible by BCP. Even if BCP qualifies for taxation
as a REIT, the Company may be subject to certain federal, state and local taxes
on its income and property. In accordance with the REIT provisions of the Code,
BCP will adopt the calendar year as its taxable year. In connection with BCP's
election to be taxed as a REIT, BCP's Charter imposes restrictions on the
transfer of the Common Stock. See "Risk Factors--Legal and Tax Risks--Tax Risks"
and "Federal Income Tax Considerations-- Taxation of the Company."
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ORGANIZATION AND RELATIONSHIPS
The relationship among BCP, the Operating Partnership, the BCP Affiliate and
the BCP Sister Corp. (if formed), and the equity ownership thereof subsequent to
this Offering and the Formation Transactions is depicted in the picture shown
below. Notes refer to the above descriptions.
[LOGO]
- ------------------------
(1) The Company anticipates that at the time of formation of the BCP Sister
Corp., the stockholders of BCP and the BCP Sister Corp. would be the same.
However, the equity interests of BCP and the BCP Sister Corp. may be owned
and transferred separately and independently of each other and,
consequently, the stockholder constituency of each entity may change over
time.
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RISK FACTORS
An investment in the Common Stock involves various risks. Before purchasing
any of the shares of Common Stock offered hereby, prospective investors should
give special consideration to the information set forth below, in addition to
the information set forth elsewhere in this Prospectus.
ECONOMIC AND BUSINESS RISKS
DEPENDENCE ON KEY PERSONNEL. The Company believes that its success will
depend to a significant extent upon the experience of its founders, Alan M.
Leventhal and Lionel P. Fortin, and on other members of senior management of the
Company whose continued service is not guaranteed. The Company believes that
Messrs. Leventhal and Fortin, in particular, have national reputations in the
real estate investment industry which are expected to assist the Company in
identifying Assets for acquisition. While Messrs. Leventhal and Fortin have
entered employment and non-competition agreements with the Company and while the
Company further believes that it could replace these key executives, the loss of
the services of either of them could have a material adverse effect on the
operations of the Company because the Company would have a diminished capacity
to obtain real estate investment opportunities, to capitalize upon their
relationships in the real estate industry and to structure and execute its
potential investments. The Company may not be able to successfully recruit
additional personnel and any additional personnel that are recruited may not
have the requisite skills, knowledge or experience necessary or desirable to
enhance the incumbent management. The Company does not currently intend to
maintain key-man life insurance with respect to any of its executive officers.
See "The Company--Directors and Executive Officers" and "The Company--Management
Compensation."
PAST PERFORMANCE NOT A PREDICTOR OF FUTURE RESULTS. Neither the track
record of senior management of the Company while they were employed at Beacon
Properties, nor the performance of Beacon Properties during that period, shall
imply or predict (directly or indirectly) any level of future performance of
management or the Company. Management's performance and the performance of the
Company is dependent on future events and is, therefore, inherently uncertain.
Past performance cannot be relied upon to predict future events for a variety of
reasons, including, without limitation, varying business strategies, different
local and national economic circumstances, different supply and demand
characteristics relevant to buyers and sellers of Assets, varying degrees of
competition and varying circumstances pertaining to the capital markets.
RISKS RELATED TO GROWTH STRATEGY.
AVAILABILITY OF CAPITAL. The ability of the Company to implement its growth
strategy depends on access to capital necessary to invest in Assets through the
use of borrowings, subsequent issuances of Common Stock or other securities or
operating cash flow. The failure to obtain necessary capital could have a
material adverse effect on the Company's ability to acquire Assets. The Company
anticipates that it will, in part, be dependent upon a bank or other
institutional lender with respect to a credit facility. No such credit facility
has yet been obtained by the Company.
FAILURE TO EFFECTIVELY MANAGE RAPID GROWTH. To successfully implement its
acquisition strategy, the Company must integrate acquired Assets into its
existing operations. As a result, the consolidation of functions and integration
of departments, systems and procedures of acquired Assets with the Company's
then-existing operations presents a significant management challenge, and the
failure to effectively integrate such Assets into the Company's management and
operating structures could have a material adverse effect on the results of
operations and financial condition of the Company.
PORTFOLIO ACQUISITION RISKS. The Company's business and acquisition
strategy includes acquisitions of multiple Assets in single transactions in
order to reduce acquisition expenses per property and to enable the Company to
gain a critical mass of Assets that provides operating leverage. However,
portfolio
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acquisitions are more complex than single-property acquisitions, and the risk
that a multiple-property acquisition will not close may be greater than in a
single-property acquisition. In addition, the Company's costs for a portfolio
acquisition that does not close are generally greater than for a single-property
acquisition that does not close. If the Company fails to close portfolio
acquisitions, its ability to increase its Funds from Operations will be limited
and a charge to earnings for costs related to the failed acquisition may occur.
Portfolio acquisitions may also result in the Company owning Assets in
geographically dispersed markets that are geographically removed from the
Company's principal markets. This geographic diversity will place additional
demands on the Company's ability to manage such operations. Another risk
associated with portfolio acquisitions is that a seller may require that a group
of properties be purchased as a package, even though one or more of the
properties in the portfolio does not meet the Company's investment criteria. In
such cases, the Company may attempt to make a joint bid with another buyer, or
the Company may purchase a portfolio of Assets with the intent to subsequently
dispose of those Assets which do not meet its criteria. In the case of joint
bids, however, it is possible that the other buyer may default in its
obligations, which increases the risk that the acquisition may not close, with
the adverse consequences described above. In cases where the Company intends to
dispose of Assets it does not wish to own, there can be no assurance as to how
quickly the Company could sell or exchange such Assets or the terms on which
they could be sold or exchanged.
RISKS ASSOCIATED WITH THE DEVELOPMENT OR REDEVELOPMENT OF ASSETS. The
Company also intends to pursue the development and construction of Real-Estate
Related Assets, in accordance with the Company's development and underwriting
policies in effect from time to time as opportunities arise in the future. Risks
associated with such development and construction activities include the risk
that: (i) the Company may abandon development opportunities after expending
resources to determine feasibility; (ii) construction costs of a project may
exceed original estimates; (iii) occupancy rates and rents at a newly completed
property may not be sufficient to make the property profitable; (iv) financing
may not be available on favorable terms for development of a property; and (v)
construction and lease-up may not be completed on schedule, resulting in
increased debt service expense and construction costs. Development activities
are also subject to risks relating to the inability to obtain, or delays in
obtaining, all necessary zoning, land-use, building, occupancy, and other
required governmental permits and authorizations. In addition, new development
activities, regardless of whether or not they are ultimately successful,
typically require a substantial portion of management's time and attention.
The Company anticipates that development may be financed, in whole or in
part, through equity or debt offerings or under lines of credit or other forms
of secured or unsecured construction financing that will result in the risk
that, upon completion of construction, permanent financing for newly developed
properties may not be available or may be available only on disadvantageous
terms. If a project is unsuccessful, the Company's losses may exceed its
investment in the project.
CONFLICTS OF INTEREST.
CONFLICTS RELATING TO THE OPERATING PARTNERSHIP. BCP, as the General
Partner of the Operating Partnership, will have fiduciary obligations to the
limited partners (including the BCP Affiliate) of the Operating Partnership,
which may conflict with the interests of BCP's stockholders. In addition, those
persons holding Units, as limited partners, will have the right to vote as a
class on certain amendments to the Operating Partnership Agreement and
individually to approve certain amendments that would adversely affect their
rights, which voting rights may be exercised in a manner that conflicts with the
interests of those investors who acquire shares of Common Stock in this
Offering. In addition, under the terms of the Operating Partnership Agreement,
the holders of Units will have certain approval rights with respect to certain
transactions that affect all stockholders of BCP, but which may be exercised in
a manner which does not reflect the interests of all stockholders of BCP. See
"The Company--Certain Relationships; Conflicts of Interest."
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CONFLICTS RELATING TO THE BCP SISTER CORP. Certain of the officers and
directors of BCP may also serve as officers or directors of the BCP Sister Corp,
when formed. If ownership of the BCP Sister Corp. and the Company differ over
time, conflicts of interest may develop. Provisions in the BCP Sister Corp.'s
formation documents are expected to (i) provide that the BCP Sister Corp. may
enter into transactions with the Company to the extent deemed beneficial by
their respective boards of directors (and the Company may enter into an
inter-company agreement with the BCP Sister Corp. with respect thereto) and (ii)
generally prohibit the BCP Sister Corp. from engaging in activities or making
investments appropriate for a REIT unless the Company was first given the
opportunity to do so, but elected not to do so, in each instance. The Company
and the Board of Directors may be subject to various potential conflicts of
interest as a result of the relationships between the BCP Sister Corp. and the
Company. See "The Company--Certain Relationships; Conflicts of Interest."
CONFLICTS RELATING TO THE INCENTIVE RETURN. As part of the Company's
long-term incentive plans, the BCP Affiliate has been issued the Convertible
Unit which shall convert (provided that the Incentive Return has in fact been
earned), at the end of the three-year period following the completion of the
first calendar year following the Closing of the Original Offering, into a
certain number of Incentive Units (if any) with a fair market value equal to the
Incentive Return. Messrs. Leventhal and Fortin control and own equity interests
in the BCP Affiliate and certain members of the Company's senior management may
also hold equity interests in the BCP Affiliate. While the Incentive Return was
designed to align the interests of the Company's senior management with the
interests of the Company's stockholders, no assurance can be given that
conflicts will not arise between such management's interests in the Incentive
Return and the stockholders' interests in the Company. See "The
Company--Long-Term Incentive Plan."
POLICIES WITH RESPECT TO CONFLICTS OF INTEREST. The Company intends to
adopt certain policies designed to eliminate or minimize conflicts of interest,
which will include a requirement that all transactions in which officers or
Directors have a conflicting interest must be approved by a majority of the
Company's Independent Directors. However, there can be no assurance that these
policies will be successful in minimizing or eliminating such conflicts and, if
they are not successful, decisions could be made that might fail to fully
reflect the interests of all stockholders of the Company.
LEVERAGE CAN REDUCE INCOME AVAILABLE FOR DISTRIBUTION. The Company intends
to leverage its Assets through borrowings, generally through the use of bank
credit facilities, mortgage loans on real estate and other borrowings. To the
extent that changes in market conditions cause the cost of such financing to
increase relative to the income that can be derived from the Assets acquired,
the Company's return on its investment and cash available for distribution to
its stockholders may be adversely affected.
Additionally, leverage creates an opportunity for increased returns on
equity, but at the same time creates risks. For example, debt service payments
can reduce the net income available for distributions to stockholders. There can
be no assurance that the Company will be able to meet its debt service
obligations and, to the extent that it cannot, the Company may lose some or all
of its Assets to foreclosure or sale to satisfy its debt obligations. Changes in
interest rates can affect the Company's income by affecting the spread between
the Company's income on its Assets and interest-bearing liabilities, as well as,
among other things, the value of the Company's interest-earning Assets and its
ability to realize gains from the sale of Assets. There is no specified
limitation on the Company's indebtedness. However, the Company currently intends
to adopt guidelines to maintain a debt to market capitalization ratio not in
excess of 60%. For purposes of this policy, the Company's debt to market
capitalization ratio is calculated as the Company's proportionate share of total
consolidated and unconsolidated debt as a percentage of the sum of the market
value of outstanding shares of capital stock of the Company and Units plus the
Company's proportionate share of total consolidated and unconsolidated debt. The
Charter and Bylaws do not limit the amount of indebtedness the Company can
incur. Accordingly, the Board of Directors of the Company could alter or
eliminate this policy and would do so, for example, if it were necessary in
order for the Company to continue to qualify as a REIT. See "Certain Provisions
of Maryland Law and of BCP's
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Charter and Bylaws" and "Risk Factors--Legal and Tax Risks--Board of Directors
May Change Certain Policies Without Stockholder Consent."
RISKS ASSOCIATED WITH HEDGING INVESTMENTS. Changes in interest rates may
adversely affect the Company's investments. Interest rates are highly sensitive
to many factors, including governmental, monetary and tax policies, domestic and
international economic and political considerations, and other factors beyond
the control of the Company. The Company may employ a hedging strategy to limit
the effects of changes in interest rates on its operations, including engaging
in interest rate swaps, caps, floors and other interest rate exchange contracts.
The use of these types of derivatives to hedge the Company's assets and
liabilities carries certain risks, including the risk that losses on a hedge
position will reduce the funds available for distribution to stockholders and,
indeed, that such losses may exceed the amount invested in such instruments.
There is no perfect hedge for any investment, and a hedge may not perform its
intended use of offsetting losses on an investment. Moreover, with respect to
certain of the instruments used as hedges for the Company's assets and
liabilities, the Company is exposed to the risk that the counterparties with
which the Company trades may cease making markets and quoting prices in such
instruments, which may render the Company unable to enter into an offsetting
transaction with respect to an open position. Consequently, the profitability of
the Company may be adversely affected during any period as a result of changing
interest rates.
THE COMPANY'S INSURANCE WILL NOT COVER ALL LOSSES. The Company intends to
maintain comprehensive insurance on each of the Assets, including liability and
fire and extended coverage, in amounts sufficient to permit the replacement of
the Assets in the event of a total loss, subject to applicable deductibles. The
Company will endeavor to obtain coverage of the type and in the amount
customarily obtained by owners of similar properties. There are certain types of
losses, however, generally of a catastrophic nature, including, without
limitation, earthquakes, floods and hurricanes, that may be uninsurable or not
economically insurable. Inflation, changes in building codes and ordinances,
environmental considerations, and other factors may also make it infeasible to
use insurance proceeds to replace an Asset if it is damaged or destroyed. Under
such circumstances, the insurance proceeds received by the Company might not be
adequate to restore its economic position with respect to the affected Asset.
PROPERTY TAXES DECREASE RETURNS ON REAL ESTATE. Each Asset will be subject
to real and, in some instances, personal property taxes. The real and personal
property taxes on Assets in which the Company invests may increase or decrease
as property tax rates change and as the Assets are assessed or reassessed by
taxing authorities. If property taxes on the Company's investments increase, the
Company's cash available for distribution to its stockholders will be adversely
affected.
COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND OTHER CHANGES IN
GOVERNMENTAL RULES AND REGULATIONS MAY BE COSTLY. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all public properties are required to meet
certain federal requirements related to access and use by disabled persons.
Properties acquired by the Company may not be in compliance with the ADA. If a
property is not in compliance with the ADA, the Company will be required to make
modifications to such property to bring it into compliance, or face the
possibility of an imposition of fines or an award of damages to private
litigants. In addition, changes in governmental rules and regulations or
enforcement policies affecting the use and operation of the properties,
including changes to building codes and fire and life-safety codes, may occur.
If the Company were required to make substantial modifications to the properties
to comply with the ADA or other changes in governmental rules and regulations,
the Company's ability to make expected distributions to its stockholders could
be adversely affected.
RISK OF ADVERSE EFFECT ON RESULTS OF OPERATIONS DUE TO POSSIBLE
ENVIRONMENTAL LIABILITIES. The Company's operating costs may be affected by the
obligation to pay for the cost of complying with existing environmental laws,
ordinances and regulations, as well as the cost of complying with future
legislation with respect to the Assets, or loans secured by Assets, with
environmental problems that materially impair the value of the Assets. Under
various federal, state and local environmental laws, ordinances and
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regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under, or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, the presence of hazardous or toxic
substances, or the failure to remediate properly such property, may adversely
affect the owner's ability to borrow by using such real property as collateral.
Persons who arrange for the transportation, disposal or treatment of hazardous
or toxic substances may also be liable for the costs of removal or remediation
of such substances at the disposal or treatment facility, whether or not such
facility is or ever was owned or operated by such person. Certain environmental
laws and common law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials ("ACMs"), into the
environment, and third parties may seek recovery from owners or operators of
real properties for personal injury associated with exposure to released ACMs or
other hazardous materials. Environmental laws may also impose restrictions on
the manner in which a property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In connection
with the ownership and operation of properties, the Company may be potentially
liable for any such costs. The cost of defending against claims of liability or
remediating contaminated property and the cost of complying with such
environmental laws could materially adversely affect the Company's results of
operations and financial condition.
In connection with the acquisition of Real Estate-Related Assets, the
Company intends to obtain Phase I environmental site assessments ("ESAs")
prepared by qualified independent environmental engineers. The purpose of ESAs
is to identify potential sources of contamination for which the Real
Estate-Related Assets may be responsible and to assess the status of
environmental regulatory compliance. It is possible, however, that these ESAs
will not reveal all environmental liabilities or that such Real Estate-Related
Assets may be subject to material environmental liabilities of which the Company
is unaware.
BCP SISTER CORP. WILL HAVE SEPARATE FINANCING. The Company anticipates that
the BCP Sister Corp. will obtain its own financing, separate from that of the
Company. There can be no assurance that such financing will be readily available
or, if available, that it will be on terms acceptable to the BCP Sister Corp. In
addition, to the extent that the BCP Sister Corp. should default under such
financing, there can be no assurance that the BCP Sister Corp. would be able to
obtain sufficient financing to cure such default or to ascertain the full impact
of such default on the Company.
INVESTMENTS MADE BY BCP SISTER CORP. Certain investments which may
otherwise have been made by the Company may be made by the BCP Sister Corp. The
BCP Sister Corp. will be subject to income tax at regular corporate rates, which
may have the effect of reducing cash available for distribution to stockholders.
NEWLY-ORGANIZED CORPORATION. The Company has a limited operating history.
The Company will be dependent upon the experience and expertise of its senior
management in administering its day-to-day operations. There can be no assurance
that the Company's management will be able to implement successfully the
strategies that the Company intends to pursue. In addition, as a newly-organized
company, the Company's policies and procedures are subject to change over time.
See "The Company--Directors and Executive Officers" and "--Risks Related to
Growth Strategy."
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INVESTMENT ACTIVITY RISKS
APPROPRIATE INVESTMENTS MAY NOT BE AVAILABLE. Although the Company may
invest in Other Assets as opportunities arise, the Company intends to focus
primarily on acquiring Real Estate-Related Assets consistent with its Investment
Strategy (as defined below). There can be no assurance, however, that the
Company will identify Assets that meet its investment criteria, that the Company
will be successful in acquiring any Assets that may be identified or that any
such Assets will produce a return on the Company's investment. The Company will
have broad authority to invest the net proceeds of this Offering in Assets
consistent with its Investment Strategy. The Company may invest in
highly-leveraged Assets, which may increase the likelihood of a loss of the
Company's Assets through foreclosure. No assurance can be made that the
Company's decisions in this regard will result in a profit for the Company.
Investment in real estate is a highly-competitive business and the acquisition
of Assets is often based on competitive bidding. Consequently, the Company's
inability to identify appropriate Assets may have an adverse effect on the
Company's results of operations and hinder the Company's growth rate.
REAL ESTATE IS ILLIQUID AND VALUE IS DEPENDENT ON CONDITIONS BEYOND THE
COMPANY'S CONTROL. The Company expects to invest in Assets which may be subject
to varying degrees of risk generally incident to the ownership of real property.
Real estate investments are relatively illiquid. The ability of the Company to
vary its investments in response to changes in economic and other conditions
will be limited. No assurances can be given that the fair market value of any
Assets acquired by the Company will not decrease in the future. The underlying
value of Assets and the Company's income and ability to make distributions to
its stockholders are dependent upon the ability of the Company to operate the
Assets in a manner sufficient to maintain or increase revenues in excess of
operating expenses and debt service or, in the case of real property leased to
one or more lessees, the ability of the lessees to make rent payments. Revenues
may be adversely affected by adverse changes in national or local economic
conditions, competition from other properties offering the same or similar
services, changes in interest rates and in the availability, cost and terms of
mortgage funds, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital improvements
(particularly in older structures), changes in real estate tax rates and other
operating expenses, adverse changes in governmental rules and fiscal policies,
civil unrest, acts of God, including, without limitation, earthquakes,
hurricanes and other natural disasters (which may result in uninsured losses),
acts of war, adverse changes in zoning laws, and other factors which are beyond
the control of the Company in whole or in part.
COMPETITION FOR ACQUISITIONS. Competition exists for investment
opportunities in most sectors of the real estate industry, including all sectors
in which the Company intends to invest. The Company may be competing for Assets
with entities that have substantially greater economic and personnel resources
than the Company or better relationships with sellers of Assets, lenders and
others. These entities may also generally be able to accept more risk than the
Company prudently can manage. Competition may generally reduce the number of
suitable prospective Assets offered to the Company and increase the bargaining
power of property owners seeking to sell, thereby increasing prices.
REAL ESTATE FINANCING RISKS. The Company is subject to the risks normally
associated with debt financing, including the risk that the Company's cash flow
will be insufficient to meet required debt service. In addition, there is a risk
that, if necessary, existing indebtedness will not be able to be refinanced or
that the terms of such refinancing will not be as favorable as the terms of the
existing indebtedness.
REAL ESTATE INVESTMENT RISKS. Real property investments are subject to
varying degrees of risks. If the Company's Assets do not generate revenues
sufficient to meet operating expenses, including debt service and capital
expenditures, the Company's cash flow and ability to make distributions to its
stockholders will be adversely affected. An Asset's revenues and value may be
adversely affected by the general economic climate, the local economic climate,
local real estate conditions, the ability of the owner to provide adequate
management, maintenance and insurance, and increased operating costs. Certain
significant
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expenditures associated with each equity investment (such as mortgage payments,
if any, real estate taxes, insurance and maintenance costs) are generally not
reduced when circumstances cause a reduction in income from the investment.
There are numerous competitors for development and acquisitions of properties,
including other REITs, which may have greater resources than the Company.
RISKS RELATED TO INVESTMENTS IN MORTGAGE LOANS. Investments in mortgage
loans may carry certain risks which are not present in other types of
investments, including, without limitation, the following:
COMMERCIAL MORTGAGE LOANS MAY INVOLVE A RISK OF LOSS. Commercial mortgage
loans involve a high degree of risk because of a variety of factors, including
(i) dependency for repayment on successful operation of the mortgaged property
and tenant businesses operating therein, (ii) the fact that such loans are
usually non-recourse to the borrower and (iii) loan terms that include
amortization schedules longer than the stated maturity and provide for balloon
payments at stated maturity rather than periodic principal payments. In
addition, the value of commercial real estate can be affected significantly by
the supply and demand in the market for that type of property.
VOLATILITY OF VALUES OF MORTGAGED PROPERTIES MAY AFFECT ADVERSELY THE
COMPANY'S MORTGAGE LOANS. Commercial real estate values and net operating income
derived therefrom are subject to volatility and may be affected adversely by a
number of factors, including, but not limited to, national, regional and local
economic conditions, local real estate conditions, changed or continued weakness
in specific industry segments, general public perceptions of the safety,
convenience, services and attractiveness of the property, the willingness and
ability of the property's owner to provide capable management and adequate
maintenance, to make capital expenditures and improvements and to provide
leasing concessions, construction quality, age and design, and increases in
operating expenses (such as energy costs).
GENERAL DEFAULT RISKS. With respect to its investments in mortgage loans,
the Company will be subject to risks of borrower defaults, bankruptcies, fraud
and special hazard losses that are not covered by standard hazard insurance. In
the event of any default under mortgage loans held by the Company, the Company
will bear a risk of loss of principal to the extent of any deficiency between
the value of the collateral and the principal amount of the mortgage loan, and
may not receive interest payments on such mortgage loan which could have a
material adverse effect on the Company's cash flow from operations. In the event
of the bankruptcy of a mortgage loan borrower, the mortgage loan to such
borrower will be deemed to be secured only to the extent of the value of the
underlying collateral at the time of bankruptcy (as determined by the bankruptcy
court), and the lien securing the mortgage loan will be subject to the avoidance
powers of the bankruptcy trustee or debtor-in-possession to the extent the lien
may be unenforceable under state law. Foreclosure of a mortgage loan can be an
expensive and lengthy process which could have a substantial negative effect on
the Company's anticipated return on the foreclosed mortgage loan.
MULTI-SECTOR INVESTMENT STRATEGY. The Company's current strategy is to
acquire Assets across a variety of real estate product-types in a variety of
geographic locations, initially with a particular emphasis on office Assets.
Accordingly, the Company will be required to maintain expertise, relationships
and market knowledge across a broad range of product-types and geographic
regions, and will be subject to the market conditions affecting each such
product-type in various markets, including such factors as the local economic
climate, business layoffs, industry slowdowns, changing demographics, and local
supply and demand issues affecting each such market. This multi-sector approach
could require more management time, staff support and expense than a company
whose focus is dedicated to a greater extent on a single product-type in fewer
jurisdictions than is contemplated by the Company.
NEW MARKETS. Although the Company's management has historical experience
with Real Estate-Related Assets and Other Assets and investments in a variety of
geographic areas of the country, it is possible that the Company's expertise in
those markets may not assist the Company in its new markets. In such event, the
Company may be exposed to, among others, risks associated with (i) a lack of
market
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knowledge and understanding of the local economy, (ii) an inability to access
land and property acquisition opportunities, (iii) an inability to obtain
construction tradespeople, (iv) sudden adverse shifts in supply and demand
factors and (v) an unfamiliarity with local governmental procedures.
RISKS INVOLVED IN ACQUISITIONS THROUGH PARTNERSHIPS AND JOINT
VENTURES. Instead of purchasing properties directly, the Company may invest as
a partner or a co-venturer. Partnership or joint venture investments may, under
certain circumstances, involve risks not otherwise present, including the
possibility that the Company's partner or co-venturer might become bankrupt,
that such partner or co-venturer might at any time have economic or other
business interests or goals which are inconsistent with the business interests
or goals of the Company, and that such partner or co-venturer may be in a
position to take action contrary to the instructions or the requests of the
Company or contrary to the Company's policies or objectives, including the
Company's policy with respect to maintaining its qualification as a REIT. Such
investments may also have the potential risk of impasse on decisions because
neither the partner nor the co-venturer would have full control over the
partnership or joint venture. The Company will, however, seek to maintain
sufficient control of such partnerships or joint ventures to permit the
Company's objectives to be achieved. There is no limitation under the Company's
organizational documents as to the amount of available funds that may be
invested in partnerships or joint ventures.
FOREIGN REAL PROPERTIES ARE SUBJECT TO CURRENCY CONVERSION RISKS AND
UNCERTAINTY OF FOREIGN LAWS. In addition to making investments in domestic
Assets, the Company may invest in Assets located outside the United States.
Investing in real estate located in foreign countries creates risks associated
with the uncertainty of foreign laws and markets. Moreover, investments in
foreign Assets are subject to currency conversion risks.
LEGAL AND TAX RISKS
TAX RISKS. BCP intends to operate in a manner so as to qualify as a REIT
for federal income tax purposes. Although BCP does not intend to request a
ruling from the Service as to its REIT status, BCP received, in connection with
the Closing of the Original Offering, an opinion from its counsel, Goodwin,
Procter & Hoar LLP, that, based on certain assumptions and representations as of
the Closing of the Original Offering, it will be organized in conformity with
the requirements for qualification as a REIT, and its proposed manner of
operation will enable it to qualify as a REIT, which opinion is based on certain
assumptions and representations with respect to BCP's past and expected ongoing
businesses and investment activities and other customary matters. Investors
should be aware, however, that opinions of counsel are not binding on the
Service or any court. The opinion of Goodwin, Procter & Hoar LLP represents only
the view of counsel to BCP based on counsel's review and analysis of existing
law, which includes no controlling precedent and which is subject to change,
possibly on a retroactive basis. See "Federal Income Tax
Considerations--Requirements for Qualification." Furthermore, both the validity
of the opinion and the continued qualification of BCP as a REIT will depend on
BCP's satisfaction of certain asset, income, organizational, distribution and
stockholder ownership requirements on a continuing basis. BCP's operations will
not be monitored by Goodwin, Procter & Hoar LLP to ensure continued compliance
with the REIT requirements. If BCP were to fail to qualify as a REIT in any
taxable year, BCP would be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates, and distributions to stockholders would not be deductible by BCP in
computing its taxable income. Any such corporate tax liability could be
substantial and would reduce the amount of cash available for distribution to
stockholders, which in turn could have an adverse impact on the value of, and
trading prices for, the Common Stock. Unless entitled to relief under certain
REIT provisions of the Code, BCP also would be disqualified from taxation as a
REIT for the four taxable years subsequent to the year during which BCP ceased
to qualify as a REIT. See "Federal Income Tax Considerations--Requirements for
Qualification."
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BCP must distribute annually at least 95% of its net taxable income
(excluding any net capital gain) in order to avoid corporate income taxation of
the earnings that it distributes. In addition, BCP will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid or deemed paid by it with respect to any calendar year are less than the
sum of (i) 85% of its ordinary income for that year, (ii) 95% of its capital
gain net income for that year, and (iii) 100% of its undistributed taxable
income from prior years. The amount of any net long-term capital gains that BCP
elects to retain and pay income tax on will be treated as distributed for
purposes of the 4% excise tax.
BCP intends to make distributions to its stockholders to comply with the 95%
distribution requirement and to avoid the nondeductible excise tax. However,
differences in timing between the recognition of taxable income and the actual
receipt of cash could require BCP to borrow funds or sell assets on a short-term
basis to meet the 95% distribution requirement and to avoid the nondeductible
excise tax. The requirement to distribute a substantial portion of BCP's net
taxable income could cause BCP (i) to sell assets in adverse market conditions,
(ii) to distribute amounts that represent a return of capital, or (iii) to
distribute amounts that would otherwise be spent on future acquisitions, capital
expenditures, or repayment of debt. Gains from the disposition of any asset held
primarily for sale to customers in the ordinary course of business generally
will be subject to a 100% tax. See "Federal Income Tax Considerations--
Requirements for Qualification."
It is anticipated that BCP may purchase mortgage loans. If BCP purchases
such Assets and is deemed to have issued debt obligations having two or more
maturities, the payments on which correspond to payments on such mortgage loans,
such arrangement will be treated as a "taxable mortgage pool" for federal income
tax purposes. If all or a portion of BCP is considered a "taxable mortgage
pool," BCP's status as a REIT generally should not be impaired, but a portion of
BCP's taxable income may be characterized as "excess inclusion income" and
allocated to the stockholders of BCP. Any excess inclusion income (i) could not
be offset by net operating losses of a stockholder, (ii) would be subject to tax
as "unrelated business taxable income" to a tax-exempt stockholder, (iii) would
be subject to the application of federal income tax withholding (without
reduction pursuant to any otherwise applicable income tax treaty), with respect
to amounts allocable to foreign stockholders, and (iv) would be taxable (at the
highest corporate tax rate) to BCP, rather than its stockholders, to the extent
allocable to shares of stock of BCP held by disqualified organizations
(generally, tax-exempt entities not subject to tax on unrelated business taxable
income, including governmental organizations).
BCP's qualification as a REIT or its ability to fully utilize the BCP Sister
Corp. structure could be affected as a result of proposed and future
legislation. In that regard, on February 2, 1998, the Clinton Administration
released a description of revenue proposals that included, among other things, a
freeze on the grandfathered status of REITs that are "paired" or "stapled" with
a related operating company. Although such proposed legislation in its current
form does not affect "paper clip" structures, there can be no assurance that the
Clinton Administration proposals or similar proposed legislation affecting the
BCP Sister Corp. structure will not place legislative or judicial scrutiny on
the "paper clip" structure or that legislation adversely affecting such
structure will not be proposed and enacted. See "Federal Income Tax
Considerations--Impact of Proposed Legislation."
AGGREGATE STOCK OWNERSHIP LIMIT MAY RESTRICT BUSINESS COMBINATION
OPPORTUNITIES. In order for BCP to maintain its qualification as a REIT under
the Code, not more than 50% in value of its outstanding shares of stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) at any time during the last half of BCP's
taxable year (other than the first taxable year for which the election to be
treated as a REIT has been made). In order to facilitate maintenance of its
qualification as a REIT for federal income tax purposes, and to otherwise
address concerns relating to concentration of stock ownership, the Charter
contains the Aggregate Stock Ownership Limit which generally prohibits any
single stockholder from "beneficially owning" (as such term is defined in the
Charter) more than 9.8% of the issued and outstanding shares of the Company's
Common Stock. Additionally, the Charter contains the Look-Through Ownership
Limit, which generally permits certain
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mutual funds and certain other widely-held entities (other than pension plans as
described in Section 401(a) of the Code) to beneficially own up to 15% of the
outstanding shares of Common Stock. The Board of Directors may waive or modify
the Aggregate Stock Ownership Limit and the Look-Through Ownership Limit with
respect to one or more persons if it is satisfied, based upon the advice of tax
counsel, that ownership in excess of this limit will not jeopardize the
Company's status as a REIT for federal income tax purposes and will not cause
the Company to be a "pension-held" REIT for federal income tax purposes. These
ownership limits may have the effect of inhibiting or impeding a change in
control and, therefore, could adversely affect the stockholders' ability to
realize a premium over the then-prevailing market price for the Common Stock in
connection with such a transaction. See "Description of Securities--Transfer
Restrictions" and "Federal Income Tax Considerations--Requirements for
Qualification."
FOREIGN INVESTORS SHOULD CONSIDER TAX RISKS UNDER FIRPTA. Gain recognized
by a Non-U.S. Stockholder (as defined herein) upon a sale of his Common Stock
generally will be taxed under the provisions of the Foreign Investment in Real
Property Tax Act of 1980 ("FIRPTA") if BCP is not a "domestically controlled
REIT." A "domestically controlled REIT" is defined generally as a REIT in which
at all times during a specified testing period less than 50% in value of the
stock was held directly or indirectly by non-U.S. persons. Although it is
currently anticipated that BCP will be a "domestically controlled REIT" and,
therefore, the re-sale of the Common Stock will not be subject to taxation under
FIRPTA, there can be no assurance that BCP will be a "domestically-controlled
REIT." Even if such gain is not subject to FIRPTA, such gain will be taxable to
a Non-U.S. Stockholder under certain other circumstances. If the gain on the
re-sale of the Common Stock were to be subject to taxation under FIRPTA, the
Non-U.S. Stockholder would be subject to the same treatment as U.S. stockholders
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals).
See "Federal Income Tax Considerations--Taxation of Non-U.S. Stockholders."
PLANS SHOULD CONSIDER ERISA RISKS OF INVESTING IN COMMON STOCK. ERISA is a
broad statutory framework that governs non-governmental employee benefit plans
in the United States. Fiduciaries of pension, profit-sharing or other employee
benefit plans subject to Title I of ERISA ("ERISA Plans"), in consultation with
their advisers, should carefully consider the impact of ERISA and the
regulations of the Department of Labor (the "DOL") thereunder on the ERISA
Plan's decision to invest in the Common Stock. In particular, a fiduciary of an
ERISA Plan should consider whether its decisions with respect to these matters
would satisfy the requirements set forth in Part 4 of subtitle B of Title I of
ERISA, including (a) the diversification and prudence requirements of ERISA, (b)
the requirement that the decisions be in the best interests of the participants
and beneficiaries of the ERISA Plan, and (c) the requirement that the decision
be authorized under the appropriate governing instruments and investment
policies of the ERISA Plan.
ERISA also prohibits certain transactions involving an ERISA Plan and
persons who are "parties in interests" with respect to the ERISA Plan. In
addition, the Code provides for similar prohibited transaction rules applicable
to "plans" (as defined in Section 4975 of the Code) and "disqualified persons"
with respect to such plans. The fiduciary of an ERISA Plan or a plan described
in Section 4975 of the Code (referred to together herein as "Plans")
contemplating an investment in the Common Stock should consider whether the
acquisition of such Common Stock would result in a prohibited transaction under
ERISA and/or the Code and if so, whether an exemption from these prohibited
transaction rules is available. In addition, the Plan Assets Regulation provides
that, subject to certain exceptions, the assets of an entity in which a Plan
holds an equity interest may be treated as assets of the investing Plan, in
which event, the underlying assets of such entity (and transactions involving
such assets) would be subject to ERISA and applicable provisions of the Code
(including prohibited transaction provisions of ERISA and the Code). The Company
intends to take such steps as may be necessary to qualify BCP and the Operating
Partnership (and any BCP Sister Corp.) for one or more of the exceptions
available under such regulation and, thereby, prevent the assets of the Company
from being treated as assets of any investing Plan. Specifically, the Company
will use its reasonable best efforts to qualify as a "real estate operating
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company" (within the meaning of the Plan Assets Regulation) at least until such
time as the Common Stock qualifies as a class of "publicly offered securities"
(as such term is defined in such regulation). In addition, with respect to any
BCP Sister Corp., the Company will take such steps as may be necessary to
qualify such BCP Sister Corp. as an operating company or a venture capital
operating company or for one of the other available exceptions under the Plan
Assets Regulation prior to distributions of its equity interests, although no
assurances can be made in this regard. See "ERISA Considerations--The Treatment
of the Company's Underlying Assets Under ERISA."
MARYLAND TAKEOVER STATUTES MAY RESTRICT CERTAIN OPPORTUNITIES. As a
Maryland corporation, BCP is subject to various provisions of the Maryland
General Corporation Law (the "MGCL"), which (a) impose certain restrictions and
require certain procedures with respect to certain business combinations,
including, but not limited to, transactions with holders of more than 10% of the
voting power of BCP's equity securities and (b) limit voting rights for holders
of 20% or more of the voting power of BCP's stock. These provisions could have
the effect of discouraging a takeover or other transaction in which holders of
some, or a majority, of the shares of the Common Stock might receive a premium
for their shares of the Common Stock over the then-prevailing market price or
which such holders might believe to be otherwise in their best interests. The
Charter of the Company exempts from the Maryland statute any business
combination with Alan M. Leventhal, Lionel P. Fortin or current or future
affiliates, associates or other persons acting in concert as a group with either
of Messrs. Leventhal or Fortin. See "Certain Provisions of Maryland Law and of
BCP's Charter and Bylaws--Business Combinations" and "--Control Share
Acquisitions."
BOARD OF DIRECTORS MAY CHANGE CERTAIN POLICIES WITHOUT STOCKHOLDER
CONSENT. The major policies of the Company, including its investment policy and
other policies with respect to acquisitions, financing, growth, operations, debt
and distributions, will be determined by its Board of Directors from time to
time. The Board of Directors may amend or revise these and other policies, or
approve transactions that deviate from these policies, from time to time without
a vote of the stockholders. The effect of any such changes may be positive or
negative. See "Certain Provisions of Maryland Law and of BCP's Charter and
Bylaws."
LOSS OF INVESTMENT COMPANY ACT EXEMPTION WOULD ADVERSELY AFFECT THE
COMPANY. The Company believes that it will not be, and intends to conduct its
operations so as not to become, regulated as an investment company under the
Investment Company Act of 1940. The Investment Company Act exempts entities
that, directly or through majority-owned subsidiaries, are "primarily engaged in
the business of purchasing or otherwise acquiring mortgages and other liens on
and interests in real estate" ("Qualifying Interests"). Under current
interpretations by the Staff of the Commission, in order to qualify for this
exemption, the Company, among other things, must maintain at least 55% of its
assets in Qualifying Interests and also may be required to maintain an
additional 25% in Qualifying Interests or other real estate-related assets. The
assets that the Company may acquire therefore may be limited by the exemption
provisions of the Investment Company Act. In addition, the Company could, among
other things, be required either (a) to change the manner in which it conducts
its operations to avoid being required to register as an investment company or
(b) to register as an investment company, either of which could have an adverse
effect on the Company and the market price for the Common Stock.
LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS OF THE COMPANY. The
Charter contains a provision which limits the liability of a director or officer
to BCP and its stockholders for money damages, except for liability resulting
from (a) actual receipt of an improper benefit or profit in money, property or
services or (b) active and deliberate dishonesty established by a final judgment
as being material to the cause of action. See "Certain Provisions of Maryland
Law and of BCP's Charter and Bylaws."
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OTHER RISKS
RESTRICTIONS ON TRANSFERABILITY; LACK OF PUBLIC MARKET. Each subsequent
purchaser will be required to represent and warrant that it (i) is acquiring
Common Stock for investment and not with a view to distribution or resale, (ii)
understands it must bear the economic risk of an investment in the Common Stock
for an indefinite period of time because the Common Stock has not been
registered with the Commission or any other state or governmental agency, and
(iii) understands that the Common Stock may not be transferred or sold, unless
the Common Stock is registered or an exemption from such registration is
available. There is currently no public market for the Common Stock and there is
no assurance that one will develop. In addition, transfers of the Common Stock
are prohibited if such transfer would (x) violate the Securities Act or any
other applicable federal or state securities laws, rules or regulations, or (y)
cause the Company to fail to comply with any of the requirements for
qualification as a REIT under the Code or (z) cause the Company to violate any
of the restrictions of the Charter. In addition, holders of the Common Stock may
be prevented from relying upon the Registration Statement of which this
Prospectus forms a part for the resale of shares of the Common Stock as a result
of the right of the Company under the Registration Rights Agreement to suspend
its effectiveness during blackout periods (as defined below). See "Description
of Securities--Registration Rights." Consequently, the purchase of the Common
Stock should be considered a long-term and illiquid investment. See "Description
of Securities--Transfer Restrictions."
RISK THAT MARKET FOR COMMON STOCK WILL NOT DEVELOP. The Common Stock
presently has no established trading market. While application has been made to
have the Common Stock accepted for trading in the PORTAL Market, there can be no
assurance that an active trading market for the Common Stock will develop in the
PORTAL Market or elsewhere. Accordingly, no assurance can be given as to (i) the
likelihood that an active market for the Common Stock will develop, (ii) the
liquidity of any such market, (iii) the ability of the stockholders to sell
their Common Stock, or (iv) the prices that stockholders may obtain for their
Common Stock.
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INVESTMENT STRATEGIES AND EXPERIENCE
INVESTMENT STRATEGIES AND EXPERIENCE
BCP's investment strategy will be driven by the unique perspective of the
senior management of the Company, including management's experience with public
and private real estate companies. See "Note Regarding Management's Experience"
and "Risk Factors--Economic and Business Risks--Prior Performance Not a
Predictor of Future Results." As the capitalization of the real estate industry
continues to evolve toward a publicly-held format, BCP believes that numerous
investment opportunities will continue to emerge that reflect several primary
shifts in the real estate industry. These shifts include:
- rapid recovery of the real estate markets
- extraordinary growth of the public capital markets for real estate
companies
- continued consolidation of the ownership of real estate
- alignment of interests between investors and management
- recognition of real estate companies as operating businesses
These factors have resulted in significant investment opportunities in real
estate, including arbitrage between public and private market pricing. It is
BCP's belief that as the real estate industry continues its transformation (and
recognizing that real estate is still fundamentally a cyclical business),
disparities in pricing and capital availability, as well as ineffective
management of real estate assets by others, will provide opportunities for
skilled and experienced management teams, such as the Company's management team.
Initially, the Company expects to focus primarily on opportunities in the office
sector. As the real estate market cycle advances, the Company expects additional
opportunities to emerge in non-office market sectors, including opportunities in
the lodging, residential and industrial sectors. See "Risk Factors--Investment
Activity Risks--Multi-Sector Investment Strategy." The Company believes that,
increasingly, management expertise and creative real estate solutions will be
required for successful real estate companies. BCP's management team has a
proven track record in this regard in office as well as with other property
types. Based on these observations, BCP intends to identify, create and realize
value for the Company in its investment in Real Estate-Related Assets. Several
themes underlie this strategy:
- RELATIONSHIPS--BCP's management will draw upon its extensive network of
domestic and foreign institutional relationships established over the past
twenty years in the public and private company sectors. These
relationships have provided, and are expected to continue to provide,
early and sometimes exclusive access to negotiated transactions and
avoidance of competitive auctions.
- OPERATING COMPANY EXPERTISE--BCP will identify opportunities where its
expertise in actively managing both public and private real estate
companies can be applied to under-performing real estate assets or real
estate companies.
- INDUSTRY TRENDS--BCP will identify and capitalize on industry trends that
emerge as the market continues its transformation and maturation process.
The Company initially intends to focus its investment activity in the
following types of Real Estate-Related Assets: (i) value-added repositionings
and discounted purchases; (ii) development and re-development; (iii)
multiple-property portfolios; (iv) joint ventures and strategic partnerships;
and (v) real estate companies and real estate-related businesses.
(i) VALUE-ADDED REPOSITIONINGS AND DISCOUNTED PURCHASES. The Company expects
to target investments in under-utilized or poorly capitalized single assets and
portfolios that may be recapitalized on advantageous terms and repositioned with
the expectation of returns greater than those that could be achieved by
acquiring a stabilized property. These investments may include the purchase of
the property at a discount to replacement cost or the purchase of the underlying
debt thereon often at a discount to face
22
<PAGE>
value. In today's dynamic real estate industry with an ever-changing and
cyclical economy and changing demographic characteristics, there generally will
be opportunities to take better advantage of well-located and structurally sound
properties. Opportunities in this area include acquisitions of properties and
portfolios from controlling parties who are not focused on maximizing value in
these assets, whether because they have lost economic incentive or because they
are non-strategic or inefficient owners of real estate. In addition,
opportunities may involve substantial rehabilitation or redevelopment and
ground-up development where market conditions warrant new construction.
Investments in this area may benefit from the Company's value-added
problem-solving and structuring capabilities, as well as from the skills of
operating partners in joint venture investments. The Company believes that there
may be an availability of these opportunities due to short-term issues with the
properties (such as vacancies) that may not appeal to larger publicly-traded
REITs.
(ii) DEVELOPMENT AND RE-DEVELOPMENT. The Company expects that it will
target, on a selected basis, investments requiring strategic ground-up
development or re-development of existing properties that can benefit from
repositioning. Based on the current stage of the real estate business cycle, the
Company believes that attractive development opportunities are presenting
themselves in a number of markets. The Company expects to seek out opportunities
where market vacancy rates and market rents justify new construction and where
job growth will support new demand for office space. Development and
redevelopment of real estate was a primary element of Beacon Properties'
business strategy under the supervision of the Company's senior management. From
the founding of Beacon Properties' predecessor over 50 years ago until Beacon
Properties' merger with Equity Office Properties Trust in December 1997, Beacon
Properties was involved in numerous urban and suburban development projects in
Boston and throughout the United States. As a public company, Beacon Properties
was regarded by many for its office and mixed-use developments, particularly in
Boston. In addition, BCP's principals also have development expertise in other
property types, including lodging, industrial, retail, apartments and mixed-use
projects.
(iii) MULTIPLE PROPERTY PORTFOLIOS. The Company expects to target real
estate acquisitions resulting from corporate divestitures from users, financial
institutions, and other non-strategic and inefficient owners of real estate.
Many domestic and foreign corporations and institutions (i.e., insurance
companies, pension funds and endowments) have made direct investments in real
estate assets or, on occasion, have established full-service real estate
subsidiaries. In the current era of corporate restructuring and downsizing, many
companies have chosen to liquidate non-core businesses and real estate assets.
In addition, the Company believes that the trend from private to public
ownership is motivating many institutions to liquidate their privately-held real
estate portfolios. As a result, the Company believes that many opportunities
will exist to acquire real estate assets, real estate operating businesses or
interests in real estate joint ventures directly from corporations and
institutions. In some instances, the selling companies may have particular
objectives, such as the need to sell assets prior to the end of a fiscal quarter
or a desire to allow an operating partner to continue to participate in an
investment, which the Company expects to be able to accommodate. The Company
also believes that foreign institutions may become particularly active sellers
of domestic and foreign assets in the near future. The Company believes that it
will be able to capitalize on management's historically successful relationships
with a wide range of institutions and, therefore, have a competitive advantage
in accessing many of these portfolios. The Company believes that its experienced
management team and its expertise in managing large, complex portfolios may
allow the Company to (i) pursue property portfolios that other real estate
investment entities may view as too complex, and (ii) take advantage of the
opportunities presented by these portfolios that may have been inefficiently
managed.
(iv) JOINT VENTURES AND STRATEGIC PARTNERSHIPS. The Company expects to enter
into, or acquire interests in, joint ventures or strategic partnerships as a way
to leverage both capital and expertise.
(v) REAL ESTATE COMPANIES AND REAL ESTATE-RELATED BUSINESSES. As public
market ownership and consolidation continues in the real estate industry, the
Company expects to target investments in real estate companies and businesses
with a real estate component. Opportunities in this target area include
23
<PAGE>
public and private companies, and generally fall into three types of companies:
(a) real estate ownership companies, including REITs and non-REIT ownership
companies, homebuilders and other development companies; (b) real estate service
companies, such as management or brokerage companies; and (c) businesses with a
strategic dependence on real estate. In particular, there may be opportunities
to acquire controlling interests in certain small to mid-sized REITs that do not
trade at multiples as high as many other larger and better capitalized REITs.
The Company intends to invest in private placements of common stock or other
securities convertible into common stock. When the Company identifies strong
management teams and growth prospects, it may provide growth capital to such
companies and may recapitalize over-leveraged or other poorly-capitalized
companies. The Company believes that its experienced management will enhance
such companies' abilities to evaluate investment opportunities. The Company
expects to take advantage of the arbitrage between private and public market
pricing of real estate with its investments in this area. Conversely, when an
entity can be acquired for less than the value of its assets, the Company may
acquire control of such entity, whether directly (through the acquisition of a
controlling equity interest) or indirectly (through the acquisition of debt). To
supplement its efforts in this strategic area, the Company has added an
individual to its management team, who was not formerly employed by Beacon
Properties, who has extensive experience in corporate private equity
investments.
Although the Company expects that its primary emphasis will be on the
acquisition of the above-described categories of Real Estate-Related Assets,
future acquisitions also may include Other Assets. In making its investments,
the Company intends to conduct all of its investment activities in a manner
consistent with maintaining the status of BCP as a REIT for United States
federal income tax purposes. See "Federal Income Tax
Considerations--Requirements for Qualification." To the extent any of the
above-described investments are attractive, but inconsistent with maintaining
the status of BCP as a REIT, such investments could be made by the BCP Sister
Corp. However, the Company's ability to fully utilize the BCP Sister Corp.
structure could be affected as a result of proposed or future legislation. See
"Risk Factors--Legal and Tax Risks--Tax Risks."
The Company cannot anticipate with any certainty the percentage of the net
proceeds of the Original Offering, or its other assets or funds, that will be
invested in each category of Real Estate-Related Assets or Other Assets. The
Company has broad discretion in the manner in which it makes investments,
subject to its Investment Strategy. There can be no assurance that the Company
will be successful in its Investment Strategy. See "Risk Factors--Investment
Activity Risks--Appropriate Investments May Not Be Available and Investments of
Net Proceeds May Be Delayed." Management's performance while employed at Beacon
Properties, and the performance of Beacon Properties under such management's
leadership, does not guarantee or predict the performance of the Company or its
management. See "Risk Factors-- Economic and Business Risks--Past Performance
Not a Predictor of Future Results."
INVESTMENT MANAGEMENT
The Company intends to create value in, and realize value from, its
investments by identifying advantageous investment management strategies. The
senior management of the Company has extensive experience in a broad range of
aspects of real estate investment management, including financing, asset and
property management, development and dispositions.
The Company currently has offices in Boston, Chicago and Los Angeles (headed
by senior officers who headed these regions for Beacon Properties) and intends
to pursue investments throughout the country. In addition, the Company intends
to enhance and extend its internal management resources through a network of
third-party property management and brokerage firms with specialized geographic
and property-type expertise and information. Through its existing offices and
these relationships, the Company can gain a local presence in strategic markets
and hands-on operational knowledge of the assets underlying its investments, as
well as better access to proprietary transactions. The senior management of the
Company has developed a network of such parties and will expand such
relationships as they pursue the Company's Investment Strategy. Generally, the
Company intends to structure relationships with parties
24
<PAGE>
who will make meaningful equity investments and provide incentives to its
partners to ensure that the parties' interests are aligned with the Company's,
while the Company retains control over each investment. See "Risk
Factors--Economic and Business Risks--Risks Related to Growth Strategy."
The Company intends to finance investments with the use of leverage in an
effort to maximize equity returns while allowing maximum flexibility and
maintaining an acceptable level of risk. As the real estate markets have
improved, the debt financing markets also have improved from the borrower's
perspective. Lenders are providing greater leverage at relatively lower cost
with greater structuring flexibility. The senior management of the Company has
established relationships in the lending community, being regular users of debt
financing and the Company expects to benefit from such individual lending
relationships. See "Management's Discussion and Analysis of Liquidity and
Capital Resources" and "Risk Factors-- Investment Activity Risks--Real Estate
Financing Risks."
Generally, the Company intends to pursue a strategy of portfolio
diversification in terms of geographic location, property type, and investment
type. The Company believes that diversification is important to reducing
potential down-side risks. However, the Company will have no predetermined
limitations or targets for concentration of geographic location, property type,
or investment type. Instead, the Company plans to make investment decisions on a
case-by-case basis. See "Risk Factors--Investment Activity Risks--Appropriate
Investments May Not Be Available and Investment of Net Proceeds May Be Delayed"
and "Risk Factors--Investment Activity Risks--Multi-Sector Investment Strategy."
THE BCP SISTER CORP.
The Company anticipates that it may, from time to time, identify Assets that
it believes may be advantageous investments, but that may be inappropriate
(whether for REIT qualification, tax or other reasons) for investment, in whole
or in part, by a REIT, or which may otherwise be determined by the Company,
based on general prudent considerations, to be inappropriate, in whole or in
part, for investment by the Company. In order to permit stockholders to
participate in the economic benefits that may be associated with such
non-qualifying REIT Assets, the Company intends, from time to time, to cause the
Operating Partnership to form one or more subsidiary corporations, partnerships
or other entities (each, a BCP Sister Corp.), which would not elect to be taxed
as a REIT. This structure has been employed by certain other REITs (such as
Crescent Real Estate Equities Company). The Operating Partnership would
initially contribute to the BCP Sister Corp. a portion of the net proceeds of
this Offering together with, on behalf of the Initial Limited Partner, a pro
rata portion of the capital of the Operating Partnership allocable to the
Initial Limited Partner's contributed capital, which will be sufficient to
permit the BCP Sister Corp. to make such initially identified investments, in
exchange for all of the issued and outstanding equity interests in the BCP
Sister Corp. The Operating Partnership would then distribute the equity
interests pro rata to BCP and the Initial Limited Partner. BCP in turn would
distribute the BCP Sister Corp.'s equity interests to its stockholders in a
taxable transaction. The Company anticipates that the first such BCP Sister
Corp. will be comprised of Beacon Venture Partners, Inc. and its operating
partnership, Beacon Venture Partners, L.P. Concurrently therewith or immediately
subsequent thereto, the BCP Sister Corp. will form an operating partnership (the
"Sister OP") upon substantially the same terms and conditions as the Operating
Partnership Agreement (including, without limitation, the terms respecting the
distribution of the Incentive Return to the BCP Affiliate). Furthermore, to the
extent that certain synergies and efficiencies are possible between the Company,
the BCP Sister Corp. and the Sister OP, the Company intends to maximize the
opportunities presented by such synergies and efficiencies. For example, the
Company, the BCP Sister Corp. and the Sister OP may jointly acquire investments
in assets and businesses, such as hotels or health care facilities, where the
Company will acquire title to the underlying real property and lease such
property to the Sister OP, at market rents (including rents based upon a
percentage of gross revenues), while the Sister OP acquires and operates the
operating business. The Company anticipates that such synergies and efficiencies
will provide the Company with advantages in making investments over other
companies; however, no assurance can be made that the Company will be
25
<PAGE>
successful in creating and implementing such synergies and efficiencies. See
"Risk Factors--Economic and Business Risks--Conflicts of Interest" and "Risk
Factors--Legal and Tax Risks--Tax Risks."
The formation of the BCP Sister Corp. will permit stockholders of the
Company who retain common stock of the BCP Sister Corp. to participate in the
real estate operations of the Company (including ownership of real property) and
the BCP Sister Corp.'s operation of operating businesses and other assets which
may not otherwise be appropriate for a REIT. The Company's principal focus will
be to make real estate investments while any BCP Sister Corp.'s principal
function will be to serve as an operating company. The operating activities and
operating assets made available to the BCP Sister Corp. by the Company are
designed to provide BCP's stockholders with the long-term benefits of ownership
in an entity devoted to the conduct of operating business activities in addition
to their ownership interest in the Company. A small number of REITs, operating
under tax provisions that no longer are available to newly-formed REITs, have
their shares "paired" or "stapled" with shares of a related operating company,
and, therefore, cannot be owned or transferred independently. It is the
Company's intention that the Common Stock of the Company and the equity
interests of the BCP Sister Corp. will not be paired or stapled, but rather will
be structured as a "paper clip," a structure designed to permit BCP to continue
to qualify as a REIT. With respect to the Common Stock of the Company and the
equity interests of the BCP Sister Corp. that may be owned and transferred,
subject to applicable securities laws restrictions, separately and independently
of each other, the Company and the BCP Sister Corp. will not necessarily provide
a paired investment with the Company on an ongoing basis. After the initial
formation of the BCP Sister Corp. and the distribution of its equity interests,
the BCP Sister Corp. and the Company will pursue independent sources of
financing and, to the extent that the stock trades separately, may ultimately
have differing ownership. See "The Company--Certain Relationships; Conflicts of
Interest," "Federal Income Tax Considerations--BCP Sister Corp." and "Risk
Factors--Legal and Tax Risks--Tax Risks."
To the extent that payments of rent may be made by the BCP Sister Corp. to
the Company, the Company will be required to monitor and comply with the
"related party tenant" provisions of the Code, which provide that payments made
under a lease will not constitute qualifying income for purposes of the REIT
requirements if the Company owns, directly or indirectly or pursuant to
attribution rules, 10% or more of the ownership interests in the relevant
lessee. The Aggregate Stock Ownership Limit is designed to prevent a stockholder
of the Company from owning an amount of shares that would cause the Company to
be treated as owning a BCP Sister Corp. However, any stockholder owning 10% or
more of the Company by reason of a waiver of the Aggregate Stock Ownership Limit
or the application of the Aggregate Stock Ownership Limit or the application of
the Look-Through Ownership Limit may be required to reduce its ownership
percentage in the Company to below 10% in order to receive its pro rata share of
the distribution of the stock of the BCP Sister Corp., to ensure that rents
received by the REIT are not disqualified under the related party tenant
provisions.
The Company's ability to fully utilize the BCP Sister Corp. structure could
be affected as a result of proposed and future legislation. In that regard, on
February 2, 1998, the Clinton Administration released a description of revenue
proposals that included, among other things, a freeze on the grandfathered
status of REITs that are "paired" or "stapled" with a related operating company.
Although such proposed legislation in its current form does not affect the
"paper clip" structure, there can be no assurance that the Clinton
Administration proposals or similar legislation affecting the BCP Sister Corp.
structure will not place legislative or judicial scrutiny on the "paper clip"
structure or that legislation adversely affecting such structure will not be
proposed and enacted, possibly on a retroactive basis. Any such legislation
could have an adverse impact on the qualification of BCP as a REIT. See "Risk
Factors--Legal and Tax Risks--Tax Risks" and "Federal Income Tax
Considerations--Impact of Proposed Legislation."
26
<PAGE>
THE COMPANY
BCP is a recently-organized Maryland corporation, and will elect to be taxed
as a REIT under the Code. The Operating Partnership is a Delaware limited
partnership. The principal executive offices of the Company are located at One
Federal Street, 26th Floor, Boston, Massachusetts 02110. The Company's telephone
number is (617) 457-0400.
The Company believes that its senior management has long-standing
relationships with institutional owners, lenders, bankers and other real estate
operators and developers which the Company anticipates may provide the Company
with regular access to transaction activity and investment opportunities. In
addition, the operating experience of its senior management gained through the
management of public and private companies provides a unique perspective that is
expected to be particularly valuable as the real estate cycle changes and as the
real estate industry continues its transformation from private to public
capitalization. In addition to the experience gained by the senior management as
senior management of Beacon Properties, they have also been active in the
development, acquisition and management of a broad spectrum of property types,
including lodging, apartment, industrial, retail and mixed-use projects.
RECENT AND PENDING ACQUISITIONS
THE ATHENAEUM PORTFOLIO. On May 1, 1998 the Company purchased a portfolio
of eleven buildings in Cambridge, MA known as The Athenaeum Portfolio. The
mixed-use portfolio consists of approximately 970,000 square feet and contains
office, laboratory and retail uses as well as a 1,530 space parking garage. The
purchase price for the portfolio was $195 million, including the assumption of
approximately $69 million of first mortgage debt. The Company estimates that the
aggregate purchase price is approximately 80% of replacement cost. Subsequent to
the closing of the transaction, the Company completed the formation of a joint
venture with an affiliate of PaineWebber, in which both parties hold a 50%
equity interest in the properties.
The portfolio is comprised of two components: One Kendall Square and The
Athenaeum House (215 First Street), which are located within close proximity of
M.I.T. Several of the buildings were originally built as manufacturing buildings
at the turn of the century and were fully renovated in the mid-1980's for office
and laboratory uses. A nine-screen cinema was added to the complex in 1994. The
buildings are currently 100% occupied. Major tenants which occupy more than 10%
of the portfolio include: Genzyme, CLAM Associates, Cambridge Neuroscience, and
Mitotix.
The Athenaeum Portfolio is located in the East Cambridge office market. The
overall Cambridge office market includes approximately 10 million square feet.
According to Spaulding & Slye, the Cambridge office market had an overall
vacancy rate of 1.2% as of March 31, 1998.
TECHNOLOGY SQUARE & THE DRAPER BUILDING. On April 22, 1998 the Company
entered into a purchase and sale agreement with Prudential to acquire a four-
building complex known as Technology Square and an adjacent building known as
The Draper Building. The properties are located in Cambridge, MA, adjacent to
One Kendall Square (described above) and M.I.T. and consist of 1,026,000 square
feet. The purchase price for the properties under the purchase and sale
agreement is $123 million. The Company and Prudential are currently negotiating
the form of the consideration for the properties.
Technology Square is currently 100% leased to two tenants: M.I.T. and
Polaroid Corporation. The leases with these tenants expire in mid-1999. Average
net lease rates in place are $6.53 per square foot, which the Company believes
to be substantially below current market. The Company intends to re-develop and
re-lease the property over the next 18-24 months and projects substantial
increases in net operating income as the property is stabilized at current
market net rents, which the Company believes to be approximately $24 per square
foot. The scope of the re-development is currently under review by the Company.
The Draper Building is 100% leased to Draper Labs on a long-term lease, with
extension
27
<PAGE>
options through October 2051, pursuant to which the tenant has an option, under
certain circumstances, to acquire The Draper Building.
Technology Square and The Draper Building are located in the East Cambridge
office market. The overall Cambridge office market includes approximately 10
million square feet. Upon completion of this acquisition, the Company will own
approximately 2 million square feet of office and commercial in the Cambridge
market, including both The Athenaeum Portfolio and Technology Square and The
Draper Building.
THE PROPERTIES & PENDING ACQUISITIONS
Set forth below are summary descriptions of the Properties & Pending
Acquisitions.
<TABLE>
<CAPTION>
RENTABLE PERCENT
YEAR BUILT/ OWNERSHIP NO. OF PROPERTY AREA IN LEASED
PROPERTY/PENDING ACQUISITION (1) RENOVATED INTEREST (2) BLDGS. LOCATION SQUARE FEET AT 6/1/98
- ----------------------------------- ----------- ------------ ------ ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
CAMBRIDGE OFFICE MARKET:
215 First Street................... 1885/1981 50% 1 Cambridge, MA 306,084 100%
One Kendall Square Cinema.......... 1994 50% 1 Cambridge, MA 31,641 100%
Buildings 100-500.................. 1887/1984 50% 4 Cambridge, MA 222,372 99%
Buildings 600/650/700.............. 1916/1985 50% 2 Cambridge, MA 236,661 100%
Buildings 1500 & 1700.............. 1914/1986 50% 2 Cambridge, MA 39,707 100%
Building 1400...................... 1989 50% 1 Cambridge, MA 133,211 100%
------ ----------- ---------
Subtotal The Athenaeum Portfolio 11 969,676 100%
------ ----------- ---------
545 TECH SQUARE (3)................ 1965 100% 1 CAMBRIDGE, MA 144,123 100%
549 TECH SQUARE.................... 1962 100% 1 CAMBRIDGE, MA 40,377 100%
565 TECH SQUARE.................... 1965 100% 1 CAMBRIDGE, MA 201,816 100%
575 TECH SQUARE.................... 1965 100% 1 CAMBRIDGE, MA 165,208 100%
THE DRAPER BUILDING (4)............ 1976 100% 1 CAMBRIDGE, MA 474,481 100%
------ ----------- ---------
SUBTOTAL TECH SQUARE & THE DRAPER
BUILDING 5 1,026,005 100%
------ ----------- ---------
Total/Weighted Average
Properties/Pending Acquisitions 16 1,995,681 100%
------ ----------- ---------
------ ----------- ---------
</TABLE>
- ------------------------
(1) Pending Acquisitions appear in italics.
(2) The Company holds a 50% interest in The Athenaeum Portfolio which includes
eleven buildings, a nine screen-1,200 seat cinema and 1,530 structured
parking spaces.
(3) Tech Square includes 955 structured parking spaces.
(4) The Draper Building includes 965 structured parking spaces.
28
<PAGE>
OCCUPANCY RATES, BASE RENTS AND NET EFFECTIVE RENTS
The following chart sets forth the occupancy rate, expressed as a
percentage, the average annual Base Rent (as defined below) and the average Net
Effective Rent (as defined below) per square foot for each of the Company's
Properties and Pending Acquisitions. Base Rent is gross rent excluding payments
by tenants on account of real estate tax and operating expense escalation. Net
Effective Rent is Base Rent adjusted on a straight-line basis for contractual
rent step-ups and free rent periods, plus tenant payments on account of real
estate tax and operating expense escalation, less total operating expenses and
real estate taxes.
<TABLE>
<CAPTION>
AVERAGE AVERAGE
TOTAL % BASE NET EFF
PROPERTY/PENDING ACQUISITIONS AREA LEASED RENT RENT
- ----------------------------------------------------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
215 First Street..................................... 306,084 100% $ 19.22 $ 14.98
One Kendall Square Cinema............................ 31,641 100% 18.29 13.48
Buildings 100-500.................................... 222,372 99% 24.68 15.69
Buildings 600/650/700................................ 236,661 100% 31.82 24.14
Buildings 1500 & 1700................................ 39,707 100% 14.92 10.45
Building 1400........................................ 133,211 100% 26.82 19.54
---------- --- --------- ---------
The Athenaeum Portfolio 969,676 100% 24.38 17.78
---------- --- --------- ---------
Pending Acquisitions
545 Tech Square (NNN)................................ 144,123 100% 13.35 13.35
549 Tech Square...................................... 40,377 100% 6.51 4.06
565 Tech Square...................................... 201,816 100% 6.63 4.08
575 Tech Square...................................... 165,208 100% 7.32 4.16
The Draper Building (NNN)............................ 474,481 100% 6.16 6.16
---------- --- --------- ---------
Tech Square & The Draper Building.................... 1,026,005 100% 7.46 6.36
---------- --- --------- ---------
Total/Weighted Average............................... 1,995,681 100% $ 15.68 $ 11.91
---------- --- --------- ---------
---------- --- --------- ---------
</TABLE>
29
<PAGE>
LEASE EXPIRATIONS--ALL PROPERTIES & PENDING ACQUISITIONS
The following table sets forth lease expirations (in square feet) for each
of the Company's Properties & Pending Acquisitions.
<TABLE>
<CAPTION>
PROPERTY/PENDING
ACQUISITIONS 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
- --------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAMBRIDGE
- ---------------------
215 FIRST STREET
- ---------------------
square feet (a)...... 46,752 34,383 11,345 44,277 117,016 52,311 0 0 0 0
% sq. ft. (b)........ 15.3% 11.2% 3.7% 14.5% 38.2% 17.1% 0.0% 0.0% 0.0% 0.0%
annual rent (c)...... 776,849 870,416 163,420 841,040 2,555,762 839,493 0 0 0 0
% annual rent (d).... 12.8% 14.4% 2.7% 13.9% 42.3% 13.9% 0.0% 0.0% 0.0% 0.0%
tenants (e).......... 7 8 4 4 5 5 0 0 0 0
ONE KENDALL SQUARE
CINEMA
- ---------------------
square feet (a)...... 0 0 0 0 0 0 0 0 0 0
% sq. ft. (b)........ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c)...... 0 0 0 0 0 0 0 0 0 0
% annual rent (d).... 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants (e).......... 0 0 0 0 0 0 0 0 0 0
BUILDINGS 100-500
- ---------------------
square feet (a)...... 54,248 25,857 34,172 19,798 29,869 34,256 0 21,116 0 0
% sq. ft. (b)........ 24.4% 11.6% 15.4% 8.9% 13.4% 15.4% 0.0% 9.5% 0.0% 0.0%
annual rent (c)...... 1,014,041 554,269 926,647 417,581 717,629 814,951 0 520,896 0 0
% annual rent (d).... 20.4% 11.2% 18.7% 8.4% 14.5% 16.4% 0.0% 10.5% 0.0% 0.0%
tenants (e).......... 12 9 8 8 10 2 0 4 0 0
BUILDINGS 600/650/700
- ---------------------
square feet (a)...... 3,965 26,150 71,738 4,629 31,333 0 0 98,846 0 0
% sq. ft. (b)........ 1.7% 11.0% 30.3% 2.0% 13.2% 0.0% 0.0% 41.8% 0.0% 0.0%
annual rent (c)...... 213,281 400,560 2,442,338 117,395 1,252,066 0 0 3,241,160 0 0
% annual rent (d).... 2.8% 5.2% 31.9% 1.5% 16.3% 0.0% 0.0% 42.3% 0.0% 0.0%
tenants (e).......... 2 6 3 1 1 0 0 1 0 0
BUILDINGS 1500 & 1700
- ---------------------
square feet (a)...... 3,830 275 0 15,707 4,709 0 0 0 0 0
% sq. ft. (b)........ 9.6% 0.7% 0.0% 39.6% 11.9% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent (c)...... 20,529 2,196 0 393,462 103,598 0 0 0 0 0
% annual rent (d).... 3.3% 0.3% 0.0% 62.5% 16.5% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants (e).......... 1 1 0 1 1 0 0 0 0 0
BUILDING 1400
- ---------------------
square feet (a)...... 0 0 7,868 24,541 0 0 0 100,802 0 0
% sq. ft. (b)........ 0.0% 0.0% 5.9% 18.4% 0.0% 0.0% 0.0% 75.7% 0.0% 0.0%
annual rent (c)...... 0 0 197,959 784,336 0 0 0 3,072,432 0 0
% annual rent (d).... 0.0% 0.0% 4.9% 19.3% 0.0% 0.0% 0.0% 75.8% 0.0% 0.0%
tenants (e).......... 0 0 1 1 0 0 0 2 0 0
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL THE ATHENAEUM
PORTFOLIO
- ---------------------
square feet (a)...... 108,795 86,665 125,123 108,952 182,927 86,567 0 220,764 0 0
% sq. ft. (b)........ 11.2% 8.9% 12.9% 11.2% 18.9% 8.9% 0.0% 22.8% 0.0% 0.0%
annual rent (c)...... 2,024,700 1,827,441 3,730,364 2,553,814 4,629,055 1,654,443 0 6,834,489 0 0
% annual rent (d).... 8.5% 7.6% 15.6% 10.7% 19.3% 6.9% 0.0% 28.5% 0.0% 0.0%
tenants (e).......... 22 24 16 15 17 7 0 7 0 0
<CAPTION>
PROPERTY/PENDING 2008 &
ACQUISITIONS BEYOND
- --------------------- ---------
<S> <C>
CAMBRIDGE
- ---------------------
215 FIRST STREET
- ---------------------
square feet (a)...... 0
% sq. ft. (b)........ 0.0%
annual rent (c)...... 0
% annual rent (d).... 0.0%
tenants (e).......... 0
ONE KENDALL SQUARE
CINEMA
- ---------------------
square feet (a)...... 31,641
% sq. ft. (b)........ 100.0%
annual rent (c)...... 578,802
% annual rent (d).... 100.0%
tenants (e).......... 1
BUILDINGS 100-500
- ---------------------
square feet (a)...... 156
% sq. ft. (b)........ 0.1%
annual rent (c)...... 0
% annual rent (d).... 0.0%
tenants (e).......... 1
BUILDINGS 600/650/700
- ---------------------
square feet (a)...... 0
% sq. ft. (b)........ 0.0%
annual rent (c)...... 0
% annual rent (d).... 0.0%
tenants (e).......... 0
BUILDINGS 1500 & 1700
- ---------------------
square feet (a)...... 15,186
% sq. ft. (b)........ 38.2%
annual rent (c)...... 109,494
% annual rent (d).... 17.4%
tenants (e).......... 3
BUILDING 1400
- ---------------------
square feet (a)...... 0
% sq. ft. (b)........ 0.0%
annual rent (c)...... 0
% annual rent (d).... 0.0%
tenants (e).......... 0
---------
TOTAL THE ATHENAEUM
PORTFOLIO
- ---------------------
square feet (a)...... 46,983
% sq. ft. (b)........ 4.8%
annual rent (c)...... 688,296
% annual rent (d).... 2.9%
tenants (e).......... 5
</TABLE>
- ------------------------
(a) Total area in square feet covered by such leases.
(b) Percentage of total square feet of the property.
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus the current tenant payments on account of real
estate tax and operating escalations (amounts in dollars).
(d) Calculated as annual rent divided by the total annual rent.
(e) The number of tenants whose leases will expire.
30
<PAGE>
<TABLE>
<CAPTION>
PROPERTY/PENDING
ACQUISITIONS 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ---------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PENDING ACQUISITIONS
545 TECH SQUARE
- ----------------------------
square feet(a).............. 0 144,123 0 0 0 0 0 0 0
% sq. ft.(b)................ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c).............. 0 3,149,241 0 0 0 0 0 0 0
% annual rent(d)............ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants(e).................. 0 2 0 0 0 0 0 0 0
549 TECH SQUARE
- ----------------------------
square feet(a).............. 0 40,377 0 0 0 0 0 0 0
% sq. ft.(b)................ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c).............. 0 205,823 0 0 0 0 0 0 0
% annual rent(d)............ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants(e).................. 0 1 0 0 0 0 0 0 0
565 TECH SQUARE
- ----------------------------
square feet(a).............. 0 201,816 0 0 0 0 0 0 0
% sq. ft.(b)................ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c).............. 0 1,403,561 0 0 0 0 0 0 0
% annual rent(d)............ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants(e).................. 0 1 0 0 0 0 0 0 0
575 TECH SQUARE
- ----------------------------
square feet(a).............. 0 165,208 0 0 0 0 0 0 0
% sq. ft.(b)................ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c).............. 0 1,208,911 0 0 0 0 0 0 0
% annual rent(d)............ 0.0% 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants(e).................. 0 1 0 0 0 0 0 0 0
THE DRAPER BUILDING(F)
- ----------------------------
square feet(a).............. 0 0 0 0 0 0 0 0 0
% sq. ft.(b)................ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c).............. 0 0 0 0 0 0 0 0 0
% annual rent(d)............ 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants(e).................. 0 0 0 0 0 0 0 0 0
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL TECH
SQUARE & THE DRAPER
BUILDING
- ----------------------------
square feet(a).............. 0 551,524 0 0 0 0 0 0 0
% sq. ft.(b)................ 0.0% 53.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
annual rent(c).............. 0 5,967,535 0 0 0 0 0 0 0
% annual rent(d)............ 0.0% 53.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
tenants(e).................. 0 5 0 0 0 0 0 0 0
--------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL PROPERTIES & PENDING
ACQUISITIONS
- ----------------------------
square feet(a).............. 108,795 638,189 125,123 108,952 182,927 86,567 0 220,764 0
% sq. ft.(b)................ 5.5% 32.0% 6.3% 5.5% 9.2% 4.3% 0.0% 11.1% 0.0%
annual rent(c).............. 2,024,700 7,794,976 3,730,364 2,553,814 4,629,055 1,654,443 0 6,834,489 0
% annual rent(d)............ 5.8% 22.2% 10.6% 7.3% 13.2% 4.7% 0.0% 19.4% 0.0%
tenants(e).................. 22 29 16 15 17 7 0 7 0
<CAPTION>
PROPERTY/PENDING 2008 &
ACQUISITIONS 2007 BEYOND
- ---------------------------- --------- ---------
<S> <C> <C>
PENDING ACQUISITIONS
545 TECH SQUARE
- ----------------------------
square feet(a).............. 0 0
% sq. ft.(b)................ 0.0% 0.0%
annual rent(c).............. 0 0
% annual rent(d)............ 0.0% 0.0%
tenants(e).................. 0 0
549 TECH SQUARE
- ----------------------------
square feet(a).............. 0 0
% sq. ft.(b)................ 0.0% 0.0%
annual rent(c).............. 0 0
% annual rent(d)............ 0.0% 0.0%
tenants(e).................. 0 0
565 TECH SQUARE
- ----------------------------
square feet(a).............. 0 0
% sq. ft.(b)................ 0.0% 0.0%
annual rent(c).............. 0 0
% annual rent(d)............ 0.0% 0.0%
tenants(e).................. 0 0
575 TECH SQUARE
- ----------------------------
square feet(a).............. 0 0
% sq. ft.(b)................ 0.0% 0.0%
annual rent(c).............. 0 0
% annual rent(d)............ 0.0% 0.0%
tenants(e).................. 0 0
THE DRAPER BUILDING(F)
- ----------------------------
square feet(a).............. 0 474,481
% sq. ft.(b)................ 0.0% 100.0%
annual rent(c).............. 0 5,228,781
% annual rent(d)............ 0.0% 100.0%
tenants(e).................. 0 1
--------- ---------
TOTAL TECH
SQUARE & THE DRAPER
BUILDING
- ----------------------------
square feet(a).............. 0 474,481
% sq. ft.(b)................ 0.0% 46.2%
annual rent(c).............. 0 5,228,781
% annual rent(d)............ 0.0% 46.7%
tenants(e).................. 0 1
--------- ---------
TOTAL PROPERTIES & PENDING
ACQUISITIONS
- ----------------------------
square feet(a).............. 0 521,464
% sq. ft.(b)................ 0.0% 26.1%
annual rent(c).............. 0 5,917,077
% annual rent(d)............ 0.0% 16.8%
tenants(e).................. 0 6
</TABLE>
- ----------------------------------
(a) Total area in square feet covered by such leases.
(b) Percentage of total square feet of the property.
(c) Annualized expiring base rental income represented by such leases in the
year of expiration plus the current tenant payments on account of real
estate tax and operating escalations (amounts in dollars).
(d) Calculated as annual rent divided the total annual rent.
(e) The number of tenants whose leases will expire.
(f) The Draper Building is reflected as a 2008 & beyond expiration; although the
current lease term expires in 2001, the tenant has options to extend through
October 2051 at rental rates that are significantly below market.
31
<PAGE>
The following charts set forth the Historic Occupancy, Historic Base Rent
and Historic Net Rent (as defined below) per square foot for each of the
Properties & Pending Acquisitions. Historic Net Rent is Base Rent plus tenant
payments on account of real estate tax and operating expense escalation, less
total operating expenses and real estate taxes.
<TABLE>
<CAPTION>
HISTORIC OCCUPANCY
TOTAL -----------------------------------------------------
PROPERTY/PENDING ACQUISITIONS AREA 1993 1994 1995 1996 1997
- ----------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
215 First Street..................................... 306,084 63% 86% 97% 96% 100%
One Kendall Square Cinema............................ 31,641 0% 0% 100% 100% 100%
Buildings 100-500.................................... 222,372 69% 91% 75% 84% 84%
Buildings 600/650/700................................ 236,661 95% 95% 95% 97% 99%
Buildings 1500 & 1700................................ 39,707 0% 87% 82% 87% 87%
Building 1400........................................ 133,211 98% 96% 90% 100% 100%
--------- --------- --------- --------- --------- ---------
The Athenaeum Portfolio.............................. 969,676 78% 91% 90% 94% 95%
--------- --------- --------- --------- --------- ---------
PENDING ACQUISITIONS
- -----------------------------------------------------
545 Tech Square...................................... 144,123 100% 100% 100% 100% 100%
549 Tech Square...................................... 40,377 100% 100% 100% 100% 100%
565 Tech Square...................................... 201,816 100% 100% 100% 100% 100%
575 Tech Square...................................... 165,208 100% 100% 100% 100% 100%
The Draper Building.................................. 474,481 100% 100% 100% 100% 100%
--------- --------- --------- --------- --------- ---------
Tech Square & The Draper Building.................... 1,026,005 100% 100% 100% 100% 100%
--------- --------- --------- --------- --------- ---------
Total/Weighted Average............................... 1,995,681 90% 96% 95% 97% 98%
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
HISTORIC BASE RENT
TOTAL -----------------------------------------------------
PROPERTY/PENDING ACQUISITIONS AREA 1993 1994 1995 1996 1997
- ----------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
215 First Street..................................... 306,084 $ 17.32 $ 14.36 $ 13.52 $ 15.19 $ 16.62
One Kendall Square Cinema............................ 31,641 0.00 0.00 16.07 17.71 17.93
Buildings 100-500.................................... 222,372 17.93 19.43 20.92 17.82 21.74
Buildings 600/650/700................................ 236,661 26.96 28.49 28.47 28.99 31.91
Buildings 1500 & 1700................................ 39,707 0.00 9.43 10.51 11.58 11.46
Building 1400........................................ 133,211 23.16 25.67 27.96 26.95 27.30
--------- --------- --------- --------- --------- ---------
The Athenaeum Portfolio.............................. 969,676 20.88 20.52 20.81 20.71 22.82
--------- --------- --------- --------- --------- ---------
PENDING ACQUISITIONS
- -----------------------------------------------------
545 Tech Square...................................... 144,123 27.14 22.89 22.28 21.86 20.84
549 Tech Square...................................... 40,377 11.88 11.61 11.12 10.42 9.88
565 Tech Square...................................... 201,816 9.09 9.32 9.28 8.63 8.01
575 Tech Square...................................... 165,208 10.61 10.50 9.90 9.38 8.59
The Draper Building.................................. 474,481 6.16 6.16 6.16 6.16 6.16
--------- --------- --------- --------- --------- ---------
Tech Square & The Draper Building.................... 1,026,005 10.63 10.05 9.84 9.54 9.12
--------- --------- --------- --------- --------- ---------
Total/Weighted Average............................... 1,995,681 $ 15.41 $ 15.05 $ 15.17 $ 14.97 $ 15.78
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
HISTORIC NET RENT
TOTAL -----------------------------------------------------
PROPERTY/PENDING ACQUISITIONS AREA 1993 1994 1995 1996 1997
- ----------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
215 First Street..................................... 306,084 $ 7.23 $ 8.08 $ 8.63 $ 9.64 $ 11.18
One Kendall Square Cinema............................ 31,641 0.00 0.00 13.33 14.56 13.38
Buildings 100-500.................................... 222,372 8.19 14.34 16.42 13.90 13.98
Buildings 600/650/700................................ 236,661 16.95 18.79 18.56 18.27 20.75
Buildings 1500 & 1700................................ 39,707 0.00 6.75 6.47 8.70 7.93
Building 1400........................................ 133,211 14.01 14.46 17.48 16.93 16.52
--------- --------- --------- --------- --------- ---------
The Athenaeum Portfolio.............................. 969,676 11.03 13.11 14.12 13.85 14.83
--------- --------- --------- --------- --------- ---------
PENDING ACQUISITIONS
545 Tech Square...................................... 144,123 16.38 12.14 12.01 12.38 11.85
549 Tech Square...................................... 40,377 3.36 3.27 3.84 3.82 3.31
565 Tech Square...................................... 201,816 2.96 3.16 3.14 3.19 2.71
575 Tech Square...................................... 165,208 3.39 3.65 3.30 3.81 3.54
The Draper Building.................................. 474,481 5.87 5.86 5.85 5.84 5.83
--------- --------- --------- --------- --------- ---------
Tech Square & The Draper Building.................... 1,026,005 6.27 5.75 5.69 5.83 5.60
--------- --------- --------- --------- --------- ---------
Total/Weighted Average............................... 1,995,681 $ 8.50 $ 9.27 $ 9.79 $ 9.73 $ 10.08
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
32
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The Company believes that it has developed an organization of real estate
investment and management professionals that is well-positioned to take
advantage of today's real estate and capital environment. The following table
sets forth certain information about the Directors and executive officers of
BCP.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD
- ----------------------------- --- ---------------------------------------------------------
<S> <C> <C>
Alan M. Leventhal............ 45 Chairman of the Board of Directors and Chief Executive
Officer
Lionel P. Fortin............. 54 President, Chief Operating Officer and Director
William A. Bonn.............. 46 Senior Vice President and General Counsel
Jeremy B. Fletcher........... 49 Senior Vice President of BCP and Chief Executive Beacon
Capital Partners West, a division of BCP
John Halsted................. 33 Senior Vice President of BCP and Chief Investment Officer
of Beacon Venture Partners, Inc.
Douglas S. Mitchell.......... 55 Senior Vice President
Erin R. O'Boyle.............. 38 Senior Vice President and Chief Investment Officer
Randy J. Parker.............. 39 Senior Vice President and Chief Financial Officer
E. Valjean Wheeler........... 53 Senior Vice President of BCP and Chief Executive Beacon
Capital Partners Central, a division of BCP
Stephen T. Clark............. 42 Director
Steven Shulman............... 57 Director
Scott M. Sperling............ 40 Director
</TABLE>
The principal occupation for the last five years of each Director and senior
manager of BCP, as well as other related information, is set forth below.
ALAN M. LEVENTHAL. Mr. Leventhal is co-founder of BCP and serves as
Chairman and Chief Executive Officer. Prior to founding BCP, Mr. Leventhal
served as President and Chief Executive Officer of Beacon Properties, one of the
largest REITs in the United States. Beacon Properties' portfolio included 124
office properties nationwide, comprising approximately 18.8 million square feet.
Beacon Properties was merged with Equity Office Properties Trust in December
1997. Mr. Leventhal received his Bachelor's degree in Economics from
Northwestern University in 1974 and a Master of Business Administration from the
Amos Tuck School of Business Administration at Dartmouth College in 1976. Mr.
Leventhal is a Trustee of Boston University and the New England Aquarium
Corporation and recently served as First Vice Chair of the National Association
of Real Estate Investment Trusts ("NAREIT"). He is also a member of the Visiting
Committee of Northwestern University and the Board of Overseers of WGBH, Beth
Israel Deaconess Medical Center, and the Museum of Science in Boston. Mr.
Leventhal has lectured at the Amos Tuck School of Business Administration at
Dartmouth College and the Massachusetts Institute of Technology Center for Real
Estate. Mr. Leventhal has been awarded the Realty Stock Review's "Outstanding
CEO Award" for 1996 and 1997, and the Commercial Property News' "Office Property
Executive of the Year" for 1996.
LIONEL P. FORTIN. Mr. Fortin is co-founder of BCP and serves as President,
Chief Operating Officer and a Director. He served as Executive Vice President,
Chief Operating Officer and a Director of Beacon Properties. From May 1994
through February 1995, Mr. Fortin served as Chief Financial Officer of Beacon
Properties. Mr. Fortin serves as a Director of Energy Capital Partners, an
energy finance company, and has lectured at the Massachusetts Institute of
Technology Center for Real Estate. Mr. Fortin graduated from Bentley College in
1968 and is a member of the American Institute of Certified Public Accountants
and the Massachusetts Society of Certified Public Accountants.
33
<PAGE>
WILLIAM A. BONN. Mr. Bonn serves as Senior Vice President of, and General
Counsel to, the Company. Mr. Bonn served as General Counsel to Beacon Properties
prior to joining the Company. From 1987 to 1997, Mr. Bonn served as General
Counsel and Senior Vice President for Property Capital Trust, a Boston-based
REIT. From 1978 to 1987, Mr. Bonn held various positions as an attorney with The
Prudential Insurance Company of America. From 1976 to 1978, Mr. Bonn was
involved in the private practice of law in Los Angeles. Mr. Bonn currently
serves as Co-Chairman of the Government Relations Committee of NAREIT. Mr. Bonn
holds a Bachelor of Science degree from the University of California at San
Diego and a Juris Doctor degree from the University of San Diego. He is admitted
to practice law in Massachusetts, New York and California, and is a member of
the American, California and Boston Bar Associations.
JEREMY B. FLETCHER. Mr. Fletcher serves as Senior Vice President and Chief
Executive of Beacon Capital Partners West, a division of BCP. Mr. Fletcher
served as Senior Vice President and Chief Executive of Beacon Properties West
prior to joining the Company. Before joining the Company, Mr. Fletcher was the
Director of Insignia Commercial Group, Inc., Los Angeles. From 1993 to July
1996, Mr. Fletcher was with the Paragon Group, where he served as Senior Vice
President/General Partner of the Southern California/Arizona Region. Mr.
Fletcher received his Bachelor's degree in Geology from Albion College. He is a
member of the Urban Land Institute (ULI), Real Estate Investment Advisory
Council ("REIAC"), and National Association of Industrial and Office Properties
(NAIOP) and is a licensed real estate broker in the State of California.
JOHN HALSTED. Mr. Halsted serves as Senior Vice President and, upon
formation of the BCP Sister Corp., will serve as Chief Investment Officer of
Beacon Venture Partners, Inc. Prior to joining the Company, Mr. Halsted was Vice
President at Harvard Private Capital Group ("Harvard"). He joined Harvard in
1993 and was responsible for the origination and management of investments in
specialty, finance, retail and energy companies. From 1991 to 1993, Mr. Halsted
was an Associate with Simmons & Company, an investment banking firm based in
Houston, Texas. Mr. Halsted earned his Masters in Business Administration from
The Harvard Business School and a degree in economics from The University of
California at Berkeley.
DOUGLAS S. MITCHELL. Mr. Mitchell serves as Senior Vice President. Mr.
Mitchell served as the Senior Vice President--Leasing/Management and Development
of Beacon Properties and as President of the Beacon Properties Management
Company from 1994 until 1997. He joined the Beacon Properties organization in
1964 and has extensive experience in leasing, management and development. He
graduated from the Wentworth Institute in 1962 and is a member of the Greater
Boston Real Estate Board. Mr. Mitchell is also a licensed real estate broker in
Massachusetts and New York.
ERIN R. O'BOYLE. Ms. O'Boyle serves as Senior Vice President and Chief
Investment Officer. Prior to joining the Company, Ms. O'Boyle served as Vice
President, Acquisitions for Beacon Properties, where she was responsible for
negotiating over $1.8 billion of investment opportunities. Ms. O'Boyle joined
Beacon Properties in 1986 and has held positions in asset management and
development. Ms. O'Boyle received her Bachelor of Science in structural
engineering from the University of Delaware and her Master of Science in real
estate development from the Massachusetts Institute of Technology. Ms. O'Boyle
is the past chair of the Alumni Association for the Massachusetts Institute of
Technology Center for Real Estate, is past president of the New England Women in
Real Estate ("NEWIRE"), and currently is on the board of the Northeast chapter
of REIAC.
RANDY J. PARKER. Mr. Parker serves as Senior Vice President and Chief
Financial Officer. Before joining the Company, Mr. Parker was Vice President,
Investor Relations for Beacon Properties, where he was responsible for managing
the relationships with institutional stockholders and analysts. Prior to joining
Beacon Properties, Mr. Parker was Senior Vice President and Portfolio Manager at
Aldrich Eastman & Waltch ("AEW"), where he was responsible for the management of
over $400 million of investment portfolios on behalf of institutional clients.
During his eight year tenure at AEW, Mr. Parker also held positions in asset
management and investment origination. Mr. Parker was also previously associated
with
34
<PAGE>
JMB/Federated Realty, where he served as Project Manager for various retail
development projects. Mr. Parker holds a Master of Business Administration
degree from the Wharton School, University of Pennsylvania and a Bachelor of
Architecture degree from the University of Kentucky.
E. VALJEAN WHEELER. Mr. Wheeler serves as Senior Vice President and Chief
Executive of Beacon Capital Partners Central, a division of BCP. Mr. Wheeler
served as Senior Vice President and Chief Executive of Beacon Properties Midwest
prior to joining the Company. Before joining Beacon Properties, Mr. Wheeler held
various senior management positions with Equity Office Holdings, L.L.C.
beginning in 1989, and served as President and Chief Operating Officer from 1995
to 1997. He also held various senior management positions with the Broe
Companies and Williams Realty Corporation. Mr. Wheeler graduated from Oklahoma
State University with a Bachelor of Science in Education. He is a member of the
Urban Land Institute (ULI) and has served on the National Advisory Council of
the Building Owners and Managers Association (BOMA).
STEPHEN T. CLARK. Mr. Clark serves as a Director. Since 1995, Mr. Clark has
been President of Cypress Realty, Inc., a real estate investor and developer
based in Houston, Texas. Previously, Mr. Clark served as Managing Director of
Harvard Private Capital Group where he directed the group responsible for real
estate investment and management activities. Prior to joining Harvard, Mr. Clark
was a partner in Clark-Pilgrim Limited Partnership and in Trammell Crow Company
where he was in charge of office and industrial activities in Philadelphia and
Delaware. Mr. Clark has extensive investment experience in developmental and
distressed real estate assets. He received a Masters in Business Administration
degree from Harvard Business School and received his undergraduate degree from
Duke University. Mr. Clark serves as Chairman of the Board of Abacoa Development
Company.
STEVEN SHULMAN. Mr. Shulman serves as a Director. He served as a Director
of Beacon Properties from 1995 to 1997. Since 1984, Mr. Shulman has been active
in investment banking through his wholly owned company, The Hampton Group, and
Latona Associates, Inc. where he serves as a Managing Director. Currently, Mr.
Shulman is a shareholder and director in a diversified group of companies,
including Ermanco Incorporated, Corinthian Directory, Terrace Holdings, Inc. and
WPI Group, Inc. In addition, he serves as Non-executive Chairman of Terrace
Holdings, Inc. Mr. Shulman is a graduate of Stevens Institute of Technology
where he received a Bachelor's degree in Mechanical Engineering and a Master's
degree in Industrial Management. Mr. Shulman serves as Vice Chairman of the
Board of Stevens Institute of Technology.
SCOTT M. SPERLING. Mr. Sperling serves as a Director. He served as a
Director of Beacon Properties from 1994 to 1997. Mr. Sperling joined Thomas H.
Lee Co., a Boston-based investment firm, as a general partner in September 1994.
Previously, Mr. Sperling served as Managing Partner and Vice Chairman of the
Aeneas Group, Inc./Harvard Management Company from 1984 through 1994. Mr.
Sperling has been the founder and/or lead investor of numerous companies and has
led the acquisition or turnaround of companies in a wide variety of industries.
He is currently a director of Livent, PriCellular Corporation, Softkey, The
Learning Company, General Chemical Group, Object Design, Inc. and several
private firms. He received a Master's of Business Administration degree from the
Harvard Business School and received his undergraduate degree from Purdue
University. Mr. Sperling is a member of the Corporation of the Brigham and
Women's Hospital and a director of the American Technion Society.
OTHER PROFESSIONALS
MICHAEL J. BOWLER. Mr. Bowler serves as Director of Financial Analysis for
Beacon Capital Partners. Before joining the company, Mr. Bowler served as the
Director of Financial Analysis for Beacon Properties Corporation where he was
responsible for all acquisition, asset management and development financial
analysis. Prior to joining Beacon, Mr. Bowler was an Assistant Vice President at
Northland Investment Corporation where he held a variety of financial and
accounting positions from 1982 to 1994.
35
<PAGE>
Mr. Bowler is a graduate of Bentley College where he received a Bachelor of
Science degree in Accounting.
NANCY J. BRODERICK. Ms. Broderick serves as Vice President and Treasurer.
Before joining the Company, Ms. Broderick served as Vice President and Treasurer
for Beacon Properties where she was responsible for a variety of corporate
finance and treasury functions, including key banking and institutional lender
relationships as well as administration of Beacon Properties' credit facility.
Ms. Broderick holds a Bachelor of Science degree in Accounting from Stonehill
College and a Master of Science degree in Taxation from Bentley College. She is
a certified public accountant and a member of the American Institute of
Certified Public Accountants and the Massachusetts Society of Public
Accountants.
JEFFREY D. BROWN. Mr. Brown serves as Acquisition Manager. Before joining
the Company, Mr. Brown was a Financial Analyst at Beacon Properties, where he
was responsible for the analysis and underwriting of investment opportunities.
Mr. Brown was a Consultant with E&Y Kenneth Leventhal Real Estate Group from
1994 to 1996, where he was responsible for valuation analysis and due diligence
assignments for various clients. Mr. Brown holds a Bachelor of Science degree
from Cornell University.
DAVID L. COHAN. Mr. Cohan serves as Vice President. Prior to joining the
Company, Mr. Cohan served as a Senior Acquisition Manager at Beacon Properties.
Before joining Beacon Properties, Mr. Cohan held operations, planning and asset
management positions at Copley Real Estate Advisors in Boston. He has also had
project management roles for firms developing retail, resort, waterfront,
residential, and industrial projects throughout the continental United States
and Hawaii. Mr. Cohan holds a Master of Science degree in Real Estate
Development from the Massachusetts Institute of Technology Center for Real
Estate where he also served as a teaching and research assistant in recent
years. He has a Bachelor's degree in English writing from the University of
Pennsylvania.
LISA A. MEOMARTINO. Ms. Meomartino serves as Corporate Controller for
Beacon Capital Partners. Prior to joining the Company, Ms. Meomartino served as
Director of Property Accounting for Beacon Properties Corporation where she
managed the financial reporting, accounting systems administration and lease
administration functions for 21.3 million square feet of commercial office
buildings. She joined Beacon in 1985 and has held various corporate and property
accounting positions. Ms. Meomartino holds a BS in Business Administration from
Bryant College and a MS in Finance from Boston College.
JENNIFER L. PLUMPTON. Ms. Plumpton serves as a Financial Analyst. Before
joining the Company, Ms. Plumpton was a Financial Analyst at Morgan Stanley
Realty Incorporated, where she was responsible for the analysis and execution of
securities offerings, mergers, acquisitions and asset sales for real estate
investment trusts and real estate operating companies. Ms. Plumpton holds a
Bachelor's degree in Mathematics from Providence College.
THOMAS RAGNO. Mr. Ragno serves as Vice President, Management and Leasing.
Prior to joining the Company, Mr. Ragno served as Vice President, Property
Management of Beacon Properties where he directly supervised property management
operations in the metro-Boston region consisting of approximately 8.0 million
square feet and 170 employees. Mr. Ragno joined Beacon Properties in 1987 and
has held various positions in leasing and project management. Mr. Ragno holds an
S.M. in Civil Engineering from the Massachusetts Institute of Technology and a
Bachelor of Science degree in Civil Engineering and Engineering & Public Policy
from Carnegie-Mellon University.
STEPHEN A. STANLEY. Mr. Stanley serves as Director of Information
Technology for Beacon Capital Partners. Prior to joining the Company, Mr.
Stanley was the Director of Technical Services for Beacon Properties Corporation
from 1994 to 1997. Prior to joining Beacon, Mr. Stanley was Manager of
Information Systems at First Winthrop Corporation. Mr. Stanley is a graduate of
the University of Maine where he received a Bachelor of Science degree with a
concentration in Finance.
36
<PAGE>
M. WISTAR WOOD. Mr. Wood serves as Vice President, Acquisitions. Prior to
joining the Company he served as Vice President, Acquisitions for Beacon
Properties Corporation, where he managed the search and negotiations for
ownership opportunities. Prior to joining Beacon in February 1997, Mr. Wood
served as Vice President of Acquisitions for Metric Realty from 1995 to 1997 and
oversaw all acquisition activity in a 26-state territory. Prior to joining
Metric in 1995, he was with Copley Real Estate Advisors, responsible for
acquisitions and sales. Mr. Wood is a graduate of Princeton University and holds
a MBA from the Wharton School, University of Pennsylvania. He is the founder of
REIAC's Northeast Chapter, and a member of ICSC.
BOARD OF DIRECTORS AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Board of Directors is divided into three classes of directors. The
initial terms of the first, second and third classes will expire in 1999, 2000
and 2001, respectively. Beginning in 1999, directors of each class will be
chosen for three-year terms upon the expiration of their current terms and each
year one class of directors will be elected by the stockholders. All officers
serve at the discretion of the Board of Directors. Each of the Independent
Directors of the Company receive an annual director's fee of $20,000. Each
Independent Director also receives $1,000 for each regular quarterly or special
meeting of the Board of Directors attended, $1,000 for each committee meeting
attended and $250 for each special telephonic committee meeting or meeting of
the Board of Directors in which such Independent Director has participated.
Independent Directors are also reimbursed for reasonable expenses incurred to
attend director and committee meetings. Independent Directors may make an
election, subject to approval of the Board's Compensation Committee, to receive
options to purchase Common Stock at a discount to fair market value in lieu of
cash fees or to receive deferred stock units. Officers of the Company who are
Directors will not be paid any directors' fees. Independent Directors receive,
upon initial election to the Board of Directors, an option to purchase 5,000
shares of Common Stock, and annually thereafter will receive an option to
purchase 5,000 shares of Common Stock. All options granted to Independent
Directors vest on the date of grant.
The Charter of BCP provides that, except in the case of a vacancy, a
majority of the members of the Board of Directors will be Independent Directors.
Vacancies occurring on the Board of Directors among the Independent Directors
will be filled by the vote of a majority of the Directors, including a majority
of the Independent Directors. The Compensation Committee will consist solely of
Independent Directors, except that Mr. Leventhal or his designee may serve as an
EX OFFICIO, non-voting member of the Compensation Committee.
The Maryland General Corporation Law (the "MGCL") permits a corporation to
include in its charter a provision limiting the liability of directors and
officers to the corporation or its stockholders for money damages, except (i) to
the extent that it is proved that the director or officer actually received an
improper benefit or profit in money, property or services or (ii) if a judgment
or other final adjudication is entered in a proceeding based on a finding that
the director's or officer's action or failure to act was the result of active
and deliberate dishonesty and was material to the cause of action adjudicated in
the proceeding. The Charter limits the liability of the Board of Directors and
officers to the Company to the fullest extent permitted from time to time by
Maryland law. See "Certain Provisions of Maryland Law and BCP's Charter and of
Bylaws--Limitation of Liability and Indemnification."
The Charter of the Company authorizes it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, REIT, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, REIT, partnership, joint venture, trust, employee benefit plan or
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his or her status
as a present or former director or officer of the
37
<PAGE>
Company. The Bylaws of the Company obligate it, to the maximum extent permitted
by Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, REIT, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, REIT, partnership, joint venture, trust, employee benefit plan or
other enterprise and who is made a party to the proceeding by reason of his
service in that capacity. The Charter and Bylaws also permit the Company to
indemnify and advance expenses to any person who served a predecessor of the
Company in any of the capacities described above and to any employee or agent of
the Company or a predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its directors, officers and certain other
parties against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to, or at the request of, the
corporation, unless it is established that (a) the act or omission of the
indemnified party was material to the matter giving rise to the proceeding and
(i) the act or omission was committed in bad faith or (ii) the act or omission
was the result of active and deliberate dishonesty, (b) the indemnified party
actually received an improper personal benefit in money, property or services or
(c) in the case of any criminal proceeding, the indemnified party had reasonable
cause to believe that the act or omission was unlawful. However, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling BCP pursuant to the
foregoing provisions, BCP has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
38
<PAGE>
MANAGEMENT COMPENSATION
The Company intends to initially provide each executive officer at the
Senior Vice President level with the same annual salary. In addition, the
Company has awarded certain stock options and anticipates that it may (i) award
bonus compensation for certain members of senior management and (ii) at the
discretion of Messrs. Leventhal and Fortin and, with the advice of the
Compensation Committee, certain members of senior management may be eligible to
participate in the Incentive Return. See "--Long-Term Incentive Plan." The
following table sets forth certain information about the expected compensation
of the executive officers of the Company.
<TABLE>
<CAPTION>
NAME ANNUAL SALARY STOCK OPTIONS GRANTED
- ---------------------------------------------------- ------------- ---------------------
<S> <C> <C>
Alan M. Leventhal................................... $ 200,000 500,000(1)
Lionel P. Fortin.................................... $ 200,000 500,000(2)
Erin R. O'Boyle..................................... $ 125,000 175,000
William A. Bonn..................................... $ 125,000 150,000
Randy J. Parker..................................... $ 125,000 150,000
Jeremy B. Fletcher.................................. $ 125,000 125,000
John Halsted........................................ $ 125,000 125,000
Douglas S. Mitchell................................. $ 125,000 125,000
E. Valjean Wheeler.................................. $ 125,000 125,000
</TABLE>
- ------------------------
(1) Includes stock options granted to Mr. Leventhal and subsequently transferred
to a trust, of which Mr. Leventhal is a beneficiary.
(2) Includes stock options granted to Mr. Fortin and subsequently transferred to
a trust, of which Mr. Fortin's wife is a trustee.
LONG-TERM INCENTIVE PLAN
The Company's compensation and incentive plans will be designed to align the
interests of the Company's executive management with the interests of the
Company's stockholders. The Company's Long-Term Incentive Plan is designed to
reward certain members of management for growth of the Company's Funds from
Operations in excess of a specified benchmark as described below. If the
Company's Funds from Operations exceeds this benchmark, management will be
entitled to receive an incentive return determined in the manner described below
(the "Incentive Return"), which shall be calculated at the end of the three year
period following the completion of the first calendar year following the Closing
(the "Determination Date").
The Incentive Return shall equal the product of (A) 12% of the dollar amount
by which (i) the Actual Return exceeds (ii) the Base Return; multiplied by (B)
the weighted average of shares of Common Stock and Units outstanding for the 12
months immediately preceding the Determination Date; multiplied by (C) the
Company's Multiple (as defined below).
For the purposes of calculating the Incentive Return:
"Actual Return" means the Funds from Operations (before the Incentive
Return) of the Company per share of Common Stock and per Unit for the 12
months immediately preceding the Determination Date;
"Base Return" means an amount equal to what the Company's Funds from
Operations would have been for the twelve month period immediately preceding
the Determination Date assuming a benchmark cumulative rate of return on the
Offering Price equal to 10% per annum, compounding quarterly, calculated
since the beginning of the calendar quarter following the date of Closing.
39
<PAGE>
"Funds from Operations", as defined by NAREIT, means net income
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization (in
each case, only real estate-related assets), and after adjustments for
unconsolidated partnerships and joint ventures; and
"Multiple" means the price of the Company's Common Stock (as defined
below) divided by the Company's Funds from Operations per share for the
fiscal quarter ending on the Determination Date on an annualized basis.
For the purposes of calculating the Multiple, the price of the Company's
Common Stock will be calculated as follows:
(1) where there exists a public market for the Company's Common Stock,
the price of the Company's Common Stock will be the average of the closing
bid and asked prices of the Common Stock quoted in the Over-The-Counter
Market Summary or the last reported sale price of the Common Stock or the
closing price quoted on the NASDAQ System or on any exchange on which the
Common Stock is listed, whichever is applicable, as published in THE WALL
STREET JOURNAL for the 90 calendar days prior to the calculation of the
Multiple.
(2) if no public market for the Common Stock exists at the time of such
exercise, the price of the Company's Common Stock will be determined by a
single, independent appraiser to be selected by a committee composed of
Independent Directors, which appraiser shall appraise the fair market value
of one share of the Company's Common Stock within 30 days of its selection
within such guidelines as shall be determined by the committee of
Independent Directors.
The right to receive the Incentive Return, in the event of a change in
control of the Company (as such term is defined in the Operating Partnership
Agreement), shall automatically accelerate and the determination of the
Incentive Return shall be appropriately adjusted to reflect such acceleration as
determined by the Company's Compensation Committee. The Company anticipates that
the mechanism by which the Incentive Return will be adjusted as a result of a
change of control shall be established by the Compensation Committee in advance
of any such event.
The Long-Term Incentive Plan will take the form of a Convertible Unit which
will be issued to the BCP Affiliate in connection with the Closing of this
Offering for no additional consideration. The Convertible Unit shall be
convertible at the Determination Date (assuming the Incentive Return has in fact
been earned) into a certain number of Incentive Units with a fair market value
equal to the amount of the Incentive Return. Upon issuance of the Incentive
Units to the BCP Affiliate, the Incentive Units will share equally on a
unit-by-unit basis with the outstanding Units in all distributions by the
Operating Partnership and will be redeemable for cash or, at the election of the
Independent Directors of BCP, exchangeable for shares of Common Stock. See
"Operating Partnership Agreement."
Certain members of the Company's senior management have been, and from time
to time may be, offered the opportunity to acquire equity interests in the BCP
Affiliate. Messrs. Leventhal and Fortin, with the assistance and advice of the
Company's Compensation Committee, shall decide who shall be offered equity
interests in the BCP Affiliate. Members of BCP's senior executive management who
become equity holders of the BCP Affiliate shall be allocated an interest in (i)
the Incentive Return, subject to certain vesting restrictions, and (ii) the
Units held by the BCP Affiliate. On the Determination Date, 50% of each such
equity holders' interests in the Incentive Return shall vest and on the first
anniversary of the Determination Date each equity holders' interests in the
Incentive Return shall be fully vested. An equity holder of the BCP Affiliate
whose employment with the Company terminates prior to full vesting of his or her
interest in the Incentive Return, shall automatically forfeit any such unvested
interest and the general partner of the BCP Affiliate, an entity controlled by
Messrs. Leventhal and Fortin, shall have the authority to reallocate such
interest as they deem appropriate. See "Risk Factors--Economic and Business
Risks-- Conflicts of Interest."
40
<PAGE>
There can be no assurance that the Incentive Return, or the stock options or
other rewards pursuant to the Stock Incentive Plan described below, will provide
an incentive to the Company's management to enhance the value of the Common
Stock or, if properly incentivized, that management's efforts will, in fact,
result in the enhancement in value of the Common Stock. In addition, the
Incentive Return, if paid, could substantially reduce cash available for
distribution to stockholders. See "Risk Factors--Economic and Business
Risks--Conflicts of Interest."
Funds from Operations does not represent cash generated from operating
activities in accordance with GAAP and should not be considered as an
alternative to net income as an indication of the Company's performance or to
cash flows as a measure of liquidity or ability to make distributions.
The ability of the Company to generate Funds from Operations in excess of
the Base Return described above and, consequently, the ability of the BCP
Affiliate to earn the Incentive Return described in the preceding paragraph, is
dependent upon the Company's ability to execute successfully the investment
strategies described in this Prospectus, and other factors, many of which are
not within the Company's control.
STOCK INCENTIVE PLAN
The Company has adopted a Stock Incentive Plan, which provides for options
to purchase shares of Common Stock. The Stock Incentive Plan authorizes the
grant of options and other stock-based awards to the Company's executive
officers, Directors and employees and other key persons. The purpose of the
Stock Incentive Plan is to provide a means of performance-based compensation in
order to provide incentive for the members of the Company's management to
enhance the value of BCP's Common Stock.
PLAN ADMINISTRATION; ELIGIBILITY. The Stock Incentive Plan is administered
by the Compensation Committee of the Board of Directors (the "Administrator").
The Administrator will have full power to select, from among the persons
eligible for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms of
each award, subject to the provisions of the Stock Incentive Plan. Persons
eligible to participate in the Stock Incentive Plan are generally those
executive officers, Independent Directors and employees of the Company and other
key persons who are responsible for or contribute to the management, growth or
profitability of the Company, as selected from time to time by the Administrator
in its sole discretion.
RESERVED SHARES. The maximum number of shares of Common Stock reserved and
available for issuance under the Stock Incentive Plan will be such aggregate
number of shares as does not exceed the sum of (i) 12% of the outstanding equity
interests in the Company (including Common Stock and Units subject to redemption
rights) (as determined as of the Final Original Offering Closing Date) plus (ii)
as of the last business day of each calendar quarter ending after the Final
Original Offering Closing Date, an additional positive number equal to 10% of
any net increase of outstanding equity interests in the Company.
STOCK OPTIONS. The Stock Incentive Plan permits the granting of (i) options
to purchase Common Stock intended to qualify as incentive stock options
("Incentive Options") under Section 422 of the Code and (ii) options that do not
so qualify ("Non-Qualified Options"). The option exercise price of each option
will be determined by the Administrator but may not be less than 100% of the
fair market value of the Common Stock on the date of grant in the case of
Incentive Options, and may not be less than 25% of the fair market value of the
Common Stock on the date of grant in the case of Non-Qualified Options. Plan
participants may elect with the consent of the Administrator, to receive
discounted Non-Qualified Options in lieu of cash compensation. To qualify as
Incentive Options, options must meet additional federal tax requirements,
including limits on the value of shares subject to Incentive Options which first
become
41
<PAGE>
exercisable in any one calendar year, and a shorter term and higher minimum
exercise price in the case of certain large stockholders.
The term of each option will be fixed by the Administrator and may not
exceed ten years from date of grant in the case of an Incentive Option. The
Administrator will determine at what time or times each option may be exercised
and, subject to the provisions of the Stock Incentive Plan, the period of time,
if any, after retirement, death, disability or termination of employment during
which options may be exercised. Options may be made exercisable in installments,
and the exercisability of options may be accelerated by the Administrator.
OTHER STOCK BASED GRANTS. The Administrator may also award, subject to such
conditions and restrictions imposed by the Administrator, shares of Common Stock
or Units (or other interests in the Operating Partnership) which may or may not
be subject to a risk of forfeiture; deferred stock units which are ultimately
payable in the form of shares of Common Stock; performance share awards to
participants entitling the participant to receive shares of Common Stock upon
the achievement of individual or Company performance goals; dividend equivalent
rights (which entitle the recipient to receive credits for dividends that would
be paid if the recipient had held specified shares of Common Stock); awards of
capital stock other than Common Stock and other awards that are valued in whole
or in part by reference to or are otherwise based on, Common Stock.
CHANGE OF CONTROL PROVISIONS. The Stock Incentive Plan provides that unless
otherwise provided in the award agreement, all awards becomes fully vested and
non-forfeitable upon a change of control of the Company (as defined in the Stock
Incentive Plan).
AMENDMENTS AND TERMINATION. The Board of Directors may amend or terminate
the Stock Incentive Plan at any time, except that approval by BCP's stockholders
is required for such amendments or termination to the extent the Board of
Directors determines that such approval is necessary or desirable in order to
meet certain exceptions under securities, tax and other applicable laws.
EMPLOYMENT AGREEMENTS; COVENANTS NOT TO COMPETE
Messrs. Leventhal and Fortin have entered into employment agreements (the
"Employment Agreements") with the Company. The Employment Agreements, which are
for a term of three years from the Closing Date of the Original Offering ,
contain non-competition, change in control and other provisions customary for
senior executives of publicly-traded REITs. See "--Management Compensation."
CREDIT FACILITY
The Company intends to obtain a commitment from a lender to enter into a
credit facility (the "Credit Facility") to provide the Company with an available
source of debt financing. See "Risk Factors-- Investment Activity Risks--Real
Estate Financing Risks" and "Plan of Distribution."
CERTAIN RELATIONSHIPS; CONFLICTS OF INTEREST
Messrs. Leventhal and Fortin have formed the BCP Affiliate and have offered
equity interests in the BCP Affiliate to certain members of the Company's senior
management. In addition, Messrs. Leventhal and Fortin, individually and through
the BCP Affiliate, have purchased, directly from the Company and the Operating
Partnership, a combination of shares of Common Stock and Units for an aggregate
purchase price of approximately $15 million, representing approximately 4% of
the equity interests in the Company on a fully diluted basis. In addition, the
Company has established the Long-Term Incentive Plan to align the interests of
management with the interests of the Company's stockholders, pursuant to which
the BCP Affiliate has been issued, for no additional consideration, a
Convertible Unit of the Operating Partnership. Provided that the Incentive
Return has, in fact, been earned, at the end of the three year period following
42
<PAGE>
the completion of the first calendar year following the Closing Date of the
Original Offering, the Convertible Unit will convert into a certain number of
Incentive Units with a fair market value equal to the Incentive Return. See "The
Company--Long-Term Incentive Plan" and "Risk Factors--Economic and Business
Risks--Conflicts of Interest." The BCP Affiliate has been granted certain
registration rights with respect to any Common Stock issuable upon an exchange
of Units and Incentive Units held by the BCP Affiliate. See "Description of
Securities--Registration Rights." BCP's senior management, by holding equity
interests in the BCP Affiliate, will be able to participate in the Incentive
Return subject to certain vesting restrictions. See "The Company--Long-Term
Incentive Plan" and "Risk Factors--Economic and Business Risks--Conflicts of
Interest."
After the formation of the BCP Sister Corp. and the distribution of the BCP
Sister Corp.'s equity interests to the partners and stockholders of the Company,
the BCP Sister Corp. will rely on the Company to provide it investments. The
Company expects that the provisions in the BCP Sister Corp.'s formation
documents will (i) provide that the BCP Sister Corp. will enter into
transactions with the Company to the extent deemed beneficial by their
respective boards of directors (and the Company may enter into an intercompany
agreement with the BCP Sister Corp. with respect thereto) and (ii) generally
prohibit the BCP Sister Corp. from engaging in activities or making investments
appropriate for a REIT (for a specified time period) unless the Company was
first given the opportunity to do so but elected not to do so. While it is the
Company's intention that the Company and the BCP Sister Corp. have separate
boards of directors, to the extent that there is overlap, the Board of Directors
may be subject to various potential conflicts of interest as a result of the
relationships with the BCP Sister Corp. and the Company. See "Risk
Factors--Investment Activity Risks--Conflicts of Interest." In addition, to the
extent that the BCP Sister Corp. requires separate financing arrangements,
conflicts may arise between the BCP Sister Corp. and the Company to the extent
that the BCP Sister Corp. has difficulty obtaining or maintaining such
financing. See "Risk Factors--Economic and Business Risks--BCP Sister Corp. Will
Have Separate Financing."
Certain properties held by Beacon Properties that were not contributed to
Beacon Properties Corporation upon its formation as a public company were
retained by The Beacon Companies, a privately-held company. Edwin Sidman,
brother-in-law of Alan M. Leventhal and former Chairman of the Board of Beacon
Properties, is the President of The Beacon Companies. Although the Company does
not believe that the assets of the Beacon Companies are of a kind that would be
considered for investment by the Company, there may exist conflicts of interest
between The Beacon Companies and the Company as a result of the relationship
between the managements of these entities.
The market in which the Company expects to purchase assets is characterized
by rapid evolution of products and services and, thus, there may in the future
be relationships between the Company and the BCP Sister Corp. and its
affiliates, in addition to those described herein.
43
<PAGE>
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds from the sale of
the Offered Securities offered hereby. The Company will not receive any of the
proceeds from the sale by the Selling Stockholders of the Offered Securities.
DISTRIBUTION POLICY
In order to avoid corporate income taxation on the earnings that it
distributes, BCP must distribute to its stockholders an amount at least equal to
(i) 95% of its REIT taxable income (determined before the deduction for
dividends paid and excluding any net capital gain) plus (ii) 95% of the excess
of its net income from foreclosure property over the tax imposed on such income
by the Code less (iii) any excess noncash income (as determined under the Code).
See "Federal Income Tax Considerations." The actual amount and timing of
distributions, however, will be at the discretion of the Board of Directors and
will depend upon the financial condition of BCP in addition to the requirements
of the Code.
Subject to the distribution requirements referred to in the immediately
preceding paragraph, BCP intends, to the extent practicable, to invest
substantially all of the principal from repayments, sales and refinancings of
the Company's assets in Assets. BCP may, however, under certain circumstances,
make a distribution of principal or of assets. Such distributions, if any, will
be made at the discretion of BCP's Board of Directors.
It is anticipated that distributions generally will be taxable as ordinary
income to non-tax exempt stockholders of BCP, although a portion of such
distributions may be designated by BCP as long-term capital gain or may
constitute a return of capital. BCP will furnish annually to each of its
stockholders a statement setting forth distributions paid during the preceding
year and their federal income tax status. For a discussion of the federal income
tax treatment of distributions by BCP, see "Federal Income Tax
Considerations--Taxation of the Company" and "--Taxation of Taxable U.S.
Stockholders."
The declaration and payment of dividends by the BCP Sister Corp. will be
made by the BCP Sister Corp.'s board of directors from time to time based on
such considerations as the BCP Sister Corp.'s board of directors deems relevant,
will be payable only out of funds legally available therefor under the laws of
the state of formation of the BCP Sister Corp. and will be subject to any
limitations which may be contained in the debt instruments of the BCP Sister
Corp. See "Risk Factors--Economic and Business Risks--Conflicts of Interest."
44
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 1, 1998, the total number of
shares of Common Stock beneficially owned, and the percent so owned, by (i) each
person known by BCP to own more than 5% of the Common Stock, (ii) each of BCP's
directors and executive officers and (iii) all directors and executive officers
as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP(2)
---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
- -------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Wellington Management Company................................. 2,300,000 10.9%(3)
Southeastern Asset Management................................. 2,075,000 9.8%
RREEF Venture Capital Fund LP................................. 1,650,000 7.8%
875 N. Michigan Avenue
Chicago, IL 60611
ABKA/Lasalle.................................................. 1,337,500 6.3%
Alan M. Leventhal............................................. 591,312 2.8%(4)
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
Lionel P. Fortin.............................................. 271,040 1.2%(5)
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
Jeremy Fletcher............................................... 10,723 *(6)
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
Douglas Mitchell.............................................. 5,361 *
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
Erin O'Boyle.................................................. 2,000 *
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP(2)
---------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
- -------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Nancy J. Broderick............................................ 1,350 *
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
Randy Parker.................................................. 1,340 *
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
E. Valjean Wheeler............................................ 1,340 *
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
William A. Bonn............................................... 1,000 *
c/o Beacon Capital Partners
One Federal Street, 26th Floor
Boston, MA 02110
All Directors and Executive Offices as a Group
(12 persons)................................................ 885,466 4.1%(4)(5)(6)
</TABLE>
- ------------------------
* Less than one percent
(1) All information has been determined as of June 1, 1998. For the purposes of
this table, a person is deemed to have "beneficial ownership" of the number
of shares of Common Stock that person has the right to acquire pursuant to
the exercise of stock options or redemption of Operating Partnership Units
(assuming the Company elects to issue Common Stock rather than pay cash upon
such redemption) held by such person or an affiliate of such person.
(2) For the purpose of computing the percentage of outstanding shares of Common
Stock held by each person, any shares of Common Stock which such person has
the right to acquire pursuant to the exercise of a stock option or upon the
redemption of Operating Partnership Units is deemed to be outstanding, but
is not deemed to be outstanding for the purpose of computing the percent
ownership of any other person.
(3) Includes shares held by 2 separate stockholders which the Company believes
to be controlled by Wellington Management Company.
(4) Includes Operating Partnership Units held indirectly by a trust, of which
Mr. Leventhal is a beneficiary.
(5) Includes Operating Partnership Units held indirectly by a trust, of which
Mr. Fortin's wife is a trustee.
(6) Includes shares of Common Stock held by a trust, of which Mr. Fletcher is a
trustee.
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PRICE RANGE OF COMMON STOCK
There is no established market for the Common Stock, which is not listed on
any securities exchange, and trading in the Common Stock has not been quoted on
any interdealer or over-the-counter bulletin board since the Original Offering.
As of June 1, 1998, the Company believes there to be approximately 354 holders
of record of BCP's Common Stock.
CAPITALIZATION
The following table sets forth the capitalization of BCP as of March 31,
l998, and on a pro forma basis to reflect the Pro Forma Transactions (as defined
under "Selected Historical and Unaudited Pro Forma Financial Data"):
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
---------- -----------
<S> <C> <C>
(IN THOUSANDS)
Loans payable--affiliate.............................................. $ 3,560 $ 3,560
Minority interest..................................................... 4,200 4,200
Common stock; $.01 par value, 500,000,000 shares authorized,
17,360,769 and 20,973,932 shares issued and outstanding and adjusted
pro forma........................................................... 174 210
Additional paid-in capital............................................ 322,936 390,085
Accumulated deficit................................................... (387) (387)
---------- -----------
Total........................................................... $ 330,483 $ 397,668
---------- -----------
---------- -----------
</TABLE>
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<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The selected historical financial data set forth below presents the
historical financial data of BCP as of March 31, l998 and for the period from
January 21, l998 (BCP's inception) through March 31, l998. The selected pro
forma financial data of BCP set forth below assumes that BCP will qualify as a
REIT and gives effect to (i) the issuance of 3,613,163 shares of Common Stock
subsequent to March 31, l998, (ii) the acquisition of The Athenaeum Portfolio,
and the subsequent formation of a 50% joint venture, and (iii) the pending
acquisition of Technology Square and The Draper Building (collectively, the "Pro
Forma Transactions"). The selected pro forma income statement data assumes the
Pro Forma Transactions occurred on January 1, l998, and the selected pro forma
balance sheet data assumes the Pro Forma Transactions occurred on March 31,
l998. The selected pro forma financial data are not necessarily indicative of
what the actual financial position or results of operations of BCP would have
been as of or for the period ended March 31, l998, nor do they purport to be
indicative of the financial position or results of operations for future
periods. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," BCP's historical financial statements and notes thereto and BCP's
unaudited pro forma financial statements and notes thereto, each included
elsewhere herein.
<TABLE>
<CAPTION>
AS OF AND FOR THE
PERIOD
ENDED MARCH 31, L998
-----------------------
<S> <C> <C>
HISTORICAL PRO FORMA
---------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT
FOR PER SHARE DATA)
<S> <C> <C>
Income Statement Data:
Revenues............................................................ $ 584 $ 3,468
Net Income (loss)................................................... (387) 973
Net Income (loss) per common share.................................. (.02) 0.05
Balance Sheet Data:
Real estate......................................................... -- 123,000
Investment in and advance to joint venture.......................... -- 63,000
Total assets........................................................ 331,870 399,055
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following should be read in conjunction with the Consolidated Financial
Statements and notes thereto of BCP and the unaudited Pro Forma Condensed
Consolidated Financial Statements of BCP, each contained elsewhere herein. The
Consolidated Financial Statements of the Company include BCP and the Operating
Partnership, its majority-owned subsidiary. Due to its recent formation and the
relatively short period of operations presented in the Consolidated Financial
Statements, Management does not believe that the information presented therein
is indicative of expected financial performance.
LIQUIDITY AND CAPITAL RESOURCES
BCP was incorporated on January 21, 1998 as a Massachusetts corporation and
was initially capitalized through loans payable from the Company's founders,
Messrs. Leventhal and Fortin, in the amount of $3.6 million. Subsequent to March
31, 1998, Messrs. Leventhal and Fortin were repaid.
On March 20, 1998, the Company completed an initial private offering
("Original Offering") and issued 17,360,769 shares of Common Stock. The proceeds
of the Original Offering, net of offering costs were $323.1 million. The
Company's primary source of liquidity at March 31, 1998 was cash and cash
equivalents in the amount of $323.9 million. Subsequent to March 31, 1998,
through the exercise of the underwriter's over-allotment, 3,613,163 additional
shares were issued with proceeds, net of offering costs of $67.2 million.
In connection with the re-incorporation of BCP as a Maryland corporation,
BCP established Beacon Capital Partners L.P., (the "Operating Partnership"). As
contemplated in the Original Offering, a contribution of $4.2 million was due
from an entity controlled by Messrs. Leventhal and Fortin to the Operating
Partnership for a 1% limited partnership interest. For technical reasons, such
contribution could only be made subsequent to the closing of the first real
estate transaction of the Company. The $4.2 million contribution was made on May
4, 1998.
On May 1, 1998, the Company acquired The Athenaeum Portfolio, an 11
building, 970,000 square foot mixed use portfolio located in Cambridge, MA. The
purchase price was $195 million, including the assumption of approximately $69
million of first mortgage debt. Subsequent to the closing of the transaction,
the Company completed the formation of a joint venture with an affiliate of
PaineWebber, in which both parties hold a 50% equity interest in the properties.
On April 22, 1998, the Company entered into a purchase and sale agreement
with The Prudential Insurance Company of America ("Prudential") to acquire a
four building complex known as Technology Square and an adjacent building known
as The Draper Building. The properties are located in Cambridge, MA and consist
of approximately 1,026,000 square feet. The purchase price for the properties
under the purchase and sale agreement is $123 million. The Company and
Prudential are currently negotiating the form of consideration for the
acquisition.
The Company expects that capital needs for additional real estate and real
estate related investments would be met through a combination of proceeds from
the offering, net cash provided by operations, secured and unsecured borrowings
and the issuance of additional Operating Partnership Units.
RESULTS OF OPERATIONS
The Company's principal source of income for the period ended March 31, 1998
was interest earned on its invested cash and cash equivalents in the amount of
$.6 million.
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<PAGE>
DESCRIPTION OF SECURITIES
The following description of the terms of the stock of BCP does not purport
to be complete and is subject to and qualified in its entirety by reference to
the Charter and the Bylaws, copies of which are available upon request to the
Company. See "Certain Provisions of Maryland Law and of BCP's Charter and
Bylaws."
GENERAL
The Charter provides that BCP has the authority to issue up to 950,000,000
shares of stock, consisting of 500,000,000 shares of Common Stock, $.01 par
value per share, 250,000,000 shares of excess stock, $.01 par value per share
("Excess Stock") and 200,000,000 shares of preferred stock, $.01 par value per
share ("Preferred Stock"). As of June 1, 1998, 20,973,932 shares of Common Stock
are issued and outstanding and no shares of Excess Stock or Preferred Stock are
issued and outstanding. Under Maryland law, stockholders generally are not
liable for the corporation's debts or obligations.
COMMON STOCK
Subject to the preferential rights of any other class or series of stock and
to the provisions of the Charter regarding Excess Stock, holders of shares of
Common Stock are entitled to receive dividends on such Common Stock if, as and
when authorized and declared by the Board of Directors of BCP out of assets
legally available therefor and to share ratably in the assets of BCP legally
available for distribution to its stockholders in the event of its liquidation,
dissolution or winding-up after payment of or adequate provision for all known
debts and liabilities of BCP.
Subject to the provisions of the Charter regarding Excess Stock, each
outstanding share of Common Stock entitles the holder to one vote on all matters
submitted to a vote of stockholders, including the election of directors, except
as otherwise required by law and except as provided with respect to any other
class or series of stock, the holders of such shares of Common Stock will
possess exclusive voting power. There is no cumulative voting in the election of
directors, which means that the holders of a majority of the outstanding shares
of Common Stock can elect all of the directors then standing for election and
the holders of the remaining shares of Common Stock will not be able to elect
any Directors.
Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights (except as provided by Maryland
law) and have no preemptive rights to subscribe for any securities of the
Company. Subject to the provisions of the Charter regarding Excess Stock, shares
of Common Stock will have equal dividend, liquidation and other rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two thirds of the shares entitled to vote on the matter unless a different
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation's charter. The Charter of BCP
does not provide for a different percentage in such situations, except for
certain amendments to the Charter. See "Certain Provisions of Maryland Law and
BCP's Charter and Bylaws-- Amendment of Charter and Bylaws.
PREFERRED STOCK
The Charter authorizes the Board of Directors to classify any unissued
shares of Preferred Stock and to reclassify any previously classified but
unissued shares of Preferred Stock of any series, as authorized by the Board of
Directors. Prior to issuance of shares of each class or series, the Board is
required by the MGCL and the Charter to fix, subject to the provisions of the
Charter regarding Excess Stock, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other
50
<PAGE>
distributions, qualifications and terms or conditions of redemption for each
such class or series. Such rights, powers, restrictions and limitations could
include the right to receive specified dividend payments and payments on
liquidation prior to any such payments being made to the holders of some, or a
majority, of the Common Stock. The Board of Directors could authorize the
issuance of Preferred Stock with terms and conditions that could have the effect
of discouraging a takeover or any other transaction that holders of Common Stock
might believe to be in their best interests or in which holders of some, or a
majority, of the Common Stock might receive a premium for their shares over the
then current market price of such shares. As of the date hereof, no shares of
Preferred Stock are outstanding and BCP has no present plans to issue any
Preferred Stock.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
BCP believes that the power of the Board of Directors to issue additional
authorized but unissued shares of Common Stock or Preferred Stock and to
classify or reclassify unissued shares of Common or Preferred Stock and
thereafter to cause BCP to issue such classified or reclassified shares of stock
will provide BCP with increased flexibility in structuring possible future
financings and acquisitions and in meeting other needs which might arise. The
additional classes or series, as well as the Common Stock, will be available for
issuance without further action by BCP's stockholders, unless such action is
required by applicable law or the rules of any stock exchange or automated
quotation system on which BCP's securities may be listed or traded. Although the
Board of Directors has no intention at the present time of doing so, it could
authorize BCP to issue a class or series that could, depending upon the terms of
such class or series, delay, defer or prevent a transaction or a change in
control of BCP that might involve a premium price for holders of Common Stock or
otherwise be in their best interest.
DIVIDEND REINVESTMENT PLAN
BCP may implement a dividend reinvestment plan whereby stockholders may
automatically reinvest their dividends in the Common Stock. Details about any
such plan would be sent to BCP's stockholders following adoption thereof by the
Board of Directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is EquiServe (the
"Transfer Agent") in Boston, Massachusetts.
TRANSFER RESTRICTIONS
RESTRICTIONS UNDER CHARTER. In order for the Company to qualify as a REIT
under the Code, among other things, not more than 50% in value of its
outstanding stock may be owned, directly or indirectly, by five or fewer
individuals (defined in the Code to include certain entities) during the last
half of a taxable year (other than the first year for which an election to be a
REIT has been made) (the "Five or Fewer Requirement"), and such shares of
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months (other than the first year for which an
election to be a REIT has been made) or during a proportionate part of a shorter
taxable year. See "Federal Income Tax Considerations." In order to protect the
Company against the risk of losing its status as a REIT and to otherwise protect
the Company from the consequences of a concentration of ownership among its
stockholders, the Charter, subject to certain exceptions, provides that no
single person (which may include certain "groups" of persons) may "beneficially
own" more than 9.8% (the "Aggregate Stock Ownership Limit") of the aggregate
number of outstanding shares of any class or series of stock; provided, however,
that certain mutual funds registered under the Investment Company Act of 1940
and certain other widely-held entities (other than pension plans as described in
Section 401(a) of the Code) ("Look-Through Entities") may "beneficially own" no
more than 15% (the "Look-Through Ownership Limit"). Under the Charter, a person
generally "beneficially owns" shares if (i) such person has direct ownership of
such
51
<PAGE>
shares, (ii) such person has indirect ownership of such shares taking into
account the constructive ownership rules of Section 544 of the Code, as modified
by Section 856(h)(1)(B) of the Code, or (iii) such person would be deemed to
"beneficially own" such shares pursuant to Rule 13d-3 under the Exchange Act.
Any transfer of shares of stock or of any security convertible into shares of
stock that would create a direct or indirect ownership of shares of stock in
excess of the Aggregate Stock Ownership Limit or the Look-Through Ownership
Limit, as applicable, or that would result in the disqualification of the
Company as a REIT, including any transfer that results in the shares of stock
being owned by fewer than 100 persons or results in the Company being "closely
held" within the meaning of Section 856(h) of the Code or results in the Company
constructively owning 10% or more of the ownership interests in a tenant of the
Company within the meaning of Section 318 of the Code as modified by Section
856(d)(5) of the Code, shall be null and void, and the intended transferee will
acquire no rights to the shares of stock. The foregoing restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to attempt
to qualify, or to continue to qualify, as a REIT. The Board of Directors, upon
receipt of a ruling from the Service or an opinion of counsel or other evidence
or undertakings acceptable to it, may, in its sole discretion, waive the
Aggregate Stock Ownership Limit and the Look-Through Ownership Limit if evidence
satisfactory to the Board of Directors is presented that the changes in
ownership will not jeopardize the Company's REIT status or cause the Company to
be a "pension-held REIT" for federal income tax purposes and the Board of
Directors otherwise decides that such action is in the best interest of the
Company.
If any purported transfer of stock of the Company or any other event would
otherwise result in any person violating the Aggregate Stock Ownership Limit or
the Look-Through Ownership Limit, as applicable, or the Charter, then any such
purported transfer will be void and of no force or effect with respect to the
purported transferee (the "Prohibited Transferee") as to that number of shares
in excess of the applicable limit and the Prohibited Transferee shall acquire no
right or interest (or, in the case of any event other than a purported transfer,
the person or entity holding record title to any such shares in excess of the
applicable limit (the "Prohibited Owner") shall cease to own any right or
interest) in such excess shares. Any such excess shares described above will be
converted automatically into an equal number of shares of Excess Stock (the
"Excess Shares") and transferred automatically, by operation of law, to a trust,
the beneficiary of which will be a qualified charitable organization selected by
the Company (the "Beneficiary"). Such automatic transfer shall be deemed to be
effective as of the close of business on the Trading Day (as defined in the
Charter) prior to the date of such violative transfer. As soon as practical
after the transfer of shares to the trust but in an orderly fashion so as not to
materially adversely affect the trading price of the Common Stock, the trustee
of the trust (who shall be designated by the Company and be unaffiliated with
the Company and any Prohibited Transferee or Prohibited Owner) will be required
to sell such Excess Shares to a person or entity who could own such shares
without violating the applicable Limit, and distribute to the Prohibited
Transferee an amount equal to the lesser of the price paid by the Prohibited
Transferee for such Excess Shares or the sales proceeds received by the trust
for such Excess Shares. In the case of any Excess Shares resulting from any
event other than a transfer, or from a transfer for no consideration (such as a
gift or devise), the trustee will be required to sell such Excess Shares to a
qualified person or entity and distribute to the Prohibited Owner an amount
equal to the lesser of the fair market value of such Excess Shares as of the
date of such event or the sales proceeds received by the trust for such Excess
Shares. In either case, any proceeds in excess of the amount distributable to
the Prohibited Transferee or Prohibited Owner, as applicable, will be
distributed to the Beneficiary. Prior to a sale of any such Excess Shares by the
trust, the trustee will be entitled to receive in trust for the Beneficiary, all
dividends and other distributions paid by the Company with respect to such
Excess Shares.
The Prohibited Owner with respect to such Excess Shares shall repay to the
trust the amount of any dividends or distributions received by it that (i) are
attributable to any shares of stock that have been converted into Excess Shares
and (ii) were distributed by the Company to stockholders of record on a record
date which was on or after the date that such shares were converted into Excess
Shares. Each Excess Share shall entitle the holder to no voting rights other
than those voting rights which accompany a
52
<PAGE>
class of stock under Maryland law. The trustee, as record holder of the Excess
Shares, shall be entitled to vote all Excess Shares. Any vote by a Prohibited
Owner as a purported holder of shares of stock prior to the discovery by the
Company that such shares of stock have been converted into Excess Shares shall,
subject to applicable law, (i) be rescinded and shall be void AB INITIO with
respect to such Excess Shares and (ii) be recast in accordance with the desires
of the trustee acting for the benefit of the Beneficiary; provided, however,
that if the Company has already taken irreversible corporate action, then the
trustee shall not have the authority to rescind and recast such vote.
In addition, shares of stock of the Company held in the trust shall be
deemed to have been offered for sale to the Company, or its designee, at a price
per share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a devise or gift, the
market price at the time of such devise or gift) and (ii) the market price on
the date the Company, or its designee, accepts such offer. The Company shall
have the right to accept such offer for a period of 90 days following the later
of (a) the date of the event which resulted in such shares of Excess Stock or
(b) the date the Board of Directors first determined that the event resulting in
the shares of Excess Stock occurred, if the Company does not receive notice of
such event. Upon such a sale to the Company, the interest of the Beneficiary in
the shares sold shall terminate and the trustee shall distribute the net
proceeds of the sale to the Prohibited Owner.
Each stockholder shall upon demand be required to disclose to the Company in
writing any information with respect to the direct, indirect and constructive
ownership of capital stock as the Board of Directors deems necessary to comply
with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
The above-described ownership limits may have the effect of precluding
acquisition of control of the Company.
REGISTRATION RIGHTS
The Selling Stockholders of the Common Stock are entitled to the benefits of
a Registration Rights Agreement between the Company and the Initial Purchaser in
the Original offering (the "Registration Rights Agreement"). Pursuant to the
Registration Rights Agreement, the Company has agreed for the benefit of the
holders of the Common Stock that it will from time to time, at its expense, (i)
promptly, but in any event within 90 days after the date of issuance of the
Common Stock, file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the Common Stock,
(ii) use its best efforts to cause such Shelf Registration Statement to be
declared effective by the Commission as promptly as practicable and (iii) use
its best efforts to maintain such Shelf Registration Statement continuously
effective under the Securities Act, until the date (the "Expiration Date") which
is the earliest of the dates described in the following clauses (a), (b) and
(c): (a) the second annual anniversary of the latest date of original issuance
of the Common Stock, (b) such time as all Common Stock covered by the Shelf
Registration Statement has been sold pursuant to the Shelf Registration
Statement, transferred pursuant to Rule 144 under the Securities Act or
otherwise transferred in a manner that results in a new security not subject to
transfer restrictions under the Securities Act being delivered, and (c) such
time as, in the opinion of counsel, all of the Common Stock held by
nonaffiliates of the Company and covered by the Shelf Registration Statement are
eligible for resale pursuant to Rule 144(k) (or any successor or analogous rule)
under the Securities Act and the legend described under "Notice to Investors"
has been removed from such Common Stock. The Registration Statement of which
this Prospectus forms a part has been filed pursuant to the foregoing provisions
of the Registration Rights Agreement.
Notwithstanding the foregoing, the Company will be permitted to suspend the
use, from time to time, of this prospectus that is part of the Shelf
Registration Statement for periods (any such period hereinafter referred to as a
"blackout period"), if the Board of Directors of the Company shall have
determined in
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good faith that it is in the best interests of the Company to suspend such use
and the Company provides the Selling Stockholders with written notice of such
suspension.
A Selling Stockholder that sells Common Stock pursuant to the Shelf
Registration Statement, including through the use of this Prospectus, generally
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Registration Rights
Agreement that are applicable to such a holder (including certain
indemnification rights and obligations). In addition, each holder of Common
Stock may be required to deliver information to be used in connection with the
Shelf Registration Statement in order to have such holder's Common Stock
included in the Shelf Registration Statement and to benefit from the provisions
of the succeeding paragraph.
Each Common Stock certificate contains a legend to the effect that the
holder thereof, by its acceptance thereof, will be deemed to have agreed to be
bound by the provisions of the Registration Rights Agreement. In that regard,
each holder is deemed to have agreed that, upon receipt of notice from the
Company of the occurrence of any event which makes a statement in this
prospectus untrue in any material respect or which requires the making of any
changes in such prospectus in order to make the statements therein not
misleading, or of certain other events specified in the Registration Rights
Agreement, such holder will suspend the sale of Common Stock pursuant to this
prospectus until the Company has amended or supplemented such prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such holder or the Company has given notice that the
sale of the Common Stock may be resumed.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request of the Initial Purchaser.
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CERTAIN PROVISIONS OF MARYLAND LAW AND
OF BCP'S CHARTER AND BYLAWS
THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS OF BCP DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MARYLAND LAW AND TO THE CHARTER AND
BYLAWS OF BCP.
The Charter and the Bylaws of BCP contain certain provisions that could make
more difficult the acquisition of the Company by means of a tender offer, a
proxy contest or otherwise. These provisions may have the effect of delaying,
deterring or preventing certain types of coercive takeover practices and
inadequate takeover bids and to encourage persons seeking to acquire control of
the Company to negotiate first with the Board of Directors. The Company believes
that the benefits of these provisions outweigh the potential disadvantages of
discouraging such proposals because, among other things, negotiation of such
proposals might result in an improvement of their terms.
AMENDMENT OF CHARTER AND BYLAWS
BCP's Charter may be amended only by the affirmative vote of the holders of
a majority of all of the votes entitled to be cast on the matter, (or, if less
than 75% of the Directors then in office approve the amendment, by the
affirmative vote of holders of two-thirds of all votes entitled to be cast on
the matter) except that amendments dealing with certain articles of the Charter
(for example, articles relating to stockholder action; the powers, election of,
removal of and classification of directors; limitation of liability; and
amendment of the Charter) shall require the affirmative vote of not less than
seventy-five percent of the outstanding votes entitled to be cast on the matter.
Unless otherwise required by law, the Board of Directors may amend BCP's Bylaws
by the affirmative vote of a majority of the Directors then in office.
DISSOLUTION OF THE COMPANY
The MGCL permits the dissolution of the Company by (i) the affirmative vote
of a majority of the entire Board of Directors declaring such dissolution to be
advisable and directing that the proposed dissolution be submitted for
consideration at an annual or special meeting of stockholders, and (ii) upon
proper notice, stockholder approval by the affirmative vote of two-thirds of the
votes entitled to be cast on the matter.
MEETINGS OF STOCKHOLDERS
Under BCP's Bylaws, annual meetings of stockholders shall be held at such
date and time as determined by the Board of Directors, the Chairman of the Board
or the President. The Bylaws establish an advance notice procedure for
stockholders to make nominations of candidates for directors or bring other
business before an annual meeting of stockholders. Special meetings of
stockholders may be called by a majority of the Directors then in office or by
stockholders holding not less than a majority of the outstanding stock of BCP
entitled to vote at the meeting and only matters set forth in the notice of the
meeting may be considered and acted upon at such a meeting.
THE BOARD OF DIRECTORS
BCP's Charter provides that the Board of Directors shall initially consist
of five Directors and thereafter the number of Directors of the Company may be
established by the Board of Directors but may not be fewer than the minimum
number required by the MGCL nor more than nine. Subject to the rights of the
holders of any series of Preferred Stock to elect Directors and to fill
vacancies in the Board of Directors relating thereto, any vacancy will be
filled, including any vacancy created by an increase in the number of Directors,
at any regular meeting or at any special meeting called for the purpose, by a
majority of the remaining Directors. Pursuant to the terms of the Charter, the
Directors are divided into three classes. One class will hold office initially
for a term expiring at the annual meeting of stockholders to be
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<PAGE>
held in 1999, another class will hold office initially for a term expiring at
the annual meeting of stockholders to be held in 2000 and the third class will
hold office initially for a term expiring in 2001. As the term of each class
expires, Directors in that class will be elected for a term of three years and
until their successors are duly elected and qualified. The use of a classified
board may render more difficult a change in control of the Company or removal of
incumbent management. The Charter provides that a Director may be removed from
office (a) only with cause and (b) only by the affirmative vote of the holders
of at least 75% of the shares entitled to vote at a meeting of stockholders
called for that purpose. The Company believes, however, that classification of
the Board of Directors will help to assure the continuity and stability of its
business strategies and policies.
The Charter provides that the affirmative vote of more than 75% of the
Directors then in office is required to approve certain transactions or actions
of the Board, including a change of control (as defined in the Charter) of the
Company or of the Operating Partnership, any amendment to the Operating
Partnership Agreement, any waiver of the limitations on ownership contained in
the Charter, any merger, consolidation or sale of all or substantially all of
the assets of the Company or the Operating Partnership, certain issuances of
equity securities by the Company or the termination of the Company's status as a
REIT. See "Operating Partnership Agreement."
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Charter limits the liability of the Board of Directors and officers to
the Company to the fullest extent permitted from time to time by Maryland law.
The MGCL permits a corporation to include in its charter a provision limiting
the liability of directors and officers to the corporation or its stockholders
for money damages, except (i) to the extent that it is proved that the director
or officer actually received an improper benefit or profit in money, property or
services or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's action or failure
to act was the result of active and deliberate dishonesty and was material to
the cause of action adjudicated in the proceeding. This provision does not limit
the ability of BCP or its stockholders to obtain other relief, such as an
injunction or a rescission.
The Charter of the Company authorizes it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, REIT, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, REIT, partnership, joint venture, trust, employee benefit plan or
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his or her status
as a present or former director or officer of the Company. The Bylaws of the
Company obligate it, to the maximum extent permitted by Maryland law, to
indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or officer who
is made a party to the proceeding by reason of his service in that capacity or
(b) any individual who, while a director of the Company and at the request of
the Company, serves or has served another corporation, REIT, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, REIT, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The Charter
and Bylaws also permit the Company to indemnify and advance expenses to any
person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The
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MGCL permits a corporation to indemnify its directors, officers and certain
other parties against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their service to or at the request of the
corporation, unless it is established that (a) the act or omission of the
indemnified party was material to the matter giving rise to the proceeding and
(i) the act or omission was committed in bad faith or (ii) the act or omission
was the result of active and deliberate dishonesty, (b) the indemnified party
actually received an improper personal benefit in money, property or services or
(c) in the case of any criminal proceeding, the indemnified party had reasonable
cause to believe that the act or omission was unlawful. However, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
Directors and executive officers which require, among other things, that the
Company indemnify its Directors and executive officers to the fullest extent
permitted by law and advance to the Directors and executive officers all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Under these agreements, the Company must also
indemnify and advance all expenses incurred by Directors and executive officers
seeking to enforce their rights under the indemnification agreements and may
cover Directors and executive officers under the Company's Directors' and
officers' liability insurance. Although the form of indemnification agreement
offers substantially the same scope of coverage afforded by law, it provides
greater assurance to Directors and executive officers that indemnification will
be available, because, as a contract, it cannot be modified unilaterally in the
future by the Board of Directors or the stockholders to eliminate the rights it
provides.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10% or more of the voting power
of the corporation's shares or an affiliate of the corporation who, at any time
within the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then-outstanding voting stock of
the corporation (an "Interested Stockholder") or an affiliate of such an
Interested Stockholder are prohibited for five years after the most recent date
on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of such corporation and approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding shares of
voting stock of the corporation and (b) two-thirds of the votes entitled to be
cast by holders of outstanding voting stock of the corporation other than shares
held by the Interested Stockholder with whom (or with whose affiliate) the
business combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is
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received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of the MGCL do not apply, however,
to business combinations that are approved or exempted by the board of directors
of the corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The Charter exempts from the Maryland statute any
business combination with Alan M. Leventhal or Lionel P. Fortin, or current or
future affiliates, associates or other persons acting in concert as a group with
either of Messrs. Leventhal or Fortin.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror, by officers or by directors who
are employees of the corporation. "Control shares" are voting shares of stock
which, if aggregated with all other shares of stock previously acquired by the
acquiror or in respect of which the acquiror is able to exercise or direct the
exercise of voting power (except solely by virtue of a revocable proxy), would
entitle the acquiror to exercise voting power in electing directors within one
of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a majority
or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
stockholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at a stockholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation. The Charter exempts from the control share
acquisition statute the purchases of Common Stock on the Closing Date and any
future transactions which would otherwise be subject to the statute by Alan M.
Leventhal or Lionel P. Fortin or current or future affiliates, associates or
other persons acting in concert or as a group with either of Messrs. Leventhal
or Fortin. Consequently, the prohibition on voting control shares will not apply
to such persons.
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COMMON STOCK AVAILABLE FOR FUTURE SALE
As of June 1, 1998, BCP has outstanding 20,973,932 shares of Common Stock
and has reserved for issuance upon exercise of Stock Options or redemption of
Units 2,769,097 additional shares of Common Stock.
Shares of Common Stock issued to holders of Units upon exercise of the
Redemption Rights, will be "restricted" securities under the meaning of Rule 144
promulgated under the Securities Act ("Rule 144") and may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including exemptions contained in Rule 144. See
"Description of Securities-- Transfer Restrictions" and "Operating Partnership
Agreement--Redemption of OP Units."
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of restricted shares from the Company
or any "affiliate" of the Company, as defined in Rule 144 (an "Affiliate"), the
acquiror or subsequent holder thereof is entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1% of the then
outstanding Common Stock or the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the date on which notice of the
sale is filed with the Commission. Sales under Rule 144 also are subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company which will require BCP to file
periodic reports under the Exchange Act. If two years have elapsed since the
date of acquisition of restricted shares from the Company or from any Affiliate
of the Company, and the acquiror or subsequent holder thereof is deemed not to
have been an Affiliate of the Company at any time during the three months
preceding a sale, such person would be entitled to sell such shares in the
public market under Rule 144(k) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements.
No assurance can be given as to (i) the likelihood that an active market for
the shares will develop, (ii) the liquidity of any such market, (iii) the
ability of the stockholders to sell their Common Stock, or (iv) the prices that
stockholders may obtain for their Common Stock.
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OPERATING PARTNERSHIP AGREEMENT
THE FOLLOWING SUMMARY OF THE OPERATING PARTNERSHIP AGREEMENT DESCRIBES THE
MATERIAL PROVISIONS OF SUCH AGREEMENT. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE OPERATING PARTNERSHIP AGREEMENT.
CLASSES OF UNITS
The Operating Partnership has authority to issue three classes of units of
limited partnership interests: Units; Convertible Units; and Incentive Units.
The Units, and the Incentive Units once issued (collectively, the "OP Units"),
will share equally on a unit-by-unit basis in all distributions of the Operating
Partnership. The Convertible Units will not participate in any distributions of
the Operating Partnership and represent solely the right to convert into a
certain number of Incentive Units (if any) with a fair market value equal to the
Incentive Return. See "The Company--Long-Term Incentive Plan."
MANAGEMENT
The Operating Partnership is a Delaware limited partnership. BCP is the sole
general partner of, and holds approximately 99% of the economic interests in the
Operating Partnership. BCP holds an approximate 1% general partner interest in
the Operating Partnership and the balance is held as a limited partner interest.
BCP intends to conduct substantially all of its business through the Operating
Partnership and its subsidiaries.
Pursuant to the Operating Partnership Agreement, BCP, as the sole general
partner of the Operating Partnership, generally has full, exclusive and complete
responsibility and discretion in the management, operation and control of the
Operating Partnership, including the ability to cause the Operating Partnership
to enter into certain major transactions, including acquisitions, developments
and dispositions of properties and refinancings of existing indebtedness. No
limited partner may take part in the operation, management or control of the
business of the Operating Partnership by virtue of being a holder of any class
of units of the Operating Partnership. Certain restrictions apply to the
Company's ability to engage in a Business Combination, as described more fully
under "Extraordinary Transactions" below.
The limited partner of the Operating Partnership has agreed that in the
event of any conflict in the fiduciary duties owed by BCP to its stockholders
and by BCP, as general partner of the Operating Partnership, to such limited
partners, BCP may act in the best interests of BCP's stockholders without
violating its fiduciary duties to such limited partners or being liable for any
resulting breach of its duties to the limited partners.
The Operating Partnership Agreement provides that all business activities of
BCP, including all activities pertaining to the acquisition and operation of
properties, must be conducted through the Operating Partnership, and that the
Operating Partnership must be operated in a manner that will enable BCP to
satisfy the requirements for being classified as a REIT.
REMOVAL OF THE GENERAL PARTNER; TRANSFER OF THE GENERAL PARTNER'S INTEREST
The Operating Partnership Agreement provides that the limited partners may
not remove BCP as general partner of the Operating Partnership. BCP may not
transfer any of its interests as general or limited partner in the Operating
Partnership except (i) in connection with a merger or sale of all or
substantially all of its assets pursuant to a transaction for which it has
obtained the requisite approval in accordance with the terms of the Operating
Partnership Agreement, (ii) if the limited partners holding at least 66 2/3% of
the OP Units (excluding OP Units owned by BCP) consent to such transfer or (iii)
to certain affiliates of BCP.
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AMENDMENTS OF THE OPERATING PARTNERSHIP AGREEMENT
Generally, the Operating Partnership Agreement may be amended with the
approval of BCP, as general partner, and limited partners (including BCP)
holding a majority of the OP Units. Certain amendments that would, among other
things, convert a limited partner's interest into a general partner's interest,
modify the limited liability of a limited partner, alter the interest of a
partner in profits or losses or the right to receive any distributions, alter or
modify the redemption right described below, or cause the termination of the
Operating Partnership at a time or on terms inconsistent with those set forth in
the Operating Partnership Agreement must be approved by BCP and each limited
partner that would be adversely affected by such amendment. Notwithstanding the
foregoing, BCP, as general partner, has the power, without the consent of the
limited partners, to amend the Operating Partnership Agreement as may be
required to (1) add to the obligations of BCP as general partner or surrender
any right or power granted to BCP as general partner, (2) reflect the admission,
substitution, termination or withdrawal of partners in accordance with the terms
of the Operating Partnership Agreement, (3) establish the rights, powers, duties
and preferences of any additional partnership interests issued in accordance
with the terms of the Operating Partnership Agreement, (4) reflect a change of
an inconsequential nature that does not materially adversely affect the limited
partners, or cure any ambiguity, correct or supplement any provisions of the
Operating Partnership Agreement not inconsistent with law or with other
provisions of the Operating Partnership Agreement, or make other changes
concerning matters under the Operating Partnership Agreement that are not
otherwise inconsistent with the Operating Partnership Agreement or law, or (5)
satisfy any requirements of federal or state law. Certain provisions affecting
the rights and duties of BCP as general partner (e.g., restrictions on BCP's
power to conduct businesses other than owning OP Units; restrictions relating to
the issuance of securities of BCP and related capital contributions to the
Operating Partnership; restrictions relating to certain extraordinary
transactions involving BCP or the Operating Partnership) may not be amended
without the approval of a majority of the OP Units not held by BCP.
TRANSFER OF UNITS; SUBSTITUTE LIMITED PARTNERS
The Operating Partnership Agreement provides that limited partners generally
may transfer their OP Units and Convertible Units without the consent of any
other person, but may substitute a transferee as a limited partner only with the
prior written consent of BCP as the sole general partner of the Operating
Partnership. In addition, limited partners may not transfer OP Units in any
event until the one-year anniversary of the Closing of this Offering or in
violation of certain regulatory and other restrictions set forth in the
Operating Partnership Agreement.
REDEMPTION OF OP UNITS
The Operating Partnership will be obligated after the one-year anniversary
of the Closing Date of the Original Offering to redeem each OP Unit at the
request of the holder thereof for cash equal to the fair market value of such
unit at the time of such redemption (as determined in accordance with the
provisions of the Operating Partnership Agreement), provided that BCP may elect
to acquire any such OP Unit presented for redemption for one share of Common
Stock or an amount of cash of the same value. If Incentive Units are presented
for redemption, the election by BCP to acquire such Incentive Units for shares
of Common Stock must be approved by the Independent Directors. With each
redemption or acquisition by BCP, BCP's percentage ownership interest in the
Operating Partnership will increase. The BCP Affiliate shall have certain
rights, pursuant to separate registration rights agreements, to have the
issuance of shares of Common Stock that may be issued to it in exchange for its
OP Units, or the resale of such shares, registered under the Securities Act. See
"Common Stock Available for Future Sale."
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OPERATIONS
The Operating Partnership Agreement requires that the Operating Partnership
be operated in a manner that will enable BCP to satisfy the requirements for
being classified as a REIT for federal tax purposes, to avoid any federal income
or excise tax liability imposed by the Code, and to ensure that the Operating
Partnership will not be classified as a "publicly traded partnership" for
purposes of Section 7704 of the Code. In addition, the Operating Partnership
will be operated in a manner so as to qualify it as a "real estate operating
company" under the Plan Assets Regulation, at least until such time as the
Common Stock qualifies as shares of "publicly offered securities" within the
meaning of the Plan Assets Regulation.
In addition to the administrative and operating costs and expenses incurred
by the Operating Partnership, it is anticipated that the Operating Partnership
will pay all administrative costs and expenses of the Company (collectively, the
"Company Expenses") and such Company Expenses will be treated as expenses of the
Operating Partnership. The Company Expenses generally will include (i) all
expenses relating to the formation and continuity of existence of the Company,
(ii) all expenses relating to this offering and any registration of securities
by the Company, (iii) all expenses associated with the preparation and filing of
any periodic reports by the Company under federal, state or local laws or
regulations, (iv) all expenses associated with compliance by the Company with
laws, rules and regulations promulgated by any regulatory body, and (v) all
other operating or administrative costs of the Company incurred in the ordinary
course of its business on behalf of the Operating Partnership.
ISSUANCE OF ADDITIONAL LIMITED PARTNERSHIP INTERESTS
BCP as general partner is authorized, without the consent of the limited
partners, to cause the Operating Partnership to issue additional Units,
Incentive Units and Convertible Units to BCP, to the limited partners or to
other persons for such consideration and on such terms and conditions as BCP as
general partner deems appropriate. If additional OP Units are issued to BCP,
then BCP must (i) issue additional shares of Common Stock and must contribute to
the Operating Partnership the entire proceeds received by BCP from such issuance
or (ii) issue additional OP Units to all partners in proportion to their
respective interests in the Operating Partnership. In addition, BCP may cause
the Operating Partnership to issue to BCP additional partnership interests in
different series or classes, which may be senior to the OP Units, in conjunction
with an offering of securities of BCP having substantially similar rights, in
which the proceeds thereof are contributed to the Operating Partnership.
Consideration for additional partnership interests may be cash or other property
or assets. No limited partner has preemptive, preferential or similar rights
with respect to additional capital contributions to the Operating Partnership or
the issuance or sale of any partnership interests therein.
EXTRAORDINARY TRANSACTIONS
The Operating Partnership Agreement provides that BCP may not generally
engage in any merger, consolidation or other combination with or into another
person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding shares of
Common Stock (a "Business Combination"), unless the holders of OP Units will
receive, or have the opportunity to receive, the same consideration per OP Unit
as holders of Common Stock receive per share of Common Stock in the transaction;
if holders of OP Units will not be treated in such manner in connection with a
proposed Business Combination, BCP may not engage in such transaction unless
limited partners (other than BCP) holding at least 66 2/3% of the OP Units held
by limited partners vote to approve the Business Combination.
EXCULPATION AND INDEMNIFICATION OF THE GENERAL PARTNER
The Operating Partnership Agreement generally provides that BCP, as general
partner of the Operating Partnership, will incur no liability to the Operating
Partnership or any limited partner for losses sustained or liabilities incurred
as a result of errors in judgment or of any act or omission if BCP carried
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out its duties in good faith. In addition, BCP is not responsible for any
misconduct or negligence on the part of its agents, provided BCP appointed such
agents in good faith. BCP may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisors, and any action it takes or omits to take in reliance upon the opinion
of such persons, as to matters that BCP reasonably believes to be within their
professional or expert competence, shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
The Operating Partnership Agreement also provides for indemnification of
BCP, the Directors and officers of BCP, and such other persons as BCP may from
time to time designate against any judgments, penalties, fines, settlements and
reasonable expenses actually incurred by such person in connection with the
preceding unless it is established that: (1) the act or omission of the
indemnified person was material to the matter giving rise to the preceding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (2) the indemnified person actually received an improper personal
benefit in money, property or services; or (3) in the case of any criminal
proceeding, the indemnified person had reasonable cause to believe that the act
or omission was unlawful.
TAX MATTERS
BCP is the tax matters partner of the Operating Partnership and, as such,
has the authority to make tax elections under the Code on behalf of the
Operating Partnership.
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FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material federal income tax considerations is based
upon current law and is for general information purposes only. The discussion
contained herein does not address all aspects of taxation that may be relevant
to particular stockholders in light of their personal investment or tax
circumstances, or to certain types of stockholders (including, without
limitation, insurance companies, tax-exempt organizations (except as described
below), financial institutions or broker-dealers, and, except as discussed
below, foreign corporations and persons who are not citizens or residents of the
United States) subject to special treatment under the federal income tax laws.
The statements in this discussion are based on current provisions of the
Code, existing, temporary, and currently proposed Treasury Regulations
promulgated under the Code, the legislative history of the Code, existing
administrative rulings and practices of the Service, and judicial decisions. No
assurance can be given that future legislative, judicial, or administrative
actions or decisions, which may be retroactive in effect, will not affect the
accuracy of any statements in this Prospectus with respect to the transactions
entered into or contemplated prior to the effective date of such changes.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT HIS OWN TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES TO HIM, HER OR IT OF THE PURCHASE, OWNERSHIP, AND SALE
OF THE COMMON STOCK AND OF BCP'S ELECTION TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP, SALE, AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
BCP intends to make an election to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with the year ending on December 31, 1998.
The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth only the
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its stockholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change prospectively or retroactively.
Goodwin, Procter & Hoar LLP has acted as counsel to BCP in connection with
the Offering and BCP's election to be taxed as a REIT. In the opinion of
Goodwin, Procter & Hoar LLP (the "Opinion"), provided that the elections and
other procedural steps described in this discussion of "Federal Income Tax
Considerations" are completed by BCP in a timely fashion, BCP will be organized
in conformity with the requirements for qualification as a REIT pursuant to
Sections 856 through 860 of the Code, and BCP's proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a REIT under the Code. Investors should be aware, however, that
opinions of counsel are not binding upon the Service or any court. It must be
emphasized that the Opinion is based on various assumptions and is conditioned
upon certain representations made by BCP as to factual matters, including
representations regarding the nature of BCP's properties and the past and future
conduct of its business. Such factual assumptions and representations are
described below in this discussion of "Federal Income Tax Considerations" and
are set out in the Opinion. Moreover, such qualification and taxation as a REIT
depends upon BCP's ability to meet on a continuing basis, through actual annual
operating results, distribution levels, and stock ownership, the various
qualification tests imposed under the Code discussed below. Goodwin, Procter &
Hoar LLP will not review BCP's compliance with those tests on a continuing
basis. Accordingly, no assurance can be given that the actual results of BCP's
operations for any particular taxable year will satisfy any such requirements.
For a discussion of the tax consequences of failure to qualify as a REIT. See
"--Failure to Qualify."
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If BCP qualifies for taxation as a REIT, it generally will not be subject to
federal corporate income tax on its net income that is distributed currently to
its stockholders. That treatment substantially eliminates the "double taxation"
(i.e., taxation at both the corporate and stockholder levels) that generally
results from an investment in a corporation. However, BCP will be subject to
federal income tax in the following circumstances. First, BCP will be taxed at
regular corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, BCP may be
subject to the "alternative minimum tax" on its undistributed items of tax
preference, if any. Third, if BCP has (i) net income from the sale or other
disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if BCP has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property (other
than foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if BCP
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), but has maintained its qualification as a REIT because
certain other requirements have been met, it will be subject to a 100% tax on
the gross income attributable to the greater of the amount by which BCP fails
the 75% or 95% gross income test, multiplied by a fraction intended to reflect
BCP's profitability. Sixth, if BCP should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year (other than
such capital gain net income which BCP elects to retain and pay tax on) , and
(iii) any undistributed taxable income from prior periods, BCP would be subject
to a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if BCP acquires any asset from a "C" corporation
(i.e., a corporation generally subject to full corporate-level tax) in a merger
or other transaction in which the basis of the asset in BCP's hands is
determined by reference to the basis of the asset (or any other asset) in the
hands of a "C" corporation and BCP recognizes gain on the disposition of such
asset during the 10-year period beginning on the date on which it acquired such
asset, then to the extent of such asset's "built-in-gain" (i.e., the excess of
the fair market value of such asset at the time of acquisition by BCP over the
adjusted basis in such asset at such time), BCP will be subject to tax at the
highest regular corporate rate applicable (as provided in Treasury Regulations
that have not yet been promulgated). The results described above with respect to
the tax on "built-in-gain" assume that BCP will elect pursuant to IRS Notice
88-19 to be subject to the rules described in the preceding sentence if it were
to make any such acquisition.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust, or association (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) not
more than 50% in value of the outstanding shares of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year (the "5/50 Rule");
(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the Service that must be met in order
to elect and maintain REIT status; (viii) that uses a calendar year for federal
income tax purposes; and (ix) that meets certain other tests, described below,
regarding the nature of its income and assets. The Code provides that conditions
(i) to (iv) above, inclusive, must be met during the entire taxable year and
that condition (v) above must be met during at least 335 days of a taxable year
of 12 months, or during a proportionate part of a taxable year of less than 12
months. Conditions (v) and (vi) above will not apply until after the first
taxable year for which an election is made by BCP to be taxed as a REIT. For
purposes of determining stock ownership under the 5/50 Rule, a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a
trust permanently set aside or
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used exclusively for charitable purposes generally is considered an individual.
A trust that is a qualified trust under Code Section 401(a), however, generally
is not considered an individual and beneficiaries of such trust are treated as
holding shares of a REIT in proportion to their actuarial interests in such
trust for purposes of the 5/50 Rule. If BCP complies with all the requirements
for ascertaining the ownership of its outstanding stock in a taxable year and
does not know or have reason to know that it violated the 5/50 Rule, BCP will be
deemed to have complied with the 5/50 Rule for such taxable year.
Prior to the consummation of the Offering, BCP did not satisfy conditions
(v) and (vi) in the preceding paragraph. BCP anticipates issuing sufficient
Common Stock with sufficient diversity of ownership pursuant to the Offering to
allow it to satisfy requirements (v) and (vi). In addition, BCP's Charter
provides for restrictions regarding the transfer of the Common Stock that are
intended to assist BCP in continuing to satisfy the share ownership requirements
described in clauses (v) and (vi) above. Such transfer restrictions are
described in "Description of Securities--Transfer Restrictions."
Code Section 856(i) provides that a corporation that is a "qualified REIT
subsidiary" shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" shall be treated as assets, liabilities, and items of income,
deduction, and credit of the REIT. A "qualified REIT subsidiary" is a
corporation, all of the capital stock of which is held by the REIT. If BCP
acquires a corporation already in existence at the time of acquisition, such
corporation would be treated as liquidating on the date of acquisition and BCP
would be required to distribute any C corporation earnings and profits of the
corporation before the end of the taxable year. Thus, in applying the
requirements described herein, any "qualified REIT subsidiaries" of BCP will be
ignored, and all assets, liabilities, and items of income, deduction, and credit
of such subsidiaries will be treated as assets, liabilities, and items of
income, deduction, and credit of BCP.
In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the gross
income of the partnership attributable to such share. In addition, the assets
and gross income of the partnership will retain the same character in the hands
of the REIT for purposes of Section 856 of the Code, including for purposes of
satisfying the gross income and asset tests described below. BCP's proportionate
share of the assets and gross income of the Operating Partnership will be
treated as assets and gross income of BCP for purposes of applying the
requirements described herein.
INCOME TESTS
In order for BCP to qualify and to maintain its qualification as a REIT, two
requirements relating to BCP's gross income must be satisfied annually. First,
at least 75% of BCP's gross income (excluding gross income from prohibited
transactions) for each taxable year must consist of defined types of income
derived directly or indirectly from investments relating to real property or
mortgages on real property (including "rents from real property" and interest on
obligations secured by mortgages on real property or on interests in real
property, and dividends or other distributions on and gain from the sale of
stock in other REITs) or from certain types of temporary investment income.
Second, at least 95% of BCP's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such real
property, mortgages on real property, or temporary investments, and from
dividends, other types of interest, and gain from the sale or disposition of
stock or securities, or from any combination of the foregoing.
The rent received by BCP from the tenants of the Real Property ("Rent") will
qualify as "rents from real property" in satisfying the gross income tests for a
REIT described above only if several conditions are met. First, the amount of
Rent must not be based, in whole or in part, on the income or profits of any
person. However, an amount received or accrued generally will not be excluded
from the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales or solely by reason of
being based on the income or profits of a tenant if such tenant derives
substantially all
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of its gross income from the related property through the sub-leasing of
substantially all of its interest in the property to the extent the amounts
received by such tenant would be characterized as rents from real property if
received by the REIT. Second, the Code provides that the Rent received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if BCP, or a direct or indirect owner of 10% or more of BCP, owns
10% or more of such tenant, either actually or constructively (a "Related Party
Tenant"). Third, if Rent attributable to personal property, leased in connection
with a lease of Real Property, is greater than 15% of the total Rent received
under the lease, then the portion of Rent attributable (taking into account both
actual and constructive ownership) to such personal property will not qualify as
"rents from real property." Finally, for the Rent to qualify as "rents from real
property," BCP generally must not operate or manage the Real Property or furnish
or render services to the tenants of such Real Property, other than through an
"independent contractor" who is adequately compensated by the tenants and from
whom BCP derives no revenue. The "independent contractor" requirement, however,
does not apply to the extent that the services provided by BCP are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered "rendered to the occupant."
BCP has represented that it will not charge Rent for any portion of any Real
Property that is based, in whole or in part, on the income or profits of any
person (except by reason of being based on a fixed percentage or percentages of
receipts or sales, as described above) to the extent that the receipt of such
Rent would jeopardize BCP's status as a REIT. In addition, BCP has represented
that, to the extent that it receives Rent from a Related Party Tenant, such Rent
will not cause BCP to fail to satisfy either the 75% or 95% gross income test.
BCP also has represented that it will not allow the Rent attributable to
personal property leased in connection with any lease of Real Property to exceed
15% of the total Rent received under the lease, if the receipt of such Rent
would cause BCP to fail to satisfy either the 75% or 95% gross income test.
Finally, BCP has represented that it will not operate or manage its Real
Property or furnish or render noncustomary services to the tenants of its Real
Property other than through an "independent contractor," to the extent that such
operation or the provision of such services would jeopardize BCP's status as a
REIT.
The Ownership Limit and the Excess Share Provisions in the Company's Charter
are designed in part to prevent a stockholder of the Company from owning Company
stock that would cause the Company to own, actually or constructively, 10% or
more of the ownership interests in a tenant, including any BCP Sister Corp.
However, because the relevant constructive ownership rules are broad and it is
not possible to monitor continually direct and indirect transfers of Company
shares, and because the Charter provisions referred to above may not be
effective, there can be no absolute assurance that transfers or other events
will not cause the Company to constructively own 10% or more of one or more
tenants at some future date.
The term "interest," as defined for purposes of the 75% and 95% gross income
tests, generally does not include any amount received or accrued (directly or
indirectly) if the determination of such amount depends in whole or in part on
the income or profits of any person. However, an amount received or accrued
generally will not be excluded from the term "interest" solely by reason of
being based on a fixed percentage or percentages of receipts or sales. In
addition, an amount received or accrued generally will not be excluded from the
term "interest" solely by reason of being based on the income or profits of a
debtor if the debtor derives substantially all of its gross income from the
related property through the leasing of substantially all of its interests in
the property, to the extent the amounts received by the debtor would be
characterized as rents from real property if received by a REIT. Furthermore, to
the extent that interest from a loan that is based on the cash proceeds from the
sale of the property securing the loan constitutes a "shared appreciation
provision" (as defined in the Code), income attributable to such participation
feature will be treated as gain from the sale of the secured property, which
generally is qualifying income for purposes of the 75% and 95% gross income
tests.
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Interest will qualify as "interest on obligations secured by mortgages on
real property or on interests in real property" if the obligation is secured by
a mortgage on real property having a fair market value, as of the date on which
the commitment to make or purchase the obligation becomes binding on BCP, at
least equal to the highest principal amount of the loan outstanding during the
taxable year. However, if BCP receives interest income with respect to a
mortgage loan that is secured by both real property and other property and the
highest principal amount of the loan outstanding during a taxable year exceeds
the fair market value of the real property on the date on which the commitment
to acquire or originate the mortgage loan becomes binding on BCP, the interest
income will be apportioned between the real property and the other property,
which apportionment may cause BCP to recognize income that is not qualifying
income for purposes of the 75% gross income test.
BCP may receive income not described above that is not qualifying income for
purposes of one or both of the 75% and 95% gross income tests. For example, it
is possible that certain fees for services rendered by the Operating Partnership
will not be qualifying income for purposes of either gross income test. It is
not anticipated that the Operating Partnership will receive a significant amount
of such fees. In addition, dividends received from Real Estate Companies that
are C corporations generally will be qualifying income for purposes of the 95%
gross income test, but not the 75% gross income test. BCP will monitor the
amount of nonqualifying income produced by its assets and has represented that
it will manage its portfolio in order to comply at all times with the two gross
income tests.
REITs generally are subject to tax at the maximum corporate rate on any
income from foreclosure property (other than income that would be qualifying
income for purposes of the 75% gross income test), less expenses directly
connected with the production of such income. "Foreclosure property" is defined
as any real property (including interests in real property) and any personal
property incident to such real property (i) that is acquired by a REIT as the
result of such REIT having bid in such property at foreclosure, or having
otherwise reduced such property to ownership or possession by agreement or
process of law, after there was a default (or default was imminent) on a lease
of such property or on an indebtedness owed to the REIT that such property
secured, (ii) for which the related loan was acquired by the REIT at a time when
default was not imminent or anticipated, and (iii) for which such REIT makes a
proper election to treat such property as foreclosure property. BCP does not
anticipate that it will receive any income from foreclosure property that is not
qualifying income for purposes of the 75% gross income test, but, if BCP does
receive any such income, BCP will make an election to treat the related property
as foreclosure property.
Property acquired by BCP will not be eligible for the election to be treated
as foreclosure property ("Ineligible Property") if the related loan was acquired
by BCP at a time when default was imminent or anticipated. In addition, income
received with respect to such Ineligible Property may not be qualifying income
for purposes of the 75% or 95% gross income tests.
Net income derived from a prohibited transaction is subject to a 100% tax.
The term "prohibited transaction" generally includes a sale or other disposition
of property (other than foreclosure property) that is held primarily for sale to
customers in the ordinary course of a trade or business. BCP intends to conduct
its operations so that no asset owned by BCP or the Operating Partnership will
be held for sale to customers and that a sale of any such asset will not be in
the ordinary course of BCP's or the Operating Partnership's business. Whether
property is held "primarily for sale to customers in the ordinary course of a
trade or business" depends, however, on the facts and circumstances in effect
from time to time, including those related to a particular property.
Nevertheless, BCP will attempt to comply with the terms of safe-harbor
provisions in the Code prescribing when asset sales will not be characterized as
prohibited transactions. Complete assurance cannot be given, however, that BCP
can comply with the safe-harbor provisions of the Code or avoid owning property
that may be characterized as property held "primarily for sale to customers in
the ordinary course of a trade or business."
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From time to time, BCP may enter into hedging transactions with respect to
one or more of its assets or liabilities. Any such hedging transactions could
take a variety of forms, including, without limitation, interest rate swap
contracts, interest rate cap or floor contracts, futures or forward contracts,
and options. To the extent that BCP enters into such a contract to hedge against
the interest rate risks of any indebtedness incurred to acquire or carry real
estate assets, any periodic income or gain from the disposition of such contract
should be qualifying income for purposes of the 95% gross income test, but not
the 75% gross income test. To the extent that BCP hedges with other types of
financial instruments or in other situations, it may not be entirely clear how
the income from those transactions will be treated for purposes of the various
income tests that apply to REITs under the Code. BCP intends to structure any
hedging transactions in a manner that does not jeopardize its status as a REIT.
If BCP fails to satisfy one or both of the 75% and 95% gross income tests
for any taxable year, it nevertheless may qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if BCP's failure to meet such tests is
due to reasonable cause and not due to willful neglect, BCP attaches a schedule
of the sources of its income to its return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances BCP would be entitled to the
benefit of those relief provisions. As discussed above in "--Taxation of the
Company," even if those relief provisions apply, a 100% tax would be imposed on
the gross income attributable to the greater of the amount by which BCP fails
the 75% or 95% gross income test, multiplied by a fraction intended to reflect
BCP's profitability.
ASSET TESTS
BCP, at the close of each quarter of each taxable year, also must satisfy
three tests relating to the nature of its assets. First, at least 75% of the
value of BCP's total assets must be represented by cash or cash items (including
certain receivables), government securities, "real estate assets," or, in cases
where BCP raises new capital through stock or long-term (at least five-year)
debt offerings, temporary investments in stock or debt instruments during the
one-year period following BCP's receipt of such capital. The term "real estate
assets" includes interests in real property, interests in mortgages on real
property to the extent the principal balance of a mortgage does not exceed the
fair market value of the associated real property, and shares of other REITs.
For purposes of the 75% asset test, the term "interest in real property"
includes an interest in mortgage loans or land or improvements thereon, such as
buildings or other inherently permanent structures (including items that are
structural components of such buildings or structures), a leasehold of real
property, and an option to acquire real property (or a leasehold of real
property). Second, not more than 25% of the Company's total assets may be
represented by securities other than those in the 75% asset class. Third, of the
investments not included in the 75% asset class, the value of any one issuer's
securities owned by BCP may not exceed 5% of the value of BCP's total assets,
and BCP may not own more than 10% of any one issuer's outstanding voting
securities (except for its interests in the Operating Partnership, the General
Partner, the Limited Partner, any qualified REIT subsidiaries, and other
qualified REITs).
BCP expects that any interests in Real Estate Companies and interests in
Real Property that it acquires generally will be qualifying assets for purposes
of the 75% asset test. If BCP acquires any interest in a Real Estate Company
that is a C corporation, such interest may not (i) represent more than 5% of the
value of BCP's total assets or (ii) constitute more than 10% of the Real Estate
Company's outstanding voting securities. BCP will monitor the status of the
assets that it acquires for purposes of the various asset tests and has
represented that it will manage its portfolio in order to comply at all times
with such tests.
If BCP should fail to satisfy the asset tests at the end of a calendar
quarter, such a failure would not cause it to lose its REIT status if (i) it
satisfied the asset tests at the close of the preceding calendar quarter and
(ii) the discrepancy between the value of BCP's assets and the asset test
requirements arose from changes in the market values of its assets and was not
wholly or partly caused by the acquisition of one or more non-qualifying assets.
If the condition described in clause (ii) of the preceding sentence were not
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satisfied, BCP still could avoid disqualification by eliminating any discrepancy
within 30 days after the close of the calendar quarter in which it arose.
DISTRIBUTION REQUIREMENTS
In order to avoid corporate income taxation of the earnings that it
distributes, BCP is required to distribute with respect to each taxable year
dividends (other than capital gain dividends) to its stockholders in an
aggregate amount at least equal to (i) the sum of (A) 95% of its "REIT taxable
income" (computed without regard to the dividends paid deduction and its net
capital gain) and (B) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before BCP timely files its federal
income tax return for such year and if paid on or before the first regular
dividend payment date after such declaration. To the extent that BCP does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
thereon at regular ordinary and capital gains corporate tax rates. Furthermore,
if BCP should fail to distribute during each calendar year (or, in the case of
distributions with declaration and record dates falling in the last three months
of the calendar year, by the end of the January immediately following such year)
at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT capital gain income for such year (other than capital gain income
which BCP elects to retain and pay tax on), and (iii) any undistributed taxable
income from prior periods, BCP would be subject to a 4% nondeductible excise tax
on the excess of such required distribution over the amounts actually
distributed. Pursuant to recently enacted legislation, BCP may elect to retain,
rather than distribute, all or a portion of its net long-term capital gains. The
effect of such an election is that (i) BCP is required to pay the tax on such
gains, (ii) U.S. stockholders (as defined below), while required to include
their proportionate share of the undistributed long-term capital gains in
income, will receive a credit or refund for their share of the tax paid by BCP
and (iii) the basis of a U.S. stockholder's Common Stock would be increased by
the amount of the undistributed long-term capital gains (minus the amount of
capital gains tax paid by BCP) included in such U.S. stockholder's long-term
capital gains.
In certain circumstances, the Company's investments may generate income for
federal income tax purposes without a corresponding receipt of cash ("Phantom
Income"). In order for BCP to meet REIT qualifications and/or avoid tax at the
REIT level on such Phantom Income, BCP may be forced to use cash generated from
other sources, including, without limitation, asset sales and borrowings, to
make required distributions. See "Risk Factors--Legal and Tax Risks--Tax Risks."
Under certain circumstances, BCP may be able to rectify a failure to meet
the distribution requirements for a year by paying "deficiency dividends" to its
stockholders in a later year, which may be included in BCP's deduction for
dividends paid for the earlier year. Although BCP may be able to avoid being
taxed on amounts distributed as deficiency dividends, it will be required to pay
to the Service interest based upon the amount of any deduction taken for
deficiency dividends.
RECORDKEEPING REQUIREMENTS
Pursuant to applicable Treasury Regulations, BCP must maintain certain
records and request on an annual basis certain information from its stockholders
designed to disclose the actual ownership of its outstanding stock. Failure to
comply with such record keeping requirements could result in substantial
monetary penalties to BCP. BCP intends to comply with such requirements.
EXCESS INCLUSION INCOME
It is anticipated that BCP may purchase mortgage loans. If BCP purchases
such assets and is deemed to have issued debt obligations having two or more
maturities, the payments on which correspond to payments on such mortgage loans,
such arrangement will be treated as a "taxable mortgage pool" for
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federal income tax purposes. If all or a portion of BCP is considered a "taxable
mortgage pool," BCP's status as a REIT generally should not be impaired;
however, a portion of BCP's taxable income may be characterized as "excess
inclusion income" and allocated to the stockholders of BCP. Any excess inclusion
income (i) could not be offset by net operating losses of a stockholder, (ii)
would be subject to tax as "unrelated business taxable income" to a tax-exempt
stockholder, (iii) would be subject to the application of federal income tax
withholding (without reduction pursuant to any otherwise applicable income tax
treaty) with respect to amounts allocable to foreign stockholders, and (iv)
would be taxable (at the highest corporate tax rate) to BCP, rather than its
stockholders, to the extent allocable to shares of stock of BCP held by
disqualified organizations (generally, tax-exempt entities not subject to
unrelated business income tax, including governmental organizations).
IMPACT OF PROPOSED LEGISLATION
BCP's qualification as a REIT or its ability to utilize the BCP Sister Corp.
structure could be affected as a result of proposed or future legislation. In
that regard, on February 2, 1998, the Clinton Administration released a
description of revenue proposals that included, among other things, a freeze on
the grandfathered status of REITs that are "paired" or "stapled" with a related
operating company. Although such proposed legislation in its current form does
not affect "paper clip" structures, there can be no assurance that the Clinton
Administration proposals or similar proposed legislation affecting the BCP
Sister Corp. structure will not place legislative or judicial scrutiny on the
"paper clip" structure, or that legislation adversely affecting such structure
will not be proposed and enacted, possibly on a retroactive basis. Any such
legislation could have an adverse impact on BCP's qualification as a REIT. See
"Risk Factors--Legal and Tax Risks--Tax Risks."
FAILURE TO QUALIFY
If BCP fails to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, BCP will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to BCP's stockholders in any year in which BCP fails to
qualify will not be deductible by BCP nor will they be required to be made. In
such event, to the extent of BCP's current and accumulated earnings and profits,
all distributions to stockholders will be taxable as ordinary income and,
subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, BCP also will be disqualified from taxation as a
REIT for the four taxable years following the year during which BCP ceased to
qualify as a REIT. It is not possible to state whether in all circumstances BCP
would be entitled to statutory relief from its failure to qualify as a REIT.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
As used herein, the term "U.S. stockholder" means a holder of Common Stock
that for U.S. federal income tax purposes is (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any state or political
subdivision thereof, (iii) an estate whose income from sources without the
United States is includible in gross income for U.S. federal income tax purposes
regardless of its connection with the conduct of a trade or business within the
United States, or (iv) any trust with respect to which (A) a U.S. court is able
to exercise primary supervision over the administration of such trust and (B)
one or more U.S. persons have the authority to control all substantial decisions
of the trust.
As long as BCP qualifies as a REIT, distributions (including distributions
of the BCP Sister Corp. equity interests by BCP upon the formation of the BCP
Sister Corp.) made to BCP's taxable U.S. stockholders out of current or
accumulated earnings and profits (and not designated as capital gain dividends
or retained capital gains) will be taken into account by such U.S. stockholders
as ordinary income and will not be eligible for the dividends received deduction
generally available to corporations.
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Distributions that are designated as capital gain dividends by BCP will be taxed
as long-term capital gains (to the extent that they do not exceed BCP's actual
net capital gain for the taxable year) without regard to the period for which
the stockholder has held his Common Stock. Pursuant to recently enacted
legislation, in the case of a stockholder who is an individual, an estate or a
trust, long-term capital gains and losses are separated into three tax rate
groups, a 20% group, a 25% group and a 28% group, and are subject to tax at the
rate effective for each group. Pursuant to Notice 97-64, 1997-47 IRB 1, the
Company will designate capital gain dividends, if any, as 20% rate gain
distributions, 25% rate gain distributions or 28% rate gain distributions and
detail such designations in a manner intended to comply with applicable
requirements. Final regulations, if and when issued by the Treasury Department,
could affect the rules set forth in the Notice. In addition, the Service has not
issued regulations or other guidance regarding the application of the new rates
to sales of interests in REITs such as the Company, and it remains unclear how
the new rules will affect such sales, if at all. If BCP elects to retain capital
gains rather than distribute them, a U.S. stockholder will be deemed to receive
a capital gain dividend equal to the amount of such retained capital gains. A
U.S. stockholder will be allowed a credit against its federal income tax
liability for its proportionate share of tax paid by BCP on retained capital
gains. See "--Requirements for Qualification." Such gains are subject to
apportionment among the three tax rate groups as set forth above. Corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions in excess of current and accumulated
earnings and profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's Common Stock, but
rather will reduce the adjusted basis of such stock. To the extent that such
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a stockholder's Common Stock, such distributions will be
included in income as long-term capital gain (or, in the case of individuals,
trusts and estates, mid-term capital gain if the Common Stock has been held for
more than one year but not more than 18 months, and in the case of all taxpayers
short-term capital gain if the Common Stock had been held for one year or less),
provided that the Common Stock is a capital asset in the hands of the
stockholder. In addition, any distribution declared by BCP in October, November,
or December of any year and payable to a stockholder of record on a specified
date in any such month shall be treated as both paid by BCP and received by the
stockholder on December 31 of such year, provided that the distribution is
actually paid by BCP during January of the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of BCP. Instead, such losses would be carried
over by BCP for potential offset against its future income (subject to certain
limitations). Taxable distributions from BCP and gain from the disposition of
the Common Stock will not be treated as passive activity income and, therefore,
stockholders generally will not be able to apply any "passive activity losses"
(such as losses from certain types of limited partnerships in which a
stockholder is a limited partner) against such income. In addition, taxable
distributions from BCP generally will be treated as investment income for
purposes of the investment interest limitations. Capital gains from the
disposition of Common Stock (or distributions treated as such), however, will be
treated as investment income only if the stockholder so elects, in which case
such capital gains will be taxed at ordinary income rates. BCP will notify
stockholders after the close of BCP's taxable year as to the portions of the
distributions attributable to that year that constitute ordinary income or
capital gain dividends and in the case of capital gain dividends to
non-corporate stockholders, those designated as 20% rate gain distributions, 25%
rate gain distributions and 28% rate gain distributions.
It is possible that BCP may invest in certain types of mortgage loans that
may cause it under certain circumstances to recognize taxable income in excess
of its economic income (also known as "Phantom Income") and to experience an
offsetting excess of economic income over its taxable income in later years. As
a result, stockholders may from time to time be required to pay federal income
tax on distributions that economically represent a return of capital, rather
than a dividend. Such distributions would be offset in later years by
distributions representing economic income that would be treated as returns of
capital for federal income tax purposes. Accordingly, if BCP receives Phantom
Income, its stockholders may be required to pay federal income tax with respect
to such income on an accelerated basis, i.e., before such
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income is realized by the stockholders in an economic sense. If there is taken
into account the time value of money, such an acceleration of federal income tax
liabilities would cause stockholders to receive an after-tax rate of return on
an investment in BCP that would be less than the after-tax rate of return on an
investment with an identical before-tax rate of return that did not generate
Phantom Income. In general, as the ratio of BCP's Phantom Income to its total
income increases, the after-tax rate of return received by a taxable stockholder
of BCP will decrease. BCP will consider the potential effects of Phantom Income
on its taxable stockholders in managing its investments.
TAXATION OF STOCKHOLDERS ON THE DISPOSITION OF THE COMMON STOCK
In general, any gain or loss realized upon a taxable disposition of the
Common Stock by a U.S. stockholder who is not a dealer in securities will be
treated as capital gain or loss. Any such capital gain or loss generally will
(x) in the case of U.S. stockholders which are corporations, be long-term
capital gain or loss if the Common Stock has been held for more than 12 months,
and (y) in the case of U.S. stockholders who are non-corporate taxpayers, be
long-term capital gain or loss taxed at a maximum federal income tax rate of (i)
20% if the U.S. stockholder's holding period in such Common Stock was more than
18 months at the time of such disposition or (ii) 28% if the U.S. stockholder's
holding period was more than one year but not more than 18 months at the time of
such disposition. In general, any loss upon a sale or exchange of Common Stock
by a U.S. stockholder who has held such Common Stock for six months or less
(after applying certain holding period rules) will be treated as long-term
capital loss to the extent of distributions from BCP required to be treated by
that stockholder as long-term capital gain.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
BCP will report to its U.S. stockholders and to the Service the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to backup
withholding at the rate of 31% with respect to distributions paid unless such
holder (i) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with the applicable requirements of the backup withholding
rules. A stockholder who does not provide BCP with his correct taxpayer
identification number also may be subject to penalties imposed by the Service.
Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax exempt entities, including qualified employee pension and profit sharing
trusts and individual retirement accounts ("Exempt Organizations"), generally
are exempt from federal income taxation. However, they are subject to taxation
on their unrelated business taxable income ("UBTI"), as defined in Section
512(a)(1) of the Code. While many investments in real estate generate UBTI, the
Service has issued a published ruling that dividend distributions from a REIT to
an exempt employee pension trust do not constitute UBTI, provided that the
shares of the REIT are not otherwise used in an unrelated trade or business of
the exempt employee pension trust. Based on that ruling, amounts distributed by
BCP to Exempt Organizations generally should not constitute UBTI. However, if an
Exempt Organization finances its acquisition of the Common Stock with debt, a
portion of its income from BCP will constitute UBTI pursuant to the
"debt-financed property" rules. In addition, in certain circumstances, a pension
trust that owns more than 10% of BCP's stock is required to treat a percentage
of the dividends from BCP as UBTI. This rule applies to a pension trust holding
more than 10% (by value) of BCP's stock only if (i) the percentage of income of
BCP that is UBTI (determined as if BCP were a pension trust) is at least 5% and
(ii) BCP is treated as a "pension-held" REIT. BCP will be treated as a
"pension-held" REIT if (i) BCP qualifies as a REIT by reason of the modification
of the 5/50 Rule that allows the beneficiaries of the pension trust to be
treated as holding shares of BCP in proportion to their actuarial interests in
the
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pension trust, and (ii) either (A) one pension trust owns more than 25% of the
value of BCP's stock or (B) a group of pension trusts individually holding more
than 10% of the value of BCP's stock collectively owns more than 50% of the
value of BCP's stock. BCP is unlikely to become a "pension-held" REIT because,
pursuant to the Aggregate Stock Ownership Limit and the Look-Through Ownership
Limit in the Charter of BCP, no person may beneficially own shares of Common
Stock in excess of 9.8% of the outstanding shares of Common Stock of BCP;
provided, however, that certain Look-Through Entities may beneficially own up to
15% of such shares of Common Stock. Although the Board of Directors of BCP has
the discretion to waive the application of the Aggregate Stock Ownership Limit
or the Look-Through Ownership Limit with respect to any person, the Board of
Directors intends to grant such waivers only in a manner that would not cause
BCP to be or become a "pension-held" REIT. However, there can be no assurance
that BCP will not become a "pension-held" REIT or that pension trusts will not
be required to treat a percentage of dividends received from BCP as UBTI.
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders (collectively, "Non-U.S. Stockholders") are complex, and no attempt
will be made herein to provide more than a summary of such rules. PROSPECTIVE
NON-U.S. STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE
THE IMPACT OF FEDERAL, STATE, AND LOCAL INCOME TAX LAWS WITH REGARD TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING ANY REPORTING REQUIREMENTS.
Distributions to Non-U.S. Stockholders that are not attributable to gain
from sales or exchanges by BCP of U.S. real property interests and are not
designated by BCP as capital gains dividends or returned capital gains will be
treated as dividends of ordinary income to the extent that they are made out of
current or accumulated earnings and profits of BCP. Such distributions
ordinarily will be subject to a withholding tax equal to 30% of the gross amount
of the distribution unless an applicable tax treaty reduces or eliminates that
tax. However, if income from the investment in the Common Stock is treated as
effectively connected with the Non-U.S. Stockholder's conduct of a U.S. trade or
business, the Non-U.S. Stockholder generally will be subject to federal income
tax at graduated rates, in the same manner as U.S. stockholders are taxed with
respect to such distributions (and also may be subject to the 30% branch profits
tax in the case of a Non-U.S. Stockholder that is a non-U.S. corporation). BCP
expects to withhold U.S. income tax at the rate of 30% on the gross amount of
any such distributions made to a Non-U.S. Stockholder unless (i) a lower treaty
rate applies and any required form evidencing eligibility for that reduced rate
is filed with BCP or (ii) the Non-U.S. Stockholder files an IRS Form 4224 with
BCP claiming that the distribution is effectively connected income. Furthermore,
on October 6, 1997, the U.S. Treasury Department issued final Treasury
regulations governing information reporting and the certification procedures
regarding withholding and backup withholding on certain amounts paid to Non-U.S.
Stockholders after December 31, 1998 (the "New Withholding Regulations"). The
New Withholding Regulations may alter the procedure for claiming the benefits of
an income tax treaty.
Distributions in excess of current and accumulated earnings and profits of
BCP will not be taxable to a Non-U.S. Stockholder to the extent that such
distributions do not exceed the adjusted basis of the stockholder's Common
Stock, but rather will reduce the adjusted basis of such shares. To the extent
that distributions in excess of current and accumulated earnings and profits
exceed the adjusted basis of a Non-U.S. Stockholder's Common Stock, such
distributions will give rise to tax liability if the Non-U.S. Stockholder would
otherwise be subject to tax on any gain from the sale or disposition of his
Common Stock, as described below. Because it generally cannot be determined at
the time a distribution is made whether or not such distribution will be in
excess of current and accumulated earnings and profits, the entire amount of any
distribution normally will be subject to withholding at the same rate as a
dividend. However, amounts so withheld are refundable to the extent it is
determined subsequently that such
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distribution was, in fact, in excess of current and accumulated earnings and
profits of BCP. BCP is required to withhold 10% of any distribution in excess of
BCP's current and accumulated earnings and profits. Consequently, although BCP
intends to withhold at a rate of 30% on the entire amount of any distribution,
to the extent that BCP does not do so, any portion of a distribution not subject
to withholding at a rate of 30% will be subject to withholding at a rate of 10%.
For any year in which BCP qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges by BCP of U.S. real property
interests (i.e., interests in real property located in the United States and
interests in U.S. corporations at least 50% or whose assets consist of U.S. real
property interests) will be taxed to a Non-U.S. Stockholder under the provisions
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under
FIRPTA, distributions attributable to gain from sales of U.S. real property
interests are taxed to a Non-U.S. Stockholder as if such gain were effectively
connected with a U.S. trade or business. Non-U.S. Stockholders thus would be
taxed at the normal capital gain rates applicable to U.S. stockholders (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Distributions subject to FIRPTA also
may be subject to the 30% branch profits tax in the hands of a non-U.S.
corporate stockholder not entitled to treaty relief or exemption. BCP is
required to withhold 35% of any distribution that is designated by BCP as a
capital gains dividend. The amount withheld is creditable against the Non-U.S.
Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of his or her Common
Stock generally will not be taxed under FIRPTA if BCP is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by non-U.S. persons. Although it is currently anticipated that BCP
will be a "domestically controlled REIT" and, therefore, that the sale of the
Common Stock will not be subject to taxation under FIRPTA, there can be no
assurance that BCP will be a "domestically-controlled REIT." Even if such gain
is not subject to FIRPTA, such gain will be taxable to a Non-U.S. Stockholder if
(i) investment in the Common Stock is effectively connected with the Non-U.S.
Stockholder's U.S. trade or business, in which case the Non-U.S. Stockholder
will be subject to the same treatment as U.S. stockholders with respect to such
gain, or (ii) the Non-U.S. Stockholder is a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year and
certain other conditions apply, in which case the nonresident alien individual
will be subject to a 30% tax on the individual's capital gains. If the gain on
the sale of the Common Stock were to be subject to taxation under FIRPTA, the
Non-U.S. Stockholder would be subject to the same treatment as U.S. stockholders
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals).
In addition, a purchaser of Common Stock subject to taxation under FIRPTA would
generally be required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition by a Non-U.S. Stockholder. Any amount withheld would
be creditable against the Non-U.S. Stockholder's FIRPTA tax liability.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Stockholders. The New Withholding
Regulations alter the application of the information reporting and backup
withholding rules to Non-U.S. Stockholders. Non-U.S. Stockholders should consult
with a tax advisor with respect to any such information reporting and backup
withholding requirements. Backup withholding with respect to a Non-U.S.
Stockholder is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a Non-U.S. Stockholder will be allowed
as a credit against any United States federal income tax liability of such
Non-U.S. Stockholder. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the Service.
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OTHER TAX CONSEQUENCES
BCP, BCP's stockholders, the Operating Partnership or its General Partner or
Limited Partners may be subject to state and local tax in various states and
localities, including those states and localities in which it or they transact
business, own property, or reside. The state and local tax treatment of the
Company and its stockholders in such jurisdictions may differ from the federal
income tax treatment described above. Consequently, prospective stockholders
should consult their own tax advisors regarding the effect of state and local
tax laws upon an investment in the Common Stock. In addition, the Taxpayer
Relief Act of 1997 includes several provisions, some of which have been
described in the discussion above, that will liberalize certain of the
requirements for qualification as a REIT. However, these provisions will have
neither a material beneficial effect nor a material adverse effect on BCP's
ability to operate as a REIT.
BCP SISTER CORP.
Each BCP Sister Corp. organized as a corporation will pay federal, state and
local income taxes on its taxable income at regular corporate rates. Any such
taxes will reduce amounts available for distribution by the BCP Sister Corp. to
its stockholders.
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ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on (a) Plans, including
individual retirement accounts or Keogh plans, (b) any entities whose underlying
assets include Plan assets by reason of a Plan's investment in such entities
("Plan Assets Entities") and (c) persons who have certain specified
relationships to such Plans and Plan Assets Entities ("Parties-in-Interest"
under ERISA and "Disqualified Persons" under the Code). Moreover, based on the
reasoning of the United States Supreme Court in JOHN HANCOCK LIFE INS. CO. V.
HARRIS TRUST AND SAV. BANK, 114 S. Ct. 517 (1993), an insurance company's
general account may be deemed to include assets of the Plans investing in the
general account (e.g., through the purchase of an annuity contract), and the
insurance company might be treated as a Party-in-Interest or Disqualified Person
with respect to a Plan by virtue of such investment. ERISA also imposes certain
duties on persons who are fiduciaries of Plans subject to ERISA and prohibits
certain transactions between a Plan and Parties-in-Interest or Disqualified
Persons with respect to such Plans.
THE TREATMENT OF THE COMPANY'S UNDERLYING ASSETS UNDER ERISA
The DOL has issued the Plan Assets Regulation which defines what constitutes
the assets of a Plan. This regulation provides that, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Plan purchases an "equity interest" will be
deemed for purposes of ERISA and the Code to be assets of the investing Plan
unless certain exceptions apply. The Plan Assets Regulation defines an "equity
interest" as any interest in an entity other than an instrument that is treated
as indebtedness under applicable local law and which has no substantial equity
features. The Common Stock offered hereby should be treated as "equity
interests" for purposes of the Plan Assets Regulation.
One exception under the Plan Assets Regulation provides that an investing
Plan's assets will not include any of the underlying assets of an entity if at
all times less than 25% of each class of "equity" interests in the entity is
held by "benefit plan investors," which is defined to include Plans that are not
subject to ERISA such as foreign benefit plans, governmental pension plans and
individual retirement accounts as well as Plans that are subject to ERISA.
Another exception is provided for an investment in an "operating company," which
is defined in the Plan Assets Regulation to include a "real estate operating
company." To be a "real estate operating company" an entity must have, on the
date of its first long-term investment and on certain annual testing dates
thereafter, at least 50% of its assets (other than short-term investments
pending long-term commitment or distribution to investors), valued at cost,
invested in real estate that is managed or developed and with respect to which
such entity has the right to substantially participate in such management or
development activities. Another exception under the Plan Assets Regulation
provides that an investing Plan's assets will not include any of the underlying
assets of an entity if the class of "equity" interests in question is a class of
"publicly offered securities." Publicly offered securities are securities that
are (i) widely held (i.e., held by 100 or more investors who are independent of
the issuer and each other), (ii) freely transferable, and (iii) part of a class
of securities registered under Section 12(b) or 12(g) of the Exchange Act.
The Board of Directors of the Company and any Sister Corp. will take such
steps as may be necessary to qualify for one or more of the exceptions available
under the Plan Assets Regulation and thereby prevent the assets of the Company
or any BCP Sister Corp. from being treated as assets of any investing Plan.
Specifically, BCP intends to qualify as a real estate operating company until at
least such time as the Common Stock qualifies as a class of publicly offered
securities. In this connection, BCP has obtained an opinion of counsel that, on
the date of the Operating Partnership's first long-term investment BCP qualified
as a real estate operating company. It is intended that, thereafter, on at least
one date during each of BCP's "annual valuation periods" (as defined in the Plan
Assets Regulation) until at least such time as the Common Stock qualifies as
publicly offered securities, at least 50% of the assets of BCP (valued at cost
and excluding certain short-term investments) will be invested, by reason of its
investment in the Operating Partnership, in real estate which is managed or
developed and as to which BCP will have
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the right to substantially participate in the management or development of the
real estate. Consequently, BCP should qualify as a real estate operating
company. In addition, with respect to any BCP Sister Corp., the Company will
take such steps as may be necessary to qualify such BCP Sister Corp. as an
operating company or a venture capital operating company or for another
available exception under the Plan Assets Regulation prior to distribution of
its equity interests.
Any Plan fiduciary that proposes to cause a Plan to purchase Common Stock
should consult with its counsel with respect to the potential applicability of
ERISA and the Code to such investment and determine on its own whether any
exceptions or exemptions are applicable and whether all conditions of any such
exceptions or exemptions have been satisfied. Moreover, each Plan fiduciary
should determine whether, under the general fiduciary standards of investment
prudence and diversification, an investment in the Common Stock is appropriate
for the Plan, taking into account the overall investment policy of the Plan and
the composition of the Plan's investment portfolio.
SELLING STOCKHOLDERS
The Common Stock was originally issued by BCP and sold by NationsBanc
Montgomery Securities LLC (the "Initial Purchaser"), in a transaction exempt
from registration requirements of the Securities Act, to persons reasonably
believed by the Initial Purchaser to be "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act), to a limited number of
institutional "accredited investors" (as defined in Rule 501 (a) (1), (2), (3)
or (7) under the Securities Act) and to individual "accredited investors" (as
defined in Rule 501 (a) (4), (5) or (6) under the Securities Act). The Selling
Stockholders may from time to time offer and sell pursuant to this Prospectus
any or all of the Common Stock. The term Selling Stockholders, includes the
holders listed below and the beneficial owners of the Common Stock and their
transferees, pledgees, donees or other successors.
The following table sets forth information with respect to the Selling
Stockholders of the Common Stock and the respective number of shares of Common
Stock beneficially owned by each Selling Stockholders that may be offered
pursuant to this Prospectus.
SELLING STOCKHOLDER NUMBER OF SHARES
[INSERT CHART]
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Except as shown above, none of the Selling Stockholders has, or within the
past three years has had, any position, office or other material relationship
with the BCP or any of its predecessors or affiliates. Because the Selling
Stockholders may, pursuant to this Prospectus, offer all or some portion of the
Common Stock, no estimate can be given as to the amount of the Common Stock that
will be held by the Selling Stockholders upon termination of any such sales. In
addition, the Selling Stockholders identified above may have sold, transferred
or otherwise disposed of all or a portion of their Common Stock since the date
on which they provided the information regarding their Common Stock, in
transactions exempt from the registration requirements of the Securities Act,
including transactions pursuant to Rule 144 under the Securities Act.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to purchasers directly
by the Selling Stockholders. Alternatively, the Selling Stockholders may from
time to time offer the Offered Securities to or through underwriters,
broker/dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholders
or the purchasers of such securities for whom they may act as agents. The
Selling Stockholders and any underwriters, broker/dealers or agents that
participate in the distribution of Offered Securities may be deemed to be
"underwriters" within the meaning of the Securities Act and any profit on the
sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. The
sale of the Offered Securities may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Offered Securities may be listed or quoted at
the time of sale, (ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or in the over-the-counter market or (iv)
through the writing of options. At the time a particular offering of the Offered
Securities is made, a Prospectus Supplement, if required, will be distributed
which will set forth the aggregate amount and type of Offered Securities being
offered and the terms of the offering, including the name or names of any
underwriters, broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker/ dealers.
Each Common Stock certificate contains a legend to the effect that the
holder thereof, by its acceptance thereof, will be deemed to have agreed to be
bound by the provisions of the Registration Rights Agreement. In that regard,
each holder is deemed to have agreed that, upon receipt of notice from the
Company of the occurrence of any event which makes a statement in this
prospectus untrue in any material respect or which requires the making of any
changes in such prospectus in order to make the statements therein not
misleading, or of certain other events specified in the Registration Rights
Agreement, such holder will suspend the sale of Common Stock pursuant to this
prospectus until the Company has amended or supplemented such prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such holder or the Company has given notice that the
sale of the Common Stock may be resumed.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold unless they have
been registered or qualified for sale in such jurisdictions or any exemption
from registration or qualification is available and is complied with.
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The Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of the purchases and sales of any of the Offered Securities by
the Selling Stockholders. The foregoing may affect the marketability of such
securities.
All expenses of the registration of the Offered Securities will be paid by
the Company, including, without limitation, Commission filing fees and expenses
of compliance with state securities or "blue sky" laws; provided, however, that
the Selling Stockholders will pay all the underwriting discounts and selling
commissions, if any. The Selling Stockholders will be indemnified by the Company
against certain civil liabilities, including certain liabilities under the
Securities Act, or will be entitled to contribution in connection therewith. The
Company will be indemnified by the Selling Stockholders severally against
certain civil liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts. Certain partners of Goodwin, Procter
& Hoar LLP directly or indirectly own an aggregate of 7,237 shares of Common
Stock of the Company.
EXPERTS
The (i) consolidated financial statements of Beacon Capital Partners, Inc.
at March 31, l998 and for the period from January 21, l998 (inception) through
March 31, l998, (ii) the combined historical summary of gross income and direct
operating expenses for The Athenaeum Portfolio for the year ended December 31,
l997, and (iii) the historical summary of gross income and direct operating
expenses for Technology Square and The Draper Building for the year ended
December 31, 1997, all appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
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INDEX TO FINANCIAL STATEMENT AND SCHEDULES
<TABLE>
<S> <C>
Pro Forma Financial Information (Unaudited):
Beacon Capital Partners, Inc.
Pro Forma Condensed Consolidated Balance Sheet as of March 31, l998............. F-3
Notes to Pro Forma Condensed Consolidated Balance Sheet......................... F-4
Pro Forma Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, l998 and the Year Ended December 31, l997...................... F-5
Notes to Pro Forma Condensed Consolidated Statements of Operations.............. F-7
Historical Financial Information:
Beacon Capital Partners, Inc.
Report of Independent Auditors.................................................. F-8
Consolidated Balance Sheet as of March 31, l998................................. F-9
Consolidated Statement of Operations from January 21, l998 (Inception) to March
31, l998....................................................................... F-10
Consolidated Statement of Stockholders' Equity from January 21, l998 (Inception)
to March 31, l998.............................................................. F-11
Consolidated Statement of Cash Flows from January 21, l998 (Inception) to March
31, l998....................................................................... F-12
Notes to Consolidated Financial Statements...................................... F-13
The Athenaeum Portfolio
Report of Independent Auditors.................................................. F-18
Combined Historical Summary of Gross Income and Direct Operating Expenses for
the Three Months ended March 31, l998 (Unaudited) and the Year Ended December
31, l997....................................................................... F-19
Notes to Combined Historical Summary of Gross Income and Direct Operating
Expenses....................................................................... F-20
Technology Square and The Draper Building
Report of Independent Auditors.................................................. F-21
Historical Summary of Gross Income and Direct Operating Expenses for the Three
Months ended March 31, l998 (Unaudited) and the Year Ended December 31, l997... F-22
Notes to Historical Summary of Gross Income and Direct Operating Expenses....... F-23
</TABLE>
F-1
<PAGE>
BEACON CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The accompanying unaudited pro forma condensed consolidated balance sheet as
of March 31, 1998 has been prepared to reflect the acquisition of properties
subsequent to March 31, 1998, and the exercise of the underwriter's
over-allotment as if such transactions had occurred on March 31, 1998. The
accompanying unaudited pro forma condensed consolidated statements of operations
have been prepared to reflect the acquisition of properties subsequent to March
31, 1998 and the exercise of the underwriter's over-allotment as if such
transactions had occurred on January 1, 1997.
The pro forma information is unaudited and is not necessarily indicative of
the consolidated results that would have occurred if the transactions and
adjustments reflected therein had been consummated in the period or on the date
presented, or on any particular date in the future, nor does it purport to
represent the financial position, results of operations or changes in cash flows
for future periods. The pro forma information should be read in conjunction with
all of the financial statements and notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
F-2
<PAGE>
BEACON CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------
PURCHASE OTHER
HISTORICAL TRANSACTIONS ADJUSTMENTS
(A) (B) (C) PRO FORMA
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Real Estate
Operating properties................... $ -- $ 123,000 $ -- $ 123,000
----------- ------------ ------------- -----------
Total real estate.................. -- 123,000 -- 123,000
Cash and cash equivalents................ 323,893 (186,000) 67,185 205,078
Contributions receivable--affiliate...... 4,200 -- -- 4,200
Other assets............................. 3,777 -- -- 3,777
Investment in and advance to joint
venture................................ -- 63,000 -- 63,000
----------- ------------ ------------- -----------
Total assets....................... $ 331,870 $ -- $ 67,185 $ 399,055
----------- ------------ ------------- -----------
----------- ------------ ------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Loans payable--affiliate............... $ 3,560 $ -- $ -- $ 3,560
Accounts payable and accrued
expenses............................. 1,387 -- -- 1,387
----------- ------------ ------------- -----------
Total liabilities.................. 4,947 -- -- 4,947
Minority interest (D).................... 4,200 -- -- 4,200
Stockholders' equity..................... 322,723 -- 67,185 389,908
----------- ------------ ------------- -----------
Total liabilities and stockholders'
equity........................... $ 331,870 $ -- $ 67,185 $ 399,055
----------- ------------ ------------- -----------
----------- ------------ ------------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
BEACON CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(A) Reflects the historical consolidated balance sheet of Beacon Capital
Partners, Inc. as of March 31, 1998.
(B) Reflects the acquisition of (1) a portfolio of eleven buildings located in
Cambridge, MA known as The Athenaeum Portfolio and (2) the pending
acquisition of a four building complex known as Technology Square and an
adjacent building known as The Draper Building, also located in Cambridge,
MA, subsequent to March 31, 1998. The Company funded or will fund these
acquisitions with existing cash and the assumption of debt. The Athenaeum
Portfolio transaction reflects the formation by the Company of a 50% joint
venture with an affiliate of PaineWebber subsequent to the closing of the
transaction as if the formation of the joint venture had occurred on March
31, 1998. The following is a summary of the pro forma adjustments related to
purchase transactions as if they occurred on March 31, 1998:
<TABLE>
<CAPTION>
TECHNOLOGY SQUARE
THE ATHENAEUM AND
PORTFOLIO THE DRAPER BUILDING TOTAL
-------------- ------------------- -----------
<S> <C> <C> <C>
ASSETS
Real Estate:
Operating properties......................................... $ -- $ 123,000 $ 123,000
-------------- ---------- -----------
Total real estate........................................ -- 123,000 123,000
Cash and cash equivalents...................................... (63,000) (123,000) (186,000)
Investment in and advance to joint venture..................... 63,000 -- 63,000
-------------- ---------- -----------
Total assets............................................. $ -- $ -- $ --
-------------- ---------- -----------
-------------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities.................................................... $ -- $ -- $ --
Minority interest.............................................. -- -- --
Stockholders' equity........................................... -- -- --
-------------- ---------- -----------
Total liabilities and stockholders' equity............... $ -- $ -- $ --
-------------- ---------- -----------
-------------- ---------- -----------
</TABLE>
(C) Reflects the issuance of 3,613,163 shares of common stock by the Company at
$20 per share (before giving effect to the Initial Purchaser's Discount as
defined in the Offering Memorandum covering issuance of the shares), net of
$4,885 of discounts and expenses, subsequent to March 31, 1998. Of the total
shares issued, 55,084 shares were sold net of the Initial Purchaser's
Discount.
(D) Minority interest of income represents a 1.1% minority interest in the
Operating Partnership.
F-4
<PAGE>
BEACON CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------
<S> <C> <C> <C> <C>
ACQUISITION OTHER CONSOLIDATED
HISTORICAL (A) PROPERTIES (B) ADJUSTMENTS (C) PRO FORMA
--------------- --------------- ----------------- ------------
Revenues:
Rental revenue................................... $ -- $ 2,575 $ -- $ 2,575
Equity in earnings of joint venture.............. -- 739 -- 739
Interest income.................................. 576 -- (207) 369
Other revenues................................... 8 -- -- 8
----- ------ ----- ------------
Total revenues............................... 584 3,314 (207) 3,691
----- ------ ----- ------------
Expenses:
Property operating............................... -- 478 -- 478
Real estate taxes................................ -- 496 -- 496
General and administrative....................... 968 -- -- 968
Depreciation and amortization.................... 3 540 -- 543
----- ------ ----- ------------
Total expenses............................... 971 1,514 -- 2,485
----- ------ ----- ------------
Income (loss) before minority interest............. (387) 1,800 (207) 1,206
Minority interest in operating
partnership (D).................................. -- (20) 7 (13)
----- ------ ----- ------------
Net income (loss).................................. $ (387) $ 1,780 $ (200) $ 1,193
----- ------ ----- ------------
----- ------ ----- ------------
Pro forma net income per share--basic and
diluted.......................................... $ .06
------------
------------
Weighted average number of common shares
outstanding (in thousands) (E)................... 20,974
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
BEACON CAPITAL PARTNERS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------
<S> <C> <C> <C> <C>
ACQUISITION OTHER CONSOLIDATED
HISTORICAL (A) PROPERTIES (B) ADJUSTMENTS (C) PRO FORMA
--------------- ----------------- ----------------- ------------
Revenues:
Rental revenue................................ $ -- $ 10,299 $ -- $ 10,299
Equity in earnings of joint venture........... -- 2,956 -- 2,956
----- ------- ----- ------------
Total revenues............................ -- 13,255 -- 13,255
----- ------- ----- ------------
Expenses:
Property operating............................ -- 1,962 -- 1,962
Real estate taxes............................. -- 1,929 -- 1,929
General and administrative.................... -- -- -- --
Depreciation and amortization................. -- 2,159 -- 2,159
----- ------- ----- ------------
Total expenses............................ -- 6,050 -- 6,050
----- ------- ----- ------------
Income before minority interest................. -- 7,205 -- 7,205
Minority interest in operating partnership (D).. -- (79) -- (79)
----- ------- ----- ------------
Net income...................................... $ -- $ 7,126 $ -- $ 7,126
----- ------- ----- ------------
----- ------- ----- ------------
Pro forma net income per share--basic and
diluted....................................... $ .34
------------
------------
Weighted average number of common shares
outstanding (in thousands) (E)................ 20,974
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
BEACON CAPITAL PARTNERS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(A) Reflects the historical condensed consolidated statement of operations of
Beacon Capital Partners, Inc. for the period January 21, 1998 (inception)
through March 31, 1998. Beacon Capital Partners, Inc. was not in existence
prior to January 21, 1998. See the historical consolidated financial
statements and notes thereto of Beacon Capital Partners, Inc. included
elsewhere in this prospectus.
(B) Reflects the acquisition of The Athenaeum Portfolio and the pending
acquisition of Technology Square and The Draper Building subsequent to March
31, 1998 based on the historical operations of such properties for periods
prior to acquisition by the Company. The Athenaeum Portfolio acquisition
reflects the formation by the Company of a 50% joint venture with an
affiliate of PaineWebber subsequent to the closing of the transaction as if
the formation of the joint venture had occurred on January 1, 1997. The
joint venture will be accounted for using the equity method of accounting
and, accordingly, 50% of the historical operations of The Athenaeum
Portfolio, adjusted for depreciation using an asset life of 40 years, has
been reflected in equity in earnings of joint venture. The pending
Technology Square and The Draper Building acquisition also reflects
estimated depreciation based upon an asset life of 40 years. See the
Combined Historical Summary of Gross Income and Direct Operating Expenses
and notes thereto for each of the properties included elsewhere in this
prospectus.
(C) Reflects interest income reduction attributed to cash used to fund the
acquisition of The Athenaeum Portfolio and the pending acquisition of
Technology Square and The Draper Building.
(D) Minority interest in operating partnership represents a 1.1% minority
interest in the Operating Partnership.
(E) Pro Forma net income per share includes the issuance 3,613,163 shares of
common stock by the Company subsequent to March 31, 1998. As each Operating
Partnership unit is redeemable for one share of common stock, the
calculation of earnings per share upon redemption will be unaffected as unit
holders and stockholders share equally on a per unit and per share basis in
the net income of the Company.
F-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Beacon Capital Partners, Inc.
We have audited the accompanying consolidated balance sheet of Beacon
Capital Partners, Inc. as of March 31, 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for the period
from January 21, 1998 (inception) through March 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Beacon Capital
Partners, Inc. at March 31, 1998, and the consolidated results of its operations
and its cash flows for the period from January 21, 1998 (inception) through
March 31, 1998, in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
June 3, 1998
F-8
<PAGE>
BEACON CAPITAL PARTNERS, INC.
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents......................................................... $ 323,893
Contributions receivable--affiliate............................................... 4,200
Other assets...................................................................... 3,777
---------
Total assets................................................................ $ 331,870
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Loans payable--affiliate........................................................ $ 3,560
Accounts payable and accrued expenses........................................... 1,387
---------
Total liabilities........................................................... 4,947
---------
Commitments and contingencies
Minority interest in consolidated partnership..................................... 4,200
Stockholders' Equity:
Preferred stock; $.01 par value, 200,000,000 shares authorized, none issued or
outstanding................................................................... --
Excess stock; $.01 par value, 250,000,000 shares authorized, none issued or
outstanding................................................................... --
Common stock; $.01 par value, 500,000,000 shares authorized, 17,360,769 shares
issued and outstanding........................................................ 174
Additional paid-in capital...................................................... 322,936
Accumulated deficit............................................................. (387)
---------
Total stockholders' equity.................................................. 322,723
---------
Total liabilities and stockholders' equity.................................. $ 331,870
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-9
<PAGE>
BEACON CAPITAL PARTNERS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 21, 1998 (INCEPTION) TO MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<S> <C>
Revenues:
Interest income.................................................................. $ 576
Other income..................................................................... 8
---------
Total revenues............................................................... 584
---------
Expenses:
General and administrative....................................................... 968
Depreciation..................................................................... 3
---------
Total expenses............................................................... 971
---------
Loss before minority interest...................................................... (387)
Minority interest in operating partnership......................................... --
---------
Net loss..................................................................... $ (387)
---------
---------
Loss per common share--basic and diluted........................................... $ (0.02)
---------
---------
Weighted average number of common shares outstanding (in thousands)................ 17,361
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-10
<PAGE>
BEACON CAPITAL PARTNERS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM JANUARY 21, 1998 (INCEPTION) TO MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER OF COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
------------ ----------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock, net..................... 17,360,769 $ 174 $ 322,936 $ -- $ 323,110
Net loss.......................................... -- -- -- (387) (387)
------------ ----- ---------- ----- ----------
Balance at March 31, 1998......................... 17,360,769 $ 174 $ 322,936 $ (387) $ 322,723
------------ ----- ---------- ----- ----------
------------ ----- ---------- ----- ----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-11
<PAGE>
BEACON CAPITAL PARTNERS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 21, 1998 (INCEPTION) TO MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................ $ (387)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense.......................................................... 3
Increase (decrease) in cash arising from changes in operating assets and
liabilities:
Other assets.................................................................. (617)
Accounts payable and accrued expenses......................................... 1,387
---------
Net cash provided by operating activities................................... 386
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits........................................................................ (3,000)
Acquisition costs............................................................... (119)
Purchases of furniture, fixtures and equipment.................................. (44)
---------
Net cash used in investing activities....................................... (3,163)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable--affiliate.......................................... 3,560
Issuance of common stock........................................................ 345,800
Offering costs.................................................................. (22,690)
---------
Net cash provided by financing activities................................... 326,670
---------
Net increase in cash and cash equivalents and balance at end of period.......... $ 323,893
---------
---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-12
<PAGE>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
1. ORGANIZATION
Beacon Capital Partners, Inc. ("BCP") was incorporated on January 21, 1998
as a Massachusetts corporation (the "Formation"), and was initially capitalized
through loans payable from the two founders (Messrs. Leventhal and Fortin),
which were repaid in May 1998. BCP intends to qualify as a real estate
investment trust under the Internal Revenue Code of 1986, as amended. BCP was
formed to develop, acquire, lease and manage real estate and real estate related
assets.
On March 17, 1998, BCP was reincorporated as a Maryland corporation and on
March 20, 1998 it completed an initial private offering (the "Original
Offering") in accordance with Rule 144A of the Securities Act. BCP initially
issued 17,360,769 common shares with proceeds, net of expenses, of $323,110.
Subsequent to March 31, 1998, 3,613,163 additional shares were issued through
the exercise of the underwriter's over-allotment, with proceeds, net of
expenses, of $67,185.
In connection with the reincorporation of BCP in Maryland, BCP established
Beacon Capital Partners, L.P. (the "Operating Partnership"). BCP and the
Operating Partnership are collectively referred to as the "Company". The
Operating Partnership is a Delaware limited partnership. BCP is the sole general
partner of, and holds approximately 99% of the economic interest in, the
Operating Partnership. BCP holds an approximate 1% general partnership interest
in the Operating Partnership and the balance is held as a limited partnership
interest. The limited partnership interests not held by BCP are presented as
minority interest in the accompanying consolidated financial statements. The
term of the Operating Partnership commenced on March 16, 1998 and shall continue
until January 1, 2056 or until such time as a Liquidating Event, as defined, has
occurred. As contemplated in the Original Offering, a contribution of $4,200 was
due from an entity controlled by Messrs. Leventhal and Fortin to the Operating
Partnership for a 1% limited partner interest. For technical reasons, such
contribution could only be made subsequent to the closing of the first real
estate transaction of the Company. The $4,200 contribution was made on May 4,
1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying consolidated financial statements are prepared in
accordance with generally accepted accounting principles and include the
accounts of BCP and its majority-owned subsidiary, Beacon Capital Partners, L.P.
BCP consolidates all wholly-owned subsidiaries and those majority-owned
subsidiaries in which it exercises control. Investor entities over which BCP can
exercise influence, but does not control, are accounted for on the equity
method. All significant intercompany transactions and balances have been
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
F-13
<PAGE>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
BASIS OF ACCOUNTING (CONTINUED)
INCOME TAXES
For the period ending March 31, 1998, BCP had limited operations. Although
BCP is not yet able to elect to be taxed as a real estate investment trust
("REIT") under the Internal Revenue Code, BCP intends to make such election on
its initial Federal return for the taxable year ended December 31, 1998. As a
result of such election, BCP will generally not be subject to Federal income
taxes to the extent that it makes timely distributions to its shareholders at
least equal to its taxable income and meets certain other requirements for
qualification as a real estate investment trust.
BCP has indicated that it may acquire and operate businesses that do not
satisfy the REIT qualification tests prescribed by the Internal Revenue Code.
Transactions that give rise to such assets and income are expected to be owned
through a C corporation known as a "paper clip", the shares of such entity would
be distributed to BCP's stockholders. Such C corporation, if formed, will be
subject to Federal, state and local taxation.
REVENUE RECOGNITION
Revenues are recognized when earned and the amounts can be reasonably
estimated on the accrual basis of accounting.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term, highly liquid assets with
original maturities of three months or less from the date of purchase.
FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment are recorded at cost and depreciated over
their useful lives, ranging from three to ten years.
STOCK OPTIONS
BCP has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, "Accounting for Stock-
Based Compensation," requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of BCP's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
FAIR VALUE OF FINANCIAL INSTRUMENTS
BCP is required to disclose the fair value of financial instruments, for
which it is practicable to estimate such fair value. The fair value of financial
instruments are estimates based upon market conditions and perceived risks at
March 31, 1998 and require varying degrees of management judgment.
F-14
<PAGE>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
BASIS OF ACCOUNTING (CONTINUED)
The fair value of financial instruments presented may not be indicative of
amounts BCP could realize on the disposition of the financial instruments.
Cash and cash equivalents are carried at an amount, which due to their
nature, approximates fair value.
BASIC EARNINGS PER COMMON SHARE
Computation of basic earnings per common share is based upon the weighted
average number of shares of common stock outstanding during the period
subsequent to the Original Offering.
As BCP has no dilutive securities, there is no difference between basic and
diluted earnings per share of common stock.
3. STOCK INCENTIVE PLAN
The Company has adopted a Stock Incentive Plan, which authorizes the grant
of options to purchase shares of common stock and other stock-based awards to
the Company's executive officers, independent directors and employees and other
key persons. The Stock Incentive Plan will be administered by the Compensation
Committee of the Board of Directors (the "Administrator").
The maximum number of shares of common stock reserved and available for
issuance under the Stock Incentive Plan will be such aggregate number of shares
as does not exceed the sum of (i) 12% of the outstanding equity interests in the
Company (including common stock and units subject to redemption rights) (as
determined as of the final original offering closing date plus (ii) as of the
last business day of each calendar quarter ending after the final original
offering closing date, an additional positive number equal to 10% of any net
increase of outstanding equity interests in the Company.
The Stock Incentive Plan permits the granting of (i) options to purchase
common stock intended to qualify as incentive stock options ("Incentive
Options") under Section 422 of the Internal Revenue Code and (ii) options that
do not so qualify ("Non-Qualified Options"). The option exercise price of each
option may not be less than 100% of the fair market value of the common stock on
the date of grant in the case of Incentive Options, and may not be less than 25%
of the fair market value of the common stock on the date of grant in the case of
Non-Qualified Options.
The term of each option will be fixed and may not exceed ten years from date
of grant in the case of an Incentive Option. The Administrator will determine at
what time or times each option may be exercised and, subject to the provisions
of the Stock Incentive Plan, the period of time, if any, after retirement,
death, disability or termination of employment during which options may be
exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Administrator.
F-15
<PAGE>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
3. STOCK INCENTIVE PLAN (CONTINUED)
Changes in options outstanding under the Stock Incentive Plan during the
period were as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDER PER SHARE OPTION
OPTION PRICE-AVERAGE
------------- -----------------
<S> <C> <C>
Granted at Initial Private Offering.......................... 649,500 $ 20.00
Granted March 20-March 31, 1998.............................. -- --
Canceled March 20-March 31, 1998............................. -- --
------------- ------
Shares under option at March 31, 1998........................ 649,500 $ 20.00
------------- ------
------------- ------
Options available for grant at beginning of period........... --
-------------
-------------
Options available for grant at end of period................. 1,460,816
-------------
-------------
</TABLE>
The weighted-average fair value of the options granted during the period is
$20.00.
4. LONG-TERM INCENTIVE PLAN
The Company has adopted a Long-Term Incentive Plan which is designed to
reward certain members of management for growth of the Company's Funds from
Operations, as defined by the National Association of Real Estate Investment
Trusts, in excess of a specified benchmark. If the Company's Funds from
Operations exceeds the specified benchmark, management will be entitled to
receive an incentive return which shall be calculated at the end of the three
year period following the completion of the first calendar year following the
closing of the original offering (the "Determination Date").
The incentive return shall equal the product of (A) 12% of the dollar amount
by which (i) the Actual Return, as defined, exceeds (ii) the Base Return, as
defined, multiplied by (B) the weighted average of shares of common stock and
units outstanding for the 12 months immediately preceding the Determination Date
multiplied by (C) the Company's Multiple, as defined.
The Long-Term Incentive Plan will take the form of a convertible unit which
will be issued to an affiliated organization in connection with the closing of
the original offering. The convertible unit is convertible at the Determination
Date into a certain number of incentive units in the Operating Partnership with
a fair market value equal to the amount of the incentive return. No amount has
been earned with respect to the Long-Term Incentive Plan.
5. SUBSEQUENT EVENTS
On May 1, 1998 the Company purchased a portfolio of eleven buildings in
Cambridge, MA known as The Athenaeum Portfolio. The mixed-use portfolio consists
of approximately 970,000 square feet and contains office, laboratory and retail
uses as well as a 1,530 space parking garage. The purchase price for the
portfolio was $195,000, including the assumption of approximately $69,000 of
first mortgage debt. Subsequent to the closing of the transaction, the Company
completed the formation of a joint venture with an affiliate of PaineWebber, in
which both parties hold a 50% equity interest in the properties.
F-16
<PAGE>
BEACON CAPITAL PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
5. SUBSEQUENT EVENTS (CONTINUED)
On April 22, 1998, the Company entered into a purchase and sale agreement
with The Prudential Insurance Company of America ("Prudential") to acquire a
four-building complex known as Technology Square and an adjacent building known
as The Draper Building. The properties are located in Cambridge, MA, and consist
of approximately 1,026,000 square feet. The purchase price for the properties
under the purchase and sale agreement is $123,000. The Company and Prudential
are currently negotiating the form of the consideration for the properties.
F-17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Beacon Capital Partners, Inc.
We have audited the accompanying Combined Historical Summary of Gross Income
and Direct Operating Expenses (the "Historical Summary") for One Kendall Square
Buildings 100-500, One Kendall Square Buildings 600/650/700, One Kendall Square
Building 1400, One Kendall Square Building 1500, One Kendall Square Building
1700, 215 First Street, the One Kendall Square Cinema, the One Kendall Square
Parking Garage, and 195 First Street Parking Lot (collectively, known as "The
Athenaeum Portfolio") for the year ended December 31, 1997. This Historical
Summary is the responsibility of The Athenaeum Portfolio's management. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summary. An audit also includes
assessing the basis of accounting used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Registration Statement on Form S-11 of Beacon
Capital Partners, Inc. as described in Note 1, and is not intended to be a
complete presentation of The Athenaeum Portfolio's revenues and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in Note 1 of The Athenaeum Portfolio for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
May 22, 1998
F-18
<PAGE>
COMBINED HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES
FOR THE ATHENAEUM PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
(UNAUDITED)
Gross income
Rental income..................................................................... $ 4,948 $ 19,593
Reimbursement of operating expenses and taxes..................................... 1,349 5,238
Other income...................................................................... 53 213
------ ------------
Total gross income.................................................................. 6,350 25,044
------ ------------
Direct operating expenses
Property operating................................................................ 1,420 5,514
Real estate taxes................................................................. 963 3,740
------ ------------
Total direct operating expenses..................................................... 2,383 9,254
------ ------------
Gross income in excess of direct operating expenses............................... $ 3,967 $ 15,790
------ ------------
------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-19
<PAGE>
NOTES TO COMBINED HISTORY SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
FOR THE ATHENAEUM PORTFOLIO
(DOLLARS IN THOUSANDS)
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presented herein is the combined historical summary ("Historical Summary")
of gross income and direct operating expenses of the following properties, held
under common control (collectively, "The Athenaeum Portfolio"):
<TABLE>
<S> <C>
One Kendall Square Buildings 100-500 One Kendall Square Cinema
One Kendall Square Buildings 600/650/700 195 First Street Parking Lot
One Kendall Square Building 1400 215 First Street
One Kendall Square Building 1500 One Kendall Square Parking Garage
One Kendall Square Building 1700
</TABLE>
The mixed-use properties were acquired by Beacon Capital Partners, Inc. on
May 1, 1998.
The accompanying Historical Summary has been prepared in accordance with
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for
inclusion in the Registration Statement on Form S-11 of Beacon Capital Partners,
Inc. Accordingly, certain historical expenses which may not be comparable to the
expenses expected to be incurred in the proposed future operations of The
Athenaeum Portfolio have been excluded. Excluded expenses consist of
depreciation and amortization, and interest not directly related to the future
operations of The Athenaeum Portfolio.
Rental income is recognized on a straight line basis over the term of the
related leases.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. LEASES
Minimum future rentals under operating leases with The Athenaeum Portfolio
in effect at December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
YEAR
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... $ 16,711
1999............................................................................... 16,195
2000............................................................................... 13,833
2001............................................................................... 12,090
2002............................................................................... 9,876
Thereafter......................................................................... 20,633
---------
$ 89,338
---------
---------
</TABLE>
Terms of the leases range from one to twenty years and provide for operating
expense reimbursement, real estate tax escalations and, in certain cases,
percentage rent and increases in minimum rent. Approximately 26% of The
Athenaeum Portfolio's revenue for the year ended December 31, 1997 was derived
from one tenant.
F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Beacon Capital Partners, Inc.
We have audited the accompanying Historical Summary of Gross Income and
Direct Operating Expenses (the "Historical Summary") for Technology Square and
The Draper Building owned by Asahi Seimei-Prudential Associates, Number Three
for the year ended December 31, 1997. This Historical Summary is the
responsibility of Technology Square and The Draper Building's management. Our
responsibility is to express an opinion on the Historical Summary based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summary. An audit also includes
assessing the basis of accounting used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summary. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the Registration Statement on Form S-11 of Beacon
Capital Partners, Inc. as described in Note 1, and is not intended to be a
complete presentation of Technology Square and The Draper Building's revenues
and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in
all material respects, the gross income and direct operating expenses described
in Note 1 of Technology Square and The Draper Building for the year ended
December 31, 1997, in conformity with generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
May 22, 1998
F-21
<PAGE>
HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES
FOR TECHNOLOGY SQUARE AND THE DRAPER BUILDING
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
Gross income
Rental income..................................................................... $ 2,077 $ 8,164
Reimbursement of operating expenses and taxes..................................... 498 2,077
Other income...................................................................... -- 58
------ ------
Total gross income.................................................................. 2,575 10,299
------ ------
Direct operating expenses
Property operating................................................................ 478 1,962
Real estate taxes................................................................. 496 1,929
------ ------
Total direct operating expenses..................................................... 974 3,891
------ ------
Gross income in excess of direct operating expenses............................... $ 1,601 $ 6,408
------ ------
------ ------
</TABLE>
SEE ACCOMPANYING NOTES.
F-22
<PAGE>
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME
AND DIRECT OPERATING EXPENSES
FOR TECHNOLOGY SQUARE AND THE DRAPER BUILDING
(DOLLARS IN THOUSANDS)
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Asahi Seimei-Prudential Associates, Number Three (the "Joint Venture") owns
five office buildings, two garages leased to two tenants and land with a surface
parking lot located in Cambridge, Massachusetts (collectively, "Technology
Square and The Draper Building"). Asahi International Ltd. and The Prudential
Insurance Company of America ("Prudential") are the Joint Venture Partners and
each have a 50% interest in the Joint Venture.
The accompanying Historical Summary has been prepared in accordance with
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for
inclusion in the Registration Statement on Form S-11 of Beacon Capital Partners,
Inc. Accordingly, certain historical expenses which may not be comparable to the
expenses expected to be incurred in the proposed future operations of Technology
Square and The Draper Building have been excluded. Excluded expenses consist of
depreciation and amortization, interest and asset management costs not directly
related to the future operations of Technology Square and The Draper Building.
Rental income is recognized on a straight line basis over the term of the
related leases.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. LEASES
The Joint Venture, as lessor, has entered into non-cancelable operating
leases at Technology Square and The Draper Building. Minimum future rentals
under the leases in effect at December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>
YEAR
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... $ 8,309
1999............................................................................... 5,616
2000............................................................................... 2,923
2001............................................................................... 2,436
---------
$ 19,284
---------
---------
</TABLE>
The leases at Technology Square are generally for a term greater than one
year and no more than five years and provide for operating expense
reimbursement, real estate tax escalations and, in certain cases, increases in
minimum rent. The Draper Building is leased on a triple net basis to a single
tenant on a long-term lease through 2001, with extension options through October
2051. Approximately 99% of Technology Square and The Draper Building's revenue
at December 31, 1997 was derived from three tenants.
F-23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NOTE REGARDING MANAGEMENT'S EXPERIENCE........... i
CAUTIONARY STATEMENTS FOR PURPOSES OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995....... i
AVAILABLE INFORMATION............................ ii
OFFERING SUMMARY................................. 1
RISK FACTORS..................................... 10
INVESTMENT STRATEGIES AND EXPERIENCE............. 22
THE COMPANY...................................... 27
USE OF PROCEEDS.................................. 44
DISTRIBUTION POLICY.............................. 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................. 45
PRICE RANGE OF COMMON STOCK...................... 47
CAPITALIZATION................................... 47
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
FINANCIAL DATA................................. 48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............ 49
DESCRIPTION OF SECURITIES........................ 50
CERTAIN PROVISIONS OF MARYLAND LAW AND OF BCP'S
CHARTER AND BYLAWS............................. 55
COMMON STOCK AVAILABLE FOR FUTURE SALE........... 59
OPERATING PARTNERSHIP AGREEMENT.................. 60
FEDERAL INCOME TAX CONSIDERATIONS................ 64
ERISA CONSIDERATIONS............................. 77
SELLING STOCKHOLDERS............................. 78
PLAN OF DISTRIBUTION............................. 79
LEGAL MATTERS.................................... 80
EXPERTS.......................................... 80
INDEX TO FINANCIAL STATEMENT AND SCHEDULES....... F-1
</TABLE>
20,394,843 SHARES
BEACON CAPITAL
PARTNERS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the estimated expenses payable by the Company
in connection with this offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
SEC Registration Fee.............................................................. $ 120,330
Accounting Fees and Expenses...................................................... 200,000
Legal Fees and Expenses........................................................... 250,000
Printing Expenses................................................................. 75,000
Miscellaneous..................................................................... 75,000
----------
Total....................................................................... $ 720,330
----------
----------
</TABLE>
- ------------------------
(1) The amounts set forth above, except for the SEC Registration fee, are in
each case estimated.
ITEM 32. SALES TO SPECIAL PARTIES.
See Item 33.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order below is information regarding the number
of unregistered shares of capital stock issued by the Registrant since its
incorporation in 1998. Further included is the consideration, if any, received
by the Registrant for such shares, and information relating to the section of
the Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed.
(1) In March 1998, BCP issued 1,000 shares of its Common Stock for an
aggregate purchase price of $10.00 to Beacon Capital Partners, Inc., a
Massachusetts corporation, in reliance upon the exemption from registration
under Section 4(2) of the Securities Act.
(2) In March 1998, BCP issued 200 shares of its Common Stock to the
stockholders of Beacon Capital Partners, Inc., a Massachusetts corporation,
in exchange for all of the outstanding capital stock of Beacon Capital
Partners, Inc., a Massachusetts corporation, pursuant to a merger agreement
and in reliance upon the exemption from registration under Section 4(2) of
the Securities Act.
(3) On March 20, 1998, BCP issued an aggregate of 16,781,680 shares of
Common Stock to Qualified Institutional Buyers (as defined in Rule 144A
under the Securities Act) in reliance upon the exemption from registration
requirements provided by Rule 144A under the Securities Act and to a limited
number of "accredited investors" (as defined in Rule 501 under the
Securities Act) in reliance upon the exemption from registration provided by
Regulation D under the Securities Act. The initial purchaser of such shares
of Common Stock was NationsBanc Montgomery Securities LLC. The aggregate
proceeds to BCP from such offering and the aggregate initial purchaser's
discount were $312,969,332 and $22,021,651, respectively.
(4) On March 20, 1998, the Company issued an aggregate of 579,089 shares
of Common Stock and 225,201 Units to two trusts established by Alan M.
Leventhal and Lionel P. Fortin for an
II-1
<PAGE>
aggregate cash purchase price of approximately $15,000,000 in reliance upon
the exemption from registration under Section 4(2) of the Securities Act.
(5) On April 3, 1998, BCP issued an aggregate of 2,707,213 shares of
Common Stock pursuant to an over-allotment option granted to NationsBanc
Montgomery Securities LLC in connection with the offering on March 20, 1998,
to Qualified Institutional Buyers (as defined in Rule 144A under the
Securities Act) in reliance upon the exemption from registration
requirements provided by Rule 144A under the Securities Act and to a limited
number of "accredited investors" (as defined in Rule 501 under the
Securities Act) in reliance upon the exemption from registration provided by
Regulation D under the Securities Act. The initial purchaser of such shares
of Common Stock was NationsBanc Montgomery Securities LLC. The aggregate
proceeds to BCP from such offering and the aggregate initial purchaser's
discount were $50,489,522 and $3,510,503, respectively.
(6) On April 13, 1998, BCP issued an aggregate of 905,950 shares of
Common Stock pursuant to an over-allotment option granted to NationsBanc
Montgomery Securities LLC in connection with the offering on March 20, 1998,
to Qualified Institutional Buyers (as defined in Rule 144A under the
Securities Act) in reliance upon the exemption from registration
requirements provided by Rule 144A under the Securities Act and to a limited
number of "accredited investors" (as defined in Rule 501 under the
Securities Act) in reliance upon the exemption from registration provided by
Regulation D under the Securities Act. The initial purchaser of such shares
of Common Stock was NationsBanc Montgomery Securities LLC. The aggregate
proceeds to BCP from such offering and the aggregate initial purchaser's
discount were $16,895,968 and $1,174,904, respectively.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability result
from (a) actual receipt of an improper benefit or profit in money, property or
services or (b) active and deliberate dishonesty established by a final judgment
as being material to the cause of action. The Charter contains such a provision
which eliminates such liability to the maximum extent permitted by the MGCL.
The Charter authorizes BCP, to the maximum extent permitted by Maryland law,
to obligate itself to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer or (b) any individual who, while a director of BCP and at
the request of BCP serves or has served another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his or her status as a present or former director or officer of
BCP. The Bylaws obligate BCP, to the maximum extent permitted by Maryland law,
to indemnify and, without requiring a preliminary determination of the ultimate
entitlement to indemnification, to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of BCP and
at the request of BCP, serves or has served another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee of such
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his service in that capacity. The Charter and Bylaws
also permit BCP to indemnify and advance expenses to any person who served a
predecessor of BCP in any of the capacities described above. Under the Bylaws,
if a claim for indemnification or advancement of expenses by a director or
officer is not paid in full by BCP within (a) 60 days after the receipt by BCP
of a written claim for indemnification or (b) in the case of a director, 10 days
after the receipt by BCP of documentation of expenses and the required
II-2
<PAGE>
undertaking, such director or officer may at any time thereafter bring suit
against BCP to recover the unpaid amount of the claim, and if successful in
whole or in part, such director or officer is also entitled to be paid the
expenses of prosecuting such claim. The Bylaws permit BCP to maintain (and it
does maintain) insurance, at its expense, to protect itself and any director,
officer, or non-officer employee against any liability of any character asserted
against or incurred by BCP or any such director, officer, or non-officer
employee, or arising out of any such person's corporate status, whether or not
BCP would have the power to indemnify such person against such liability under
the MGCL or the Bylaws.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which his is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, under the MGCL, a Maryland corporation may
not indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that personal benefit
was improperly received, whether or not received in the director's or officer's
official capacity, unless in either case a court orders indemnification and then
only for expenses. In addition, the MGCL permits a corporation to advance
reasonable expenses to a director or officer upon the corporation's receipt of
(a) a written affirmation by the director or officer of his good belief that he
has met the standard of conduct necessary for indemnification by the corporation
and (b) a written undertaking by or on his behalf to repay the amount paid or
reimbursed by the corporation if it shall ultimately be determined that the
standard of conduct was not met. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or
persons controlling BCP pursuant to the foregoing provisions, BCP has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
BCP has entered into indemnification agreements with each of its directors
and senior officers. The indemnification agreements require, among other
matters, that BCP indemnify its directors and officers, as well as their spouses
and children, to the fullest extent permitted by Maryland law and advance to the
directors and officers all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under these
agreements, BCP must also indemnify and advance all expenses incurred by
directors and officers seeking to enforce their rights under the indemnification
agreements or recovery under any directors' and officers' liability insurance
policies maintained by BCP.. BCP is not required to indemnify the director or
officer for amounts paid or to be paid in settlement unless such settlement is
approved in advance by BCP. The agreements also require BCP to provide to the
directors or officers the maximum amount of directors' and officers' liability
insurance available under any insurance policy or policies maintained by BCP,
and to continue such coverage for seven years after the directors or officers no
longer serve as directors or officers of BCP for events occurring during their
service with BCP.
Under Section 8 of the Purchase Agreement filed as Exhibit 1.1 hereto, the
Initial Purchaser has agreed to indemnify, under certain conditions, BCP, its
directors, officers, employees and persons who control BCP within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against
certain losses, claims, damages, liabilities or expenses.
II-3
<PAGE>
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(a) The following financial statements are being filed as part of this
Registration Statement:
<TABLE>
<S> <C>
Pro Forma Financial Information (Unaudited):
Beacon Capital Partners, Inc.
Pro Forma Condensed Consolidated Balance Sheet as of March 31, l998
Notes to Pro Forma Condensed Consolidated Balance Sheet
Pro Forma Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, l998 and the Year Ended December 31, l997
Notes to Pro Forma Condensed Consolidated Statements of Operations
Historical Financial Information:
Beacon Capital Partners, Inc.
Report of Independent Auditors
Consolidated Balance Sheet as of March 31, l998
Consolidated Statement of Operations from January 21, l998 (Inception) to March
31, l998
Consolidated Statement of Stockholders' Equity from January 21, l998
(Inception) to March 31, l998
Consolidated Statement of Cash Flows from January 21, l998 (Inception) to March
31, l998
Notes to Consolidated Financial Statements
The Athenaeum Portfolio
Report of Independent Auditors
Combined Historical Summary of Gross Income and Direct Operating Expenses for
the Three Months ended March 31, l998 (Unaudited) and the Year Ended December
31, l997
Notes to Historical Summary of Gross Income and Direct Operating Expenses
Technology Square and The Draper Building
Report of Independent Auditors
Historical Summary of Gross Income and Direct Operating Expenses for the Three
Months ended March 31, l998 (Unaudited) and the Year Ended December 31, l997
Notes to Historical Summary of Gross Income and Direct Operating Expenses
</TABLE>
II-4
<PAGE>
(b) Exhibits. The following is a complete list of Exhibits filed or
incorporated by reference as part of this Registration Statement.
<TABLE>
<C> <S>
1.1 Placement Agent Agreement between NationsBanc Montgomery Securities LLC and the
Company, as amended.
2.1 Agreement and Plan of Merger by and between the Predecessor and the Company.
3.1 Articles of Incorporation.
3.2 Certificate of Correction to Articles of Incorporation.
3.3 Amended and Restated By-laws.
3.4* Agreement of Limited Partnership of Beacon Capital Partners, L.P.
4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the Company.
5.1* Opinion of Goodwin, Procter & Hoar LLP as to the validity of the securities being
offered.
10.1 Employment and Non-Competition Agreement for Alan M. Leventhal.
10.2 Employment and Non-Competition Agreement for Lionel P. Fortin.
10.3 Beacon Capital Partners 1998 Stock Option and Incentive Plan.
10.4 Form of Indemnification Agreement between the Registrant and its directors and
executive officers.
10.5 Purchase and Sale Contract between Eastern Properties Master LLC and the Registrant.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto).
23.2 Consent of Ernst & Young LLP.
24. Power of Attorney (included on the signature page hereto).
27. Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment
ITEM 37. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Boston, Massachusetts, on June 12,
1998.
<TABLE>
<S> <C> <C>
BEACON CAPITAL PARTNERS, INC.
By: /s/ ALAN M. LEVENTHAL
---------------------------------------------
Alan M. Leventhal
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints each of Alan M. Leventhal and Lionel P. Fortin
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or to any
other registration statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act), and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that any said attorney-in-fact and agent, or any
substitute or substitutes of any of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------- ------------------------------------------ ---------------
<C> <S> <C>
/s/ ALAN M. LEVENTHAL Chairman of the Board and Chief June 12, 1998
--------------------------------------- Executive Officer and
Alan M. Leventhal Director (Principal Executive Officer)
/s/ LIONEL P. FORTIN President, Chief Operating Officer June 12, 1998
--------------------------------------- Executive Officer and
Lionel P. Fortin and Director
/s/ RANDY J. PARKER Senior Vice President and Chief June 12, 1998
--------------------------------------- Financial Officer (Principal Financial
Randy J. Parker and Accounting Officer)
/s/ STEPHEN T. CLARK Director June 12, 1998
---------------------------------------
Stephen T. Clark
/s/ STEVEN SHULMAN Director June 12, 1998
---------------------------------------
Steven Shulman
/s/ SCOTT M. SPERLING Director June 12, 1998
---------------------------------------
Scott M. Sperling
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Placement Agent Agreement between NationsBanc Montgomery Securities LLC and the
Company, as amended
2.1 Agreement and Plan of Merger by and between the Predecessor and the Company.
3.1 Articles of Incorporation.
3.2 Certificate of Correction to Articles of Incorporation.
3.3 Amended and Restated By-laws.
3.4* Agreement of Limited Partnership of Beacon Capital Partners, L.P.
4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the Company.
5.1* Opinion of Goodwin, Procter & Hoar LLP as to the validity of the securities being
offered.
10.1 Employment and Non-Competition Agreement for Alan M. Leventhal.
10.2 Employment and Non-Competition Agreement for Lionel P. Fortin.
10.3 Beacon Capital Partners 1998 Stock Option and Incentive Plan.
10.4 Form of Indemnification Agreement between the Registrant and its directors and
executive officers.
10.5 Purchase and Sale Contract between Eastern Properties Master LLC and the Registrant.
21.1* Subsidiaries of the Registrant.
23.1* Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1 hereto).
23.2 Consent of Ernst & Young LLP.
24. Power of Attorney (included on the signature page hereto).
27. Financial Data Schedule.
</TABLE>
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* To be filed by amendment
<PAGE>
Exhibit 1.1
PURCHASE AGREEMENT
March 17, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
As Initial Purchaser
600 Montgomery Street
San Francisco, CA 94111
Ladies and Gentlemen:
INTRODUCTORY. Beacon Capital Partners, Inc., a Maryland
corporation (the "Company"), proposes to issue and sell to NationsBanc
Montgomery Securities LLC (the "Initial Purchaser") an aggregate of 16,781,680
shares (the "Firm Shares") of its common stock, par value $.01 per share (the
"Common Stock"). In addition, the Company has granted the Initial Purchaser an
option to purchase up to an additional 3,517,194 shares of its Common Stock (the
"Option Shares" and, together with the Firm Shares, the "Shares"). The Initial
Purchaser intends to sell the Shares to certain "qualified institutional buyers"
(as defined herein) and to certain "accredited investors" (as defined herein).
Subject to the terms and conditions and representations and warranties set forth
herein, NationsBanc Montgomery Securities LLC has agreed to act as the Initial
Purchaser in connection with the offering and sale of the Shares.
The holders of the Shares will be entitled to the benefits of
a registration rights agreement dated as of the First Closing Date (as herein
defined) (the "Registration Rights Agreement"), between the Company and the
Initial Purchaser, pursuant to which the Company will agree to file, within
ninety (90) days following the First Closing Date, a registration statement with
the Securities and Exchange Commission (the "Commission") registering the resale
of the Shares under the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder (collectively, the "Securities Act").
The Company understands that the Initial Purchaser proposes to
make an offering of the Shares on the terms and in the manner set forth herein
and in the Offering Memorandum (as defined below) and agrees that the Initial
Purchaser may resell, subject to the conditions set forth herein, all or a
portion of the Shares to purchasers (the "Subsequent Purchasers") as described
in the Final Offering Memorandum (as defined below) at any time after the date
of this Agreement. The Shares are to be offered and sold to or through the
Initial Purchaser without being registered with the Commission under the
Securities Act, in reliance upon exemptions therefrom.
<PAGE>
The Company has prepared and delivered to the Initial
Purchaser copies of an Offering Memorandum "subject to completion" dated
February 16, 1998 (the "Preliminary Offering Memorandum") and has prepared and
will deliver to the Initial Purchaser, on the date hereof or the next succeeding
day, copies of the Offering Memorandum dated March 17, 1998 (the "Final Offering
Memorandum") describing the terms of the offering of the Shares, each for use by
the Initial Purchaser in connection with its solicitation of offers to purchase
the Shares. As used herein, the "Offering Memorandum" shall mean, with respect
to any date or time referred to in this Agreement, the Preliminary Offering
Memorandum, the Final Offering Memorandum, including amendments or supplements
thereto, and any exhibits thereto in the most recent form that has been prepared
and delivered by the Company to the Initial Purchaser in connection with its
solicitation of offers to purchase the Shares. Further, any reference to the
Preliminary Offering Memorandum, the Final Offering Memorandum or the Offering
Memorandum shall be deemed to refer to and include any Additional Issuer
Information (as defined in Section 3(g)) furnished by the Company prior to the
completion of the distribution of the Shares. This Agreement, the Articles of
Incorporation of the Company, the Articles of Incorporation of BCP Sister Corp.
(a to-be-formed entity), a Delaware corporation, the Registration Rights
Agreement, the Agreement of Limited Partnership of Beacon Capital Partners,
L.P., a Delaware limited partnership (the "Operating Partnership") (the
"Partnership Agreement"), the Purchase Agreement between the BCP Affiliate (as
defined below), the Company and the Operating Partnership, the Employment and
Non- Competition Agreement between the Company and each of Messrs. Alan M.
Leventhal and Lionel P. Fortin dated as of the First Closing Date (as herein
defined), the Stock Incentive Plan and any agreement between any of the Company
and the Operating Partnership, which was entered into in connection with the
offer and sale of the Shares and Units, are sometimes referred to herein
individually as an "Operative Document" and collectively as the "Operative
Documents."
The Company and the Operating Partnership hereby confirm their
agreements with the Initial Purchaser as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The
Company and the Operating Partnership hereby represent, warrant
and covenant to the Initial Purchaser as follows:
(a) NO REGISTRATION REQUIRED. It is not necessary in
connection with the offer, sale and delivery of the Shares to the Initial
Purchaser and to each Subsequent Purchaser, as the case may be, in the manner
contemplated by this Agreement and the Offering Memorandum to register the
Shares or comply with the prospectus delivery requirements under the Securities
Act.
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(b) NO INTEGRATION OF OFFERINGS OR GENERAL SOLICITATION. The
Company and the Operating Partnership have not, directly or indirectly,
solicited any offer to buy or offered to sell, and the Company, the Operating
Partnership, Beacon Capital Participation Plan, L.P., a Delaware limited
partnership (the "BCP Affiliate") and the BCP Sister Corp. shall not, directly
or indirectly, solicit any offer to buy or offer to sell any security which is
or would be integrated with the sale of the Shares. Neither the Company, the
Operating Partnership, the BCP Affiliate, the BCP Sister Corp., nor any of their
respective affiliates (as such term is defined under Rule 501(b) of the
Securities Act and which shall include, without limitation, their respective
officers, directors and controlling persons (each, an "Affiliate")), or any
person acting on any of their behalf has engaged or will engage, in connection
with the offering of the Shares, in any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act.
(c) ELIGIBILITY FOR RESALE. The Shares (i) are eligible for
resale pursuant to Rule 144A, Section 4(1), Section 4(2) or "Section
4(1 1/2)" under the Securities Act, (ii) shall not be, at the Closing Date
(as defined below), of the same class as securities listed on a national
securities exchange registered under Section 6 of the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Exchange Act") or quoted in a U.S. automated interdealer
quotation system or securities of an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act of 1940 (the
"Investment Company Act").
(d) THE OFFERING MEMORANDUM. The Offering Memorandum does not,
and at the Closing Date will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein not misleading. Each of the Preliminary Offering Memorandum and the
Final Offering Memorandum, as of their respective dates, contains all the
information specified in, and satisfying the requirements of, subsection (d)(4)
of Rule 144A. The Company has not distributed and will not distribute, prior to
the later of the Closing Date and the completion of the Initial Purchaser's
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than the Preliminary Offering Memorandum
and the Final Offering Memorandum.
(e) THE OPERATIVE DOCUMENTS. Each of the Operative Documents
has been duly authorized, executed and delivered by, and is a valid and binding
agreement of, each of the Company and the Operating Partnership, as applicable,
enforceable in accordance with its terms.
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<PAGE>
(f) AUTHORIZATION OF THE SHARES. The Shares to be purchased by
the Initial Purchaser from the Company have been duly authorized for issuance
and sale pursuant to this Agreement and the Offering Memorandum and, when issued
and delivered by the Company and paid for by the Initial Purchaser pursuant to
this Agreement will be validly issued, fully paid and nonassessable.
(g) DESCRIPTION OF THE SHARES. The Shares conform in all
respects to the statements relating thereto contained in the Offering Memorandum
under the caption "Description of Securities." In addition, the Shares contain
all legends as described in the Offering Memorandum and required under
international, federal and state securities laws.
(h) NO MATERIAL ADVERSE CHANGE. Since the respective dates as
of which information is given in the Offering Memorandum: (i) there has been no
material adverse change, or any development that could reasonably be expected to
result in a material adverse change, in the condition, financial or otherwise,
or in the earnings, business or operations, whether or not arising from
transactions in the ordinary course of business, of the Company or the Operating
Partnership (any such change is herein referred to as a "Material Adverse
Change"); (ii) neither the Company nor the Operating Partnership has incurred
any material liability or obligation, indirect, direct or contingent, nor
entered into any material acquisition, transaction or agreement; (iii) there has
been no dividend or distribution of any kind declared, paid or made by the
Company or the Operating Partnership on any class of capital stock or interest,
or repurchase or redemption by the Company or the Operating Partnership of any
class of capital stock or interest; and (iv) no casualty loss or condemnation or
other adverse event with respect to any Real Property, Real Estate-Related
Assets or Other Assets (as further defined in the Offering Memorandum and,
collectively, the "Assets") owned by Company or the Operating Partnership, if
any, has occurred.
(i) ORGANIZATION AND GOOD STANDING OF THE COMPANY AND THE
OPERATING PARTNERSHIP. Each of the Company and the Operating Partnership (i) has
been duly incorporated or organized, as applicable, and is validly existing as a
corporation or limited partnership, as the case may be, in good standing under
the laws of the jurisdiction of its organization; (ii) has corporate or
partnership power and authority, as applicable, to own, lease and operate the
Assets and to conduct its business as described in the Offering Memorandum; and,
(iii) has the power and authority to enter into and perform its obligations
under each Operative Document to which it is a party. Each of the Company and
the Operating Partnership is duly qualified as a foreign corporation or
partnership, as the case may be, to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of the Assets or the conduct of business, except where
the failure to so
4
<PAGE>
qualify would have a material adverse effect on its business. The Company does
not own or control, directly or indirectly, any corporation, partnership,
association or other entity other than the Operating Partnership. The Company is
the sole general partner and a limited partner of the Operating Partnership and
immediately following the First Closing Date will own a 1% general partnership
interest and all of the outstanding limited partnership interest in the
Operating Partnership, other than the limited partnership interest held by the
BCP Affiliate. The BCP Affiliate is a limited partner of the Operating
Partnership and immediately following the First Closing Date will own the
remainder of the limited partner interest in the Operating Partnership which
shall not be in excess of $15,000,000. As of the First Closing date, no one else
will own an interest in the Operating Partnership.
(j) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. On the
First Closing Date, on a consolidated basis, after giving effect to the issuance
and sale of the Shares pursuant hereto and as described in the Offering
Memorandum, the Company will have an authorized and outstanding capitalization
as set forth in the Offering Memorandum under the caption "Capitalization." All
of the outstanding shares of Common Stock, all of the outstanding units of
limited partnership interest in the Operating Partnership (the "Units"), and all
capital stock or interests of the Company and the Operating Partnership as of
the date hereof, have been duly authorized and validly issued, are fully paid
and nonassessable and have been issued in compliance with applicable federal and
state securities laws. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable for,
any capital stock of the Company or interests in the Operating Partnership. The
description of the Company's stock option plans and the incentive plans and the
options or other rights granted thereunder, as set forth in the Offering
Memorandum, accurately and fairly describes such plans, options and rights in
all material respects.
(k) NON-CONTRAVENTION OF EXISTING INSTRUMENTS; NO FURTHER
AUTHORIZATIONS OR APPROVALS REQUIRED. Neither the Company, the Operating
Partnership, nor any of their respective Affiliates (including, without
limitation, senior management of the Company) is in violation of its
organizational documents or is in default (or, with the giving of notice or
lapse of time, or both, would be in default) ("Default") under any indenture,
mortgage, loan or credit agreement, note, contract, franchise, lease or other
instrument or agreement, written or oral, to which the Company or the Operating
Partnership, or any of their respective Affiliates (including, without
limitation, senior management of the Company) is a party or by which any of them
may be bound, or to which any of the Assets of the Company, the Operating
Partnership, or any of their respective Affiliates is
5
<PAGE>
subject, including, without limitation, the Merger Agreement (as defined below)
(each, an "Existing Instrument"). The Company's and the Operating Partnership's
execution, delivery and performance of each of the Operative Documents to which
it is a party, and the issuance and delivery of the Shares, and consummation of
the transactions contemplated hereby and by the Offering Memorandum (i) have
been duly authorized by all necessary corporate or partnership action, as the
case may be, and will not result in any violation of the provisions of the
organizational documents of the Company or the Operating Partnership, (ii) will
not conflict with or constitute a breach of, or Default or a Debt Repayment
Triggering Event (as defined below) under, or result in the creation or
imposition of any lien, charge or encumbrance upon the Assets of the Company or
the Operating Partnership, if any, or any of their respective Affiliates
pursuant to, or require the consent of any other party to, any Existing
Instrument, and (iii) will not result in any violation of any law,
administrative regulation or administrative or court decree applicable to the
Company, the Operating Partnership, or any of their respective Affiliates. No
consent, approval, authorization or other order of, or registration or filing
with, any court or other governmental or regulatory authority or agency, is
required for the execution, delivery and performance by the Company or the
Operating Partnership of any Operative Document or the issuance and delivery of
the Shares or consummation of the transactions contemplated hereby, and by the
other Operative Documents except (x) such as have been obtained or made by the
Company or the Operating Partnership, and are in full force and effect and are
attached hereto as SCHEDULE 1, or (y) such as may be required by federal and
state securities laws in connection with the obligations under the Registration
Rights Agreement or (z) such as may be required by state securities laws in
connection with the pre-offer and post-sale filings of the Form D. As used
herein, a "Debt Repayment Triggering Event" means any event or condition which
gives, or with the giving of notice or lapse of time would give, the holder of
any note, debenture or other evidence of indebtedness (or any person acting on
such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company, the Operating
Partnership, or any of their respective Affiliates.
(l) NO MATERIAL ACTIONS OR PROCEEDINGS. There are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's or the Operating Partnership's knowledge, threatened (i) against or
affecting the Company or the Operating Partnership, or any of the Assets owned
by the Company or the Operating Partnership, if any, (ii) which has as the
subject thereof any officer or director of, or any of the Assets owned or leased
by, the Company or the Operating Partnership, if any, or (iii) relating to
environmental or discrimination matters, where in any such case (A) there is a
reasonable possibility that such action, suit or proceeding might be
6
<PAGE>
determined adversely to the Company or the Operating Partnership, as the case
may be, and (B) any such action, suit or proceeding, if so determined adversely
to the Company or the Operating Partnership, would reasonably be expected to
result in a Material Adverse Change to the Company or the Operating Partnership,
or adversely affect the consummation of the transactions contemplated by this
Agreement or the other Operative Documents. No material labor dispute with the
employees of the Company or the Operating Partnership exists or, to the best of
the Company's or the Operating Partnership's knowledge, is threatened or
imminent.
(m) RIGHTS TO THE NAMES. Neither Equity Office Properties
Trust, EOP Operating Limited Partnership, any of their Affiliates, nor any other
person, own or possess any rights to the names "Beacon Capital Partners, Inc."
or "Beacon Capital Partners, L.P." pursuant to that certain Agreement and Plan
of Merger, dated as of September 15, 1997, as amended November 17, 1997, by and
among Equity Office Properties Trust, EOP Operating Limited Partnership, Beacon
Properties Corporation, and Beacon Properties, L.P. (the "Merger Agreement") or
any other agreement, written or oral.
(n) ALL NECESSARY PERMITS, ETC. Except as would not result in
a Material Adverse Change to the Company or the Operating Partnership, the
Company and the Operating Partnership possess, and shall possess, such valid and
current certificates, licenses, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses as described in the Offering Memorandum,
(collectively, the "Necessary Permits") and neither the Company nor the
Operating Partnership has received any notice of proceeding relating to the
revocation or modification of, or non-compliance with, the Necessary Permits.
(o) TAX LAW COMPLIANCE. The Company and the Operating
Partnership have filed all necessary federal, state and foreign income and
franchise tax returns and have paid all taxes required to be paid by any of them
and, if due and payable, any related or similar assessment, fine or penalty
levied against any of them.
(p) THE COMPANY AND OPERATING PARTNERSHIP NOT AN
"INVESTMENT COMPANY." Neither the Company nor the Operating Partnership is
subject to registration as an investment company within the meaning of the
Investment Company Act.
(q) INSURANCE. Except as would not result in a Material
Adverse Change to the Company or the Operating Partnership, neither the Company
nor the Operating Partnership has been denied any insurance coverage which it
has sought or for which it has applied and none of the foregoing entities has
reason to believe that they will not be able to obtain insurance coverage from
nationally recognized, financially sound
7
<PAGE>
institutions as is necessary or appropriate to conduct their business as now
conducted and as proposed to be conducted.
(r) NO PRICE STABILIZATION OR MANIPULATION. The Company and
the Operating Partnership have not taken and shall not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(s) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the
Company, the Operating Partnership, nor any employee or agent of the Company or
the Operating Partnership has made any contribution or other payment to any
official of, or candidate for, any federal, state or foreign office in violation
of any law or of the character necessary to be disclosed in the Offering
Memorandum.
(t) TRANSACTIONS. All material transactions have been and
shall be executed in accordance with management's general or specific
authorization and all transactions in excess of $100,000,000 have been and shall
be approved by a majority of the Board of Directors of the Company;
(u) ACCOUNTING SYSTEM. The Company and the Operating
Partnership maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) all transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (ii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iii) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) PERIODIC REVIEW OF COSTS OF ENVIRONMENTAL COMPLIANCE. In
the ordinary course of their respective businesses, the Company and the
Operating Partnership have and shall conduct a periodic review of the effect of
Environmental Laws (as defined below) on the business, operations and the Assets
of the Company and the Operating Partnership, if any, in the course of which
they intend to identify and evaluate associated costs and liabilities
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of the Assets or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties).
(w) ERISA COMPLIANCE. The Company and the Operating
Partnership and any "employee benefit plan" (as defined under the Employee
Retirement Income Security Act of 1974, as amended, and
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the regulations and published interpretations thereunder (collectively,
"ERISA")) established or maintained by the Company or the Operating Partnership
or their "ERISA Affiliates" (as defined below) are in compliance in all material
respects with ERISA. "ERISA Affiliate" means, with respect to the Company or the
Operating Partnership, any member of any group of organizations described in
Sections 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, and the regulations and published interpretations thereunder (the
"Code") of which the Company or the Operating Partnership. Except as would not
result in a Material Adverse Change to the Company or the Operating Partnership,
no "reportable event" (as defined under ERISA Section 4043) has occurred or is
reasonably expected to occur with respect to any "employee benefit plan"
established or maintained by the Company or the Operating Partnership or any of
their ERISA Affiliates. No "employee benefit plan" established or maintained by
the Company or the Operating Partnership or any of their ERISA Affiliates, if
such "employee benefit plan" were terminated, would have any "amount of unfunded
benefit liabilities" (as defined under ERISA Section 4001(a)(18)). Neither the
Company, the Operating Partnership, nor any of their ERISA Affiliates has
incurred or reasonably expects to incur any liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "employee benefit
plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee
benefit plan" established or maintained by the Company or the Operating
Partnership or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
(x) FINDER'S FEE. Neither the Company nor the Operating
Partnership is aware of any obligation on its part, or on the part of the
Initial Purchaser to pay a "finder's fee" or any similar fee in connection with
the consummation of the transactions contemplated by the Offering Memorandum or
any Operative Document to any party.
(y) REIT ELECTION. The Company will be organized in conformity
with the requirements for qualification as a real estate investment trust
("REIT") under the Code and its proposed method of operation, as described in
the Offering Memorandum, will enable it to meet the requirements for taxation as
a REIT under the Code, commencing with the Company's taxable year ending
December 31, 1998. The formation of the BCP Sister Corp. the issuance of its
capital stock to the shareholders of the Company and the partners of the
Operating Partnership and any contractual arrangements between the Company and
the BCP Sister Corp. will not preclude the Company from complying with the REIT
requirements of the Code. The formation of the BCP Affiliate and the Operating
Partnership's issuance of its Units to the BCP
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Affiliate will not preclude the Company from complying with the REIT
requirements of the Code.
(z) GOVERNMENTAL COMPLIANCE. No authorization, approval or
consent of any court or governmental authority or agency is required in
connection with sale of the Shares, except as may be required under the state
securities laws.
(aa) REAL PROPERTY. (a) Upon the transfer of any Assets to the
Company or the Operating Partnership, as the case may be, the Company and the
Operating Partnership will receive good and marketable title to all Assets in
each case free and clear of all liens, encumbrances, claims, security interests
and defects; (b) all liens, charges, encumbrances, claims, or restrictions, on
or affecting the Assets to be purchased by the Company or the Operating
Partnership are disclosed in the Offering Memorandum; (c) none of the Company or
the Operating Partnership or any lessee under a lease relating to any of the
Assets, if any, is in default under any of the leases relating to the Assets and
neither the Company nor the Operating Partnership knows of any event which, but
for the passage of time or the giving of notice, or both, would constitute a
Default under any of such leases; (d) each of the Assets, if any, is in
compliance with all applicable codes and zoning laws and regulations; and (e)
neither the Company nor the Operating Partnership has knowledge of any pending
or threatened condemnation, zoning change, or other proceeding or action that
will in any manner affect the size of, use of, improvements on, construction on,
or access to any of the Assets, if any.
(ab) MORTGAGES. Immediately following the application of all
of the net proceeds of the Offering in the manner set forth in the Offering
Memorandum, the mortgages and deeds of trust encumbering the Assets, if any,
will not be convertible into an equity ownership interest and neither the
Company, the Operating Partnership, nor any Affiliate of the Company or the
Operating Partnership, will hold a participating interest therein and said
mortgages and deeds of trust will not be cross-defaulted or cross-collateralized
with any property not owned by the Company or the Operating Partnership.
(ac) TITLE INSURANCE. As of the Closing Date, the Company and
the Operating Partnership will have title insurance on the Assets owned or to be
owned by the Company or the Operating Partnership in an amount at least equal to
the greater of (a) the cost of acquisition of such Asset and (b) the cost of
construction of the improvements located on such Asset.
(ad) ENVIRONMENTAL COMPLIANCE. Each of the Company
and the Operating Partnership no knowledge of (a) the unlawful
presence of any substance, material or waste which is regulated
by any federal, state or local governmental or quasi-governmental
authority, including, without limitation, (i) any substance,
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material or waste defined, used or listed as a "hazardous waste", "extremely
hazardous waste", "restricted hazardous waste", "hazardous substance",
"hazardous material", "toxic substance" or other similar terms as defined or
used in any Environmental Law (as defined below), (ii) any petroleum products,
asbestos, polychlorinated biphenyls, lead-based paint, flammable explosives or
radioactive materials, (iii) any additional substances or materials which are
now or hereafter hazardous or toxic substances under any Environmental Law
relating to the Assets and (iv) as of any date of determination, any additional
substances or materials which are hereafter incorporated in or added to the
definitions of "hazardous materials" for purposes of any Environmental Law
(collectively, "Hazardous Materials") on any of the Assets and any other
property to be transferred to the Company or the Operating Partnership or of (b)
any spill, release, discharge or disposal of Hazardous Materials that have
occurred or are presently occurring at, from or onto any of the Assets or any
other property to be transferred to the Company or the Operating Partnership or
any properties near or adjacent to the Assets, which presence or occurrence
would effect a Material Adverse Change on the Company or the Operating
Partnership. In connection with the construction on or operation and use of the
Assets or any other property to be transferred to the Company or the Operating
Partnership, the Company and the Operating Partnership, represent that, as of
the date of this Agreement, each of the Company and the Operating Partnership
has no knowledge of any failure to comply with all applicable local, state and
federal environmental laws, regulations, ordinances and administrative and
judicial orders relating to the use, generation, recycling, reuse, sale, storage
handling, transport and disposal of any Hazardous Materials (collectively,
"Environmental Laws") that would have a Material Adverse Change on the Company
or the Operating Partnership.
(ae) COVENANT NOT TO COMPETE. Neither Mr. Alan M.
Leventhal nor Mr. Lionel P. Fortin is subject to any "covenant not to
compete" or similar agreements that would preclude or has as its purpose
precluding Messrs. Leventhal or Fortin from performing their respective
duties at or for the Company, the Operating Partnership or the BCP Sister
Corp. including, without limitation any covenant not to compete detailed in
the Merger Agreement, or any other agreements, written or oral.
(af) INVESTMENT ADVISORS ACT; EXCHANGE ACT. Neither the
Company, the Operating Partnership nor the BCP Affiliate is now, or, after
receipt of payment for the Shares, use of the proceeds of the offering as
described in the Offering Memorandum and consummation of all related
transactions, including, without limitation, all transactions contemplated by
the Operative Documents, will be an "investment company," or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act, or an
"investment advisor," as such term is defined
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in the Investment Advisors Act of 1940, as amended, or a "broker" within the
meaning of Section 3(a)(4) of the Exchange Act or a "dealer" within the meaning
of Section 3(a)(5) of the Exchange Act or required to be registered pursuant to
Section 15(a) of the Exchange Act.
(ag) PLAN ASSETS. Each of the Company and the Operating
Partnership is qualified (or upon such entity's initial investment of funds
other than in short-term investments pending long-term commitment, will be
qualified), and will continue to be qualified, for an exemption under the Plan
Assets Regulation of ERISA.
(ah) INFORMATION SUPPLIED BY THE COMPANY. All of the
information supplied by the Company, whether written or oral (and whether
included in the Offering Memorandum or otherwise), is true and accurate and
complete in all material respects. In addition, except as would not result in a
Material Adverse Change to the Company or the Operating Partnership, the Company
has received written permission from each and every entity or person that has
any right to own or possess or otherwise authorize permission respecting the
information. Further, the public dissemination of such information will not
constitute a Default or Debt Repayment Triggering Event under any Existing
Instruments or create any liability, except in such cases where the Company has
obtained written consents which states that the aggrieved party will not pursue
the claim in any manner.
(ai) CONFLICTS OF INTEREST. The consummation of the
transactions contemplated by the Offering Memorandum or the Operative Documents
will not result in a conflict of interest by or among the Company, the Operating
Partnership, the BCP Affiliate, the BCP Sister Corp. or any of their Affiliates
which has not been (i) approved by a majority of the independent members of the
Board of Directors of the Company or (ii) disclosed in the Offering Memorandum.
(aj) ASSETS. Other than its investment as a limited partner in
the Operating Partnership, the BCP Affiliate does not and shall not have any
right, title or interest in any of the Assets.
Any certificate signed by an officer of the Company on behalf of the Company or
on behalf of the Company as general partner of the Operating Partnership and
delivered to the Initial Purchaser or to counsel for the Initial Purchaser shall
be deemed to be a representation and warranty by the Company and the Operating
Partnership to the Initial Purchaser as to the matters set forth therein.
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<PAGE>
April 13, 1998
NATIONSBANC MONTGOMERY SECURITIES LLC
As Initial Purchaser
600 Montgomery Street
San Francisco, CA 94111
Re: Beacon Capital Partners, Inc.
AMENDMENT TO PURCHASE AGREEMENT
Ladies and Gentlemen:
Beacon Capital Partners, Inc., a Maryland corporation (the
"Company"), issued and sold to NationsBanc Montgomery Securities LLC (the
"Initial Purchaser") an aggregate of 16,781,680 shares (the "Firm Shares") of
its common stock, par value $.01 per share (the "Common Stock") pursuant to the
terms of that certain Purchase Agreement dated March 17, 1998, by and between
the Initial Purchaser, the Company and Beacon Capital Partners, L.P., a Delaware
limited partnership (the "Operating Partnership"). In addition, the Company
granted to the Initial Purchaser an option to purchase up to an additional
3,517,194 shares of its Common Stock (the "Option Shares" and, together with the
Firm Shares, the "Shares"). Capitalized terms used herein without definition
have the meanings given such terms in the Purchase Agreement.
The Company and the Operating Partnership wish to amend the
Purchase Agreement with the Initial Purchaser to increase the number of Option
Shares by 95,969 shares of Common Stock and, accordingly, the Company, the
Operating Partnership and the Initial Purchaser hereby amend the Purchase
Agreement to provide that all references therein to 3,517,194 Option Shares
shall now refer to 3,613,163 Option Shares. The Purchase Agreement is otherwise
unmodified and in full force and effect as executed on or about March 17, 1998.
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
"COMPANY"
BEACON CAPITAL PARTNERS, INC.,
a Maryland corporation
By: /s/ Lionel P. Fortin
---------------------------------------
Name: Mr. Lionel P. Fortin
Title: President
"OPERATING PARTNERSHIP"
BEACON CAPITAL PARTNERS, L.P., a
Delaware limited partnership
By Beacon Capital Partners, Inc., its
General Partner
By: /s/ Lionel P. Fortin
---------------------------------------
Name: Mr. Lionel P. Fortin
Title: President
The foregoing First Amendment to the Purchase Agreement is
hereby confirmed and accepted by the Initial Purchaser in San Francisco,
California as of the date first above written.
"INITIAL PURCHASER"
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
--------------------------------------
Name:
---------------------------
Title:
--------------------------
<PAGE>
EX-2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of March 18,
1998, between Beacon Capital Partners, Inc., a Massachusetts corporation (the
"Company"), and Beacon Capital Partners, Inc., a Maryland corporation (the
"Maryland Company").
RECITALS
WHEREAS, the Board of Directors of the Company and the Board of
Directors of the Maryland Company each have determined that it is in the best
interests of their respective corporations and/or shareholders to effect the
merger provided for herein (the "Merger") upon the terms and subject to the
conditions set forth herein; and
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto adopt the plan of merger encompassed by this Agreement and
agree as follows:
ARTICLE I
THE MERGER; CLOSING; EFFECTIVE TIME
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), the Company shall be
merged with and into the Maryland Company and the separate corporate
existence of the Company shall thereupon cease (the "Merger"). The parties
intend that the Merger qualify as a reorganization described in Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended. The Maryland
Company shall be the surviving entity in the Merger (sometimes hereinafter
referred to as the "Surviving Entity") and shall continue to be governed by
the laws of the State of Maryland and the separate existence of the Maryland
Company with all its rights, privileges, immunities, powers and franchises
shall continue unaffected by the Merger. The Merger shall have the effects
specified in the General Laws of the Commonwealth of Massachusetts (the
"MGL") and the Maryland General Corporation Law (the "MGCL").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
at such place and time and/or on such date as the Company and the Maryland
Company may agree.
1.3 Effective Time. Following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VI hereof,
the Company and the Maryland Company will, at such time as they deem
advisable, cause this Agreement to be filed, together with appropriate
certificates of each of the Company and the Maryland
<PAGE>
Company, with the Secretary of State of The Commonwealth of Massachusetts as
provided in Section 79 of Chapter 156 B of the MGL and the Articles of Merger
(the "Articles of Merger") to be filed with the State Department of
Assessments and Taxation of Maryland (the "SDAT") as provided in Sections
3-107 and 3-109 of the MGCL. The Merger shall become effective at the later
of the time of the filing of the Agreement and appropriate certificates with
the Secretary of State of The Commonwealth of Massachusetts and the time of
the acceptance for record of the Articles of Merger by the SDAT (the
"Effective Time").
ARTICLE II
CHARTER AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Charter. The Charter of the Maryland Company in effect at the
Effective Time shall be the Charter of the Surviving Entity until duly
amended in accordance with the terms thereof and with the MGCL (the
"Charter").
2.2 The Bylaws. The Bylaws of the Maryland Company in effect at the
Effective Time shall be the Bylaws of the Surviving Entity until duly amended
in accordance with the terms thereof and with the MGCL (the "Bylaws").
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 Directors and Officers. The directors and officers of the Maryland
Company at the Effective Time shall, from and after the Effective Time, be
the directors and officers, respectively, of the Surviving Entity until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
Bylaws.
ARTICLE IV
EFFECT OF THE MERGER ON CAPITAL STOCK
4.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any capital stock
of the Company;
(a) Each share of the common stock, no par value per share (the
"Company Shares"), of the Company issued and outstanding immediately prior to
the Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share (the "Maryland
Company Shares"), of the Maryland Company. Each
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<PAGE>
certificate (each, a "Certificate") representing any such Company Shares
shall thereafter represent the right to receive Maryland Company Shares. All
Company Shares shall no longer be outstanding and shall be canceled and
retired and shall cease to exist.
(b) Each Company Share held in the Company's treasury at the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, cease to be outstanding, shall be canceled and
retired without payment of any consideration therefor and shall cease to
exist.
(c) At the Effective Time, each Maryland Company Share issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Maryland Company or the
holder of such shares, be canceled and retired without payment of any
consideration therefor.
(d) Each option or other right to purchase or otherwise acquire
Company Shares pursuant to stock option or other stock-based plans of the
Company granted and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder of such option or right, be converted into and become a right to
purchase or otherwise acquire the same number of Maryland Company Shares at
the same price per share and upon the same terms and subject to the same
conditions as applicable to such options or other rights immediately prior to
the Effective Time.
ARTICLE V
CONDITIONS
5.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the Maryland Company and the Company to consummate
the Merger are subject to the fulfillment of the following condition:
(a) Shareholder Approvals. This Agreement shall have been duly
approved (i) by the holders of a majority of the Company Shares, in
accordance with applicable law and the Articles of Organization and the
Bylaws of the Company, and (ii) by the Company as sole stockholder of the
Maryland Company, in accordance with applicable law and the Charter and the
Bylaws of the Maryland Company.
ARTICLE VI
TERMINATION
6.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval
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<PAGE>
by holders of the Company Shares, by the mutual consent of the Board of
Directors of the Company and the Board of Directors of the Maryland Company.
6.2 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the Merger pursuant to this Article VI,
no party thereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement.
ARTICLE VII
MISCELLANEOUS AND GENERAL
7.1 Modification or Amendment. Subject to the applicable provisions of
the MGL and the MGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the respective parties; provided,
however, that after this Agreement has been approved by the shareholders of
the Company and the Maryland Company, this Agreement shall not be amended if
such amendment would have a material adverse effect on the shareholders of
either the Company or the Maryland Company, unless such amendment is approved
by such shareholders.
7.2 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such
counterparts shall together constitute the same agreement.
7.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland.
7.4 No Third Party Beneficiaries. This Agreement is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
7.5 Headings. The Article, Section and paragraph headings herein are
for convenience of reference only, do not constitute a part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
7.6 Service of Process. The Maryland Company may be served with process
in the State of Maryland in any proceeding for the enforcement of any
obligation of the Company, as well as for enforcement of any obligations of
the Maryland Company arising from the Merger, and it does hereby irrevocably
appoint the Secretary of State of the State of Maryland as its agent to
accept service of process in any such suit or other proceedings. The address
to which a copy of such process shall be mailed by the Secretary of State to
the Maryland Company is 50 Rowes Wharf, Boston, Massachusetts 02110.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto on the date first
hereinabove written.
BEACON CAPITAL PARTNERS, INC.,
a Massachusetts Corporation
Attest: /s/ William A. Bonn By: /s/ Lionel P. Fortin
------------------------ ---------------------------------
William A. Bonn, Lionel P. Fortin, President
Senior Vice President
and General Counsel
BEACON CAPITAL PARTNERS, INC.,
a Maryland Corporation
Attest: /s/ William A. Bonn By: /s/ Lionel P. Fortin
------------------------ ---------------------------------
William A. Bonn, Lionel P. Fortin, President
Senior Vice President
and General Counsel
S-1
<PAGE>
Exhibit 3.1
AMENDED ARTICLES OF INCORPORATION
OF
BEACON CAPITAL PARTNERS, INC.
March 17, 1998
<PAGE>
THIS IS TO CERTIFY THAT:
ARTICLE I
INCORPORATOR
The undersigned, Nancy H. Duff, whose post office address is 53 State
Street, Exchange Place, Boston, Massachusetts 02109, being at least eighteen
(18) years of age, being the sole incorporator of Beacon Capital Partners, Inc.,
and acting in that capacity prior to the organization meeting of the Board of
Directors of Beacon Capital Partners, Inc., hereby adopts Amended Articles of
Incorporation of Beacon Capital Partners, Inc., a corporation formed under the
general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
Beacon Capital Partners, Inc.
ARTICLE III
PURPOSES
Purpose and Powers. The purposes for which the Corporation is formed
are to engage in business as a real estate investment trust (a "REIT") (as that
phrase is defined under Section 856 of the Internal Revenue Code of 1986, as
amended (the "Code")) and to engage in any other lawful act or activity for
which corporations may be organized under the Maryland General Corporation Law.
The foregoing purposes shall be in no way limited or restricted by reference to,
or inference from, the terms of any other clause of these Amended Articles of
Incorporation, as may be amended from time to time (the "Articles"), and each
shall be regarded as independent. The foregoing purposes are also to be
construed as powers of the Corporation, and shall be in addition to and not in
limitation of the general powers of corporations under the laws of the State of
Maryland.
2
<PAGE>
ARTICLE IV
PRINCIPAL OFFICE ADDRESS
The address of the principal office of the Corporation in Maryland is
c/o The Corporation Trust, Inc., 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
THE RESIDENT AGENT
The Resident Agent of the Corporation in Maryland is The Corporation
Trust, Inc., whose address is 32 South Street, Baltimore, Maryland 21202.
ARTICLE VI
BOARD OF DIRECTORS
6.1 General Powers; Action by Committee. (a) The business and affairs
of the Corporation shall be managed under the direction of the Board of
Directors and, except as otherwise expressly provided by law, these Articles or
the bylaws of the Corporation (the "By-laws"), all of the powers of the
Corporation shall be vested in such Board. Any action which the Board of
Directors is empowered to take may be taken on behalf of the Board of Directors
by a duly authorized committee thereof except (i) to the extent limited by
Maryland law, these Articles or the By-laws and (ii) for any action which
requires the affirmative vote or approval of a majority or a supermajority of
the Directors then in office (unless, in such case, these Articles or the
By-laws specifically provide that a duly authorized Committee can take such
action on behalf of the Board of Directors). A majority of the Board of
Directors shall constitute a quorum and, except as provided in paragraph (b) of
this Section 6.1, the affirmative vote of a majority of the Directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
(b) Notwithstanding the foregoing or any other provision of these
Articles, the affirmative vote of more than 75% of the Directors then in office
(the "Required Directors") shall be required to approve the actions set forth in
clauses (i) through (x) below and any such action shall not be effective unless
approved by the vote of the Required Directors.
(i) a Change of Control (as hereinafter defined) of the
Corporation or the Operating Partnership;
3
<PAGE>
(ii) any amendment to the limited partnership agreement of the
Operating Partnership (except for amendments to reflect additional
issuances of Units (as defined below) in connection with the
acquisition of properties or to the Corporation in connection with the
issuance of Equity Stock (as defined below) not requiring the
affirmative vote of the Required Directors);
(iii) any waiver or modification of the Ownership Limit or the
Look-Through Ownership Limit;
(iv) any merger, consolidation or sale of all or substantially
all of the assets of the Corporation or the Operating Partnership;
(v) the issuance of any Equity Stock of the Corporation or any
securities convertible into or exchangeable or exercisable for any
Equity Stock of the Corporation, provided that the affirmative vote of
the Required Directors shall not be required with respect to the
issuance of Equity Stock (a) pursuant to any stock incentive plan or
employee bonus or compensation arrangement, (b) in a bona fide
underwritten public offering managed by one or more nationally
recognized investment banking firms, (c) in exchange for Units
presented to the Operating Partnership for redemption pursuant to the
Operating Partnership Agreement or (d) to a Look-Through Entity that
would not violate the Look-Through Ownership Limit following such
issuance;
(vi) for the Corporation to take title to assets (other than
temporarily in connection with an acquisition prior to contributing
such assets to the Operating Partnership), or to conduct business other
than through the Operating Partnership, or for the Corporation or the
Operating Partnership to engage in any business other than the
ownership, construction, development, financing, management and
operation of commercial real estate properties;
(vii) for the Corporation or the Operating Partnership to make
a general assignment for the benefit of creditors or to institute any
proceedings in bankruptcy or for the liquidation, dissolution,
reorganization or winding up of the Corporation or the Operating
Partnership or to consent to the taking of any such action against the
Corporation or the Operating Partnership;
(viii) to terminate the Corporation's status as a REIT for
federal income tax purposes;
(ix) to recommend to the stockholders that these Articles or a
provision of these Articles be amended or repealed; and
(x) to terminate the limitations on Transfer set forth in
Section 9.4(a) of Article IX.
4
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(c) Except as defined below, capitalized terms in this Section 6.1 have
the meanings specified in Section 9.1 of Article IX. For purposes of this
Section 6.1:
(i) "Change of Control" of (A) the Corporation shall mean any
transaction or series of related transactions (whether by purchase of
existing shares of Common Stock or Units, merger, consolidation or
otherwise, but not including the issuance of newly issued shares of
Common Stock by the Corporation or of Units by the Operating
Partnership following a capital contribution by the Corporation in
response to such issuance by the Corporation), to which the
Corporation is a party or the Corporation's consent or approval is
required, the result of which is that either (1) any Person or Group
becomes the Beneficial Owner, directly or indirectly, of 25% or more
of the total voting power in the aggregate of all classes of stock of
the Corporation then outstanding normally entitled to vote in the
election of Directors of the Corporation (or any surviving entity)
(including in such calculation the shares of stock such Person or
Group would receive if any Units owned by such Person or Group were
presented for redemption and acquired by the Corporation for shares of
stock) or (2) the Beneficial Owners of the stock of the Corporation
normally entitled to vote in the election of Directors immediately
prior to the transaction or series of related transactions
beneficially own less than 75% of the total voting power in the
aggregate of all classes of stock of the Corporation then outstanding
normally entitled to vote in the election of Directors of the
Corporation (or any surviving entity) immediately after such
transaction or transactions (including in such calculation the shares
of stock such Beneficial Owners would receive if any Units owned by
such Beneficial Owners were presented for redemption and acquired by
the Corporation for shares of stock); or (B) the Operating Partnership
shall mean (i) any sale, transfer or other conveyance (whether by
merger or consolidation of the Corporation or otherwise) by the
Corporation of the general partnership interest in the Operating
Partnership, or (ii) any transaction or series of related transactions
(whether by purchase of existing Units, issuance of Units (other than
as a result of a capital contribution by the Corporation following an
issuance of shares of Equity Stock), merger, consolidation or
otherwise), to which the Operating Partnership is a party or the
consent or approval of the Corporation is required, the result of
which is that either (1) any Person or Group becomes the Beneficial
Owner, directly or indirectly, of Units which represent 25% or more of
the total percentage of limited partnership interests therein or (2)
the Beneficial Owners of limited partnership interests therein
immediately prior to the transaction beneficially own less than 75% of
the total percentage of limited partnership interests therein then
outstanding immediately after such transaction or series of related
transactions.
(ii) "Person" shall have the same meaning as such term has for
purposes of Sections 13(d) and 14(d) of the Exchange Act.
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<PAGE>
(iii) "Group" shall have the same meaning as such term has for
purposes of Sections 13(d) and 14(d) of the Exchange Act.
(iv) "Beneficial Owner" shall have the same meaning as such
term has for purposes of Rule 13d-3 promulgated under the Exchange Act,
except that a Person shall be deemed to have beneficial ownership of
all shares that a Person has the right to acquire, whether or not such
right is immediately exercisable. "Beneficially Owns" and "Beneficially
Owned" shall have the correlative meanings.
(v) "Units" shall mean the units into which partnership
interests in the Operating Partnership are divided, and as the same may
be adjusted, as provided in the limited partnership agreement of the
Operating Partnership (the "Operating Partnership Agreement");
provided, however, that for the purposes of these Articles the term
"Units" shall not include the Incentive Units or Convertible Units (as
such terms are defined in the Operating Partnership Agreement).
6.2 Number. The number of Directors initially shall be five (5).
Thereafter, the number of Directors shall be as fixed by resolution duly adopted
from time to time by the Board of Directors; provided, however, that the total
number of Directors shall be not fewer than the minimum number required by the
Maryland General Corporation Law and not more than nine (9). No reduction in the
number of Directors shall cause the removal of any Director from office prior to
the expiration of his or her term.
6.3 Initial Board. The names of the initial Directors are:
Alan M. Leventhal
Lionel P. Fortin
Stephen T. Clark
Steven Shulman
Scott M. Sperling
6.4 Term; Election. The Directors, including the Independent Directors
(as defined below in Section 6.7), shall be classified, with respect to the term
for which they severally hold office, into three classes, as nearly equal in
number as possible. The initial Class I Directors of the Corporation shall be
Alan M. Leventhal; the initial Class II Directors of the Corporation shall be
Lionel P. Fortin and Stephen T. Clark; and the initial Class III Directors of
the Corporation shall be Steven Shulman and Scott M. Sperling. The initial Class
I Directors shall serve for a term expiring at the annual meeting of
stockholders to be held in 1999; the initial Class II Directors shall serve for
a term expiring at the annual meeting of stockholders to be held in 2000; and
the initial Class III Directors shall serve for a term expiring at the annual
meeting of stockholders to be held in 2001. At each annual meeting of
stockholders, the successor or successors of the class of Directors whose term
expires at that meeting shall be elected by a plurality of the votes of the
shares present in person or
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<PAGE>
represented by proxy at such meeting and entitled to vote on the election of
Directors, and shall hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election. The
Directors elected to each class shall hold office until their successors are
duly elected and qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article VII of these Articles, the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a series or together
with holders of other such series, to elect Directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of these
Articles and any articles supplementary applicable thereto, and such Directors
so elected shall not be divided into classes pursuant to this Section 6.4.
During any period when the holders of any series of Preferred Stock
have the right to elect additional Directors as provided for or fixed pursuant
to the provisions of Article VII of these Articles, then upon commencement and
for the duration of the period during which such right continues: (a) the
then otherwise total authorized number of Directors of the Corporation shall
automatically be increased by such specified number of Directors, and the
holders of such Preferred Stock shall be entitled to elect the additional
Directors so provided for or fixed pursuant to said provisions and (b) each such
additional Director shall serve until such Director's successor shall have been
duly elected and qualified, or until such Director's right to hold such office
terminates pursuant to said provisions, whichever occurs earlier, subject to
such Director's earlier death, disqualification, resignation or removal. Except
as otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall forthwith terminate and the total authorized number of
Directors of the Corporation shall be reduced accordingly.
6.5 Resignation or Removal of Directors. Any Director may resign from
the Board of Directors or any committee thereof at any time by written notice to
the Board of Directors, effective upon execution and delivery to the Corporation
of such notice or upon any future date specified in the notice. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
Directors and to remove any Director whom such holders have the right to elect,
any Director (including persons elected by Directors to fill vacancies in the
Board of Directors) may be removed from office (a) only with cause and (b) only
by the affirmative vote of the holders of at least 75% of the shares then
entitled to vote at a meeting of the stockholders called for that purpose. At
least 30 days prior to any meeting of stockholders at which it is proposed that
any Director be removed from office, written notice of such proposed removal
shall be sent to the Director whose removal will be considered at the
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<PAGE>
meeting. For purposes of these Articles, "cause," with respect to the removal of
any Director, shall mean only (i) conviction of a felony, (ii) declaration of
unsound mind by order of a court, (iii) gross dereliction of duty, (iv)
commission of any act involving moral turpitude or (v) commission of an act that
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit to such
Director and a material injury to the Corporation.
6.6 Vacancies. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect Directors and to fill vacancies in the Board
of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a Director, shall be filled solely by the
affirmative vote of a majority of the remaining Directors then in office, even
if less than a quorum of the Board of Directors; provided that any Director
appointed to fill the vacancy for an Independent Director shall also require the
vote of a majority of the Independent Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been duly elected and qualified or until such Director's earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Preferred Stock, when the number of Directors is increased or decreased, the
Board of Directors shall determine the class or classes to which the increased
or decreased number of Directors shall be apportioned; provided, however, that
no decrease in the number of Directors shall shorten the term of any incumbent
Director. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until such vacancy is filled.
6.7 Independent Directors. Notwithstanding anything herein to the
contrary, at all times (except during a period not to exceed sixty (60) days
following the death, resignation, incapacity, or removal from office of a
Director prior to the expiration of the Director's term of office), a majority
of the Board of Directors shall be comprised of persons ("Independent
Directors") who are not officers or employees of the Corporation or any
affiliate thereof and who do not have a material business or professional
relationship with the Corporation or any affiliate thereof. The foregoing
provision may not be amended, altered, changed or repealed without the
affirmative vote of two-thirds of the shares of stock of the Corporation then
outstanding and entitled to vote on such matter at a meeting of stockholders.
6.8 Powers. Subject to the express limitations herein or in the Bylaws,
the business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. These Articles, as amended or supplemented from time
to time, shall be construed with a presumption in favor of the grant of power
and authority to the Directors. The determination as to any of the following
matters, made in good faith by or pursuant to the direction of the Board of
Directors consistent with these Articles and in the absence of actual receipt of
an improper benefit in money, property or services or active and deliberate
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<PAGE>
dishonesty established by a court, shall be final and conclusive and shall be
binding upon the Corporation and every holder of shares of its stock: the amount
of the net income of the Corporation for any period and the amount of assets at
any time legally available for the payment of dividends, redemption of its stock
or the payment of other distributions on its stock; the amount of paid-in
surplus, net assets, other surplus, annual or other net profit, net assets in
excess of capital, undivided profits or excess of profits over losses on sales
of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; any matters relating to the acquisition,
holding and disposition of any assets by the Corporation; or any other matter
relating to the business and affairs of the Corporation.
ARTICLE VII
STOCK
7.1 Authorized Stock. The total number of shares of stock which the
Corporation has authority to issue (the "Stock") is nine hundred fifty million
(950,000,000) shares, initially consisting of (i) two hundred million
(200,000,000) shares of preferred stock, par value $.01 per share ("Preferred
Stock"); (ii) five hundred million (500,000,000) shares of common stock, par
value $.01 per share ("Common Stock"); and (iii) two hundred fifty million
(250,000,000) shares of excess stock, par value $.01 per share ("Excess Stock").
The aggregate par value of all the shares of all classes of stock is $9,500,000.
If shares of one class of Stock are classified or reclassified into shares of
another class of Stock pursuant to this Article VII, the number of authorized
shares of the former class shall be automatically decreased and the number of
shares of the latter class shall be automatically increased, in each case by the
number of shares so classified or reclassified, so that the aggregate number of
shares of Stock of all classes that the Corporation has authority to issue shall
not be more than the total number of shares of stock set forth in the first
sentence of this paragraph. To the extent permitted by Maryland law, the Board
of Directors, without any action by the stockholders of the Corporation, may
amend the charter from time to time to increase or decrease the aggregate number
of shares of Stock or the number of shares of Stock of any class or series that
the Corporation has authority to issue.
7.2 Preferred Stock. Subject to any limitations prescribed by law, the
Board of Directors is expressly authorized to classify any unissued shares of
Preferred Stock and reclassify any previously classified but unissued shares of
Preferred Stock of any series from time to time, in one or more classes or
series of such stock and, by filing articles supplementary with the State
Department of Assessments and Taxation of Maryland, to establish or change from
time to time the number of shares to be included in each such class or
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series, and to fix the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class or series.
Any action by the Board of Directors under this Section 7.2 of Article VII shall
require the affirmative vote of a majority of the Directors then in office (or,
if a committee shall be acting on behalf of the Board of Directors, a majority
of the members of such committee then in office, which committee was established
by the affirmative vote of a majority of the Directors then in office).
7.3 Common Stock. Subject to all of the rights, powers and preferences
of the Preferred Stock and except as provided by law or in this Article VII (or
in any articles supplementary regarding any class or series of Preferred Stock):
7.3.1 Voting Rights. The holders of shares of Common Stock
shall be entitled to vote for the election of Directors and on all
other matters requiring stockholder action, and each holder of shares
of Common Stock shall be entitled to one vote for each share of Common
Stock held by such stockholder.
7.3.2 Dividend Rights. Holders of Common Stock shall be
entitled to receive such dividends and other distributions in cash,
stock or property of the Corporation as may be authorized and declared
by the Board of Directors upon the Common Stock and, if any Excess
Stock is then outstanding, the Excess Stock out of any assets or funds
of the Corporation legally available therefor, but only when and as
authorized by the Board of Directors or any authorized committee
thereof from time to time, and shall share ratably with the holders of
Excess Stock in any such dividend or distribution.
Before payment of any dividends or other distributions, there
may be set aside out of any assets of the Corporation available for
dividends or other distributions such sum or sums as the Board of
Directors may from to time, in its absolute discretion, think proper as
a reserve fund for contingencies, for equalizing dividends or other
distributions, for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors shall
determine to be in the best interest of the Corporation, and the Board
of Directors may modify or abolish any such reserve in the manner in
which it was created.
7.3.3 Rights Upon Liquidation. Upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation,
the net assets of the Corporation available for distribution to the
holders of Common Stock, and, if any Excess Stock is then outstanding,
Excess Stock shall be distributed pro rata to such holders in
proportion to the number of shares of Common Stock and Excess Stock
held by each.
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7.4 Excess Stock. For the purposes of this Section 7.4, terms not
otherwise defined shall have the meanings set forth in Article IX.
7.4.1 Conversion into Excess Stock.
(a) If, notwithstanding the other provisions
contained in these Articles, from and after the date of the
Offering and prior to the Restriction Termination Date, there
is a purported Transfer or Non-Transfer Event such that any
Person (other than a Look- Through Entity) would Beneficially
Own shares of Equity Stock in excess of the Ownership Limit,
or such that any Person that is a Look-Through Entity would
Beneficially Own shares of Equity Stock in excess of the
Look-Through Limit, then, (i) except as otherwise provided in
Section 9.4 of Article IX, the purported transferee shall be
deemed to be a Prohibited Owner and shall acquire no right or
interest (or, in the case of a Non-Transfer Event, the Person
holding record title to the shares of Equity Stock
Beneficially Owned by such Beneficial Owner shall cease to own
any right or interest) in such number of shares of Equity
Stock which would cause such Beneficial Owner to Beneficially
Own shares of Equity Stock in excess of the Ownership Limit or
the Look-Through Limit, as the case may be, (ii) such number
of shares of Equity Stock in excess of the Ownership Limit or
the Look-Through Limit, as the case may be, (rounded up to the
nearest whole share) shall be automatically converted into an
equal number of shares of Excess Stock and transferred to a
Trust in accordance with Section 7.4.4 of this Article VII and
(iii) the Prohibited Owner shall submit the certificates
representing such number of shares of Equity Stock to the
Corporation, accompanied by all requisite and duly executed
assignments of transfer thereof, for registration in the name
of the Trustee of the Trust. Such conversion into Excess Stock
and transfer to a Trust shall be effective as of the close
of trading on the Trading Day prior to the date of the
purported Transfer or Non-Transfer Event, as the case may be,
even though the certificates representing the shares of Equity
Stock so converted may be submitted to the Corporation at a
later date.
(b) If, notwithstanding the other provisions
contained in these Articles, from and after the date of the
Offering and prior to the Restriction Termination Date there
is a purported Transfer or Non-Transfer Event that, if
effective, would (i) result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code, (ii)
cause the Corporation to Constructively Own 10% or more of the
ownership interest in a tenant of the Corporation's or a
Subsidiary's real property within the meaning of Section
856(d)(2)(B) of the Code or (iii) result in the shares of
Equity Stock being beneficially owned by fewer than 100
persons within the meaning of Section 856(a)(5) of the Code,
then (x) the purported transferee shall be deemed to be a
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Prohibited Owner and shall acquire no right or interest
(or, in the case of a Non-Transfer Event, the Person
holding record title of the shares of Equity Stock with
respect to which such Non-Transfer Event occurred shall
cease to own any right or interest) in such number of
shares of Equity Stock, the ownership of which by such
purported transferee or record holder would (A) result in
the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, (B) cause the Corporation to
Constructively Own 10% or more of the ownership interests
in a tenant of the Corporation's or a Subsidiary's real
property within the meaning of Section 856(d)(2)(B) of the
Code or (c) result in the shares of Equity Stock being
beneficially owned by fewer than 100 persons within the
meaning of Section 856(a)(5) of the Code, (y) such number
of shares of Equity Stock (rounded up to the nearest whole
share) shall be automatically converted into an equal
number of shares of Excess Stock and transferred to a Trust
in accordance with Section 7.4 of this Article VII and (z)
the Prohibited Owner shall submit such number of shares of
Equity Stock to the Corporation, accompanied by all
requisite and duly executed assignments of transfer
thereof, for registration in the name of the Trustee of the
Trust. Such conversion into Excess Stock and transfer to a
Trust shall be effective as of the close of trading on the
Trading Day prior to the date of the purported Transfer or
Non-Transfer Event, as the case may be, even though the
certificates representing the shares of Equity Stock so
converted may be submitted to the Corporation at a later
date.
(c) Upon the occurrence of such a conversion of
shares of Equity Stock into an equal number of shares of
Excess Stock, such shares of Equity Stock shall be
automatically retired and canceled, without any action
required by the Board of Directors of the Corporation, and
shall thereupon be restored to the status of authorized but
unissued shares of the particular class or series of Equity
Stock from which such Excess Stock was converted and may be
reissued by the Corporation as that particular class or series
of Equity Stock.
7.4.2 Remedies for Breach. If the Corporation, or its
designees, shall at any time determine in good faith that a Transfer
has taken place in violation of Section 9.2 of Article IX or that a
Person intends to acquire or has attempted to acquire Beneficial
Ownership or Constructive Ownership of any shares of Equity Stock in
violation of Section 9.2 of Article IX, the Corporation shall take such
action as it deems advisable to refuse to give effect to or to prevent
such Transfer or acquisition, including, but not limited to, refusing
to give effect to such Transfer on the stock transfer books of the
Corporation or instituting proceedings to enjoin such Transfer or
acquisition, but the failure to take any such action shall not affect
the automatic conversion of shares of Equity Stock into Excess Stock
and their transfer to a Trust in accordance with Section 7.4.1.
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7.4.3 Notice of Restricted Transfer. Any Person who acquires
or attempts to acquire shares of Equity Stock in violation of Section
9.2 of Article IX, or any Person who owns shares of Equity Stock that
were converted into shares of Excess Stock and transferred to a Trust
pursuant to Sections 7.4.1 and 7.4.4 of this Article VII, shall
immediately give written notice to the Corporation of such event and
shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of
such Transfer or Non-Transfer Event, as the case may be, on the
Corporation's status as a REIT.
7.4.4 Ownership in Trust. Upon any purported Transfer or Non-
Transfer Event that results in Excess Stock pursuant to Section 7.4.1
of this Article VII, (i) the Corporation shall create, or cause to be
created, a Trust, and shall designate a Trustee and name a Beneficiary
thereof and (ii) such Excess Stock shall be automatically transferred
to such Trust to be held for the exclusive benefit of the Beneficiary.
Any conversion of shares of Equity Stock into shares of Excess Stock
and transfer to a Trust shall be effective as of the close of trading
on the Trading Day prior to the date of the purported Transfer or
Non-Transfer Event that results in the conversion. Shares of Excess
Stock so held in trust shall remain issued and outstanding shares of
stock of the Corporation.
7.4.5 Dividend Rights. Each share of Excess Stock shall be
entitled to the same dividends and distributions (as to both timing and
amount) as may be declared by the Board of Directors with respect to
shares of Common Stock. The Trustee, as record holder of the shares of
Excess Stock, shall be entitled to receive all dividends and
distributions and shall hold all such dividends or distributions in
trust for the benefit of the Beneficiary. The Prohibited Owner with
respect to such shares of Excess Stock shall repay to the Trust the
amount of any dividends or distributions received by it that are (i)
attributable to any shares of Equity Stock that have been converted
into shares of Excess Stock and (ii) dividends or distributions which
were distributed by the Corporation to stockholders of record on a
record date which was on or after the date that such shares were
converted into shares of Excess Stock. The Corporation shall take all
measures that it determines reasonably necessary to recover the amount
of any such dividend or distribution paid to a Prohibited Owner,
including, if necessary, withholding any portion of future dividends or
distributions payable on shares of Equity Stock Beneficially Owned by
the Person who, but for the provisions of Articles VII and IX, would
Constructively Own or Beneficially Own the shares of Equity Stock that
were converted into shares of Excess Stock; and, as soon as reasonably
practicable following the Corporation's receipt or withholding thereof,
shall pay over to the Trust for the benefit of the Beneficiary the
dividends so received or withheld, as the case may be.
7.4.6 Rights upon Liquidation. In the event of any voluntary
or involuntary liquidation of, or winding up of, or any distribution of
the assets of, the Corporation,
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each holder of shares of Excess Stock shall be entitled to receive,
ratably with each other holder of shares of Common Stock and Excess
Stock, that portion of the assets of the Corporation that is available
for distribution to the holders of Common Stock and Excess Stock. The
Trust shall distribute to the Prohibited Owner the amounts received
upon such liquidation, dissolution, or winding up, or distribution;
provided, however, that the Prohibited Owner shall not be entitled to
receive amounts in excess of, in the case of a purported Transfer in
which the Prohibited Owner gave value for shares of Equity Stock and
which Transfer resulted in the conversion of the shares into shares of
Excess Stock, the product of (x) the price per share, if any, such
Prohibited Owner paid for the shares of Equity Stock and (y) the
number of shares of Equity Stock which were so converted into Excess
Stock, and, in the case of a Non-Transfer Event or purported Transfer
in which the Prohibited Owner did not give value for such shares
(e.g., if the shares were received through a gift or devise) and which
Non-Transfer Event or purported Transfer, as the case may be, resulted
in the conversion of the shares into shares of Excess Stock, the
product of (x) the price per share equal to the Market Price on the
date of such Non-Transfer Event or purported Transfer and (y) the
number of shares of Equity Stock which were so converted into Excess
Stock. Any remaining amount in such Trust shall be distributed to the
Beneficiary.
7.4.7 Voting Rights. Each share of Excess Stock shall entitle
the holder to no voting rights other than those voting rights which
accompany a class of stock under Maryland law. The Trustee, as record
holder of the Excess Stock, shall be entitled to vote all shares of
Excess Stock. Any vote by a Prohibited Owner as a purported holder of
shares of Equity Stock prior to the discovery by the Corporation that
such shares of Equity Stock have been converted into shares of Excess
Stock shall, subject to applicable law, (i) be rescinded and shall be
void ab initio with respect to such shares of Excess Stock and (ii) be
recast in accordance with the desires of the Trustee acting for the
benefit of the Beneficiary; provided, however, that if the Corporation
has already taken irreversible corporate action, then the Trustee shall
not have the authority to rescind and recast such vote.
7.4.8 Designation of Permitted Transferee.
(a) As soon as practicable after the Trustee acquires Excess
Stock, but in an orderly fashion so as not to materially adversely affect the
trading price of Common Stock, the Trustee shall designate one or more Persons
as Permitted Transferees and sell to such Permitted Transferees any shares of
Excess Stock held by the Trustee; provided, however, that (i) any Permitted
Transferee so designated purchases for valuable consideration (whether in a
public or private sale) the shares of Excess Stock and (ii) any Permitted
Transferee so designated may acquire such shares of Excess Stock without
violating any of the restrictions set forth in Section 9.2 of Article IX and
without such acquisition resulting in the conversion of the shares of Equity
Stock so acquired into shares of Excess Stock and the transfer of such
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shares to a Trust pursuant to Sections 7.4.1 and 7.4.4 of this Article VII. The
Trustee shall have the exclusive and absolute right to designate Permitted
Transferees of any and all shares of Excess Stock. Prior to any transfer by the
Trustee of shares of Excess Stock to a Permitted Transferee, the Trustee shall
give not less than five Trading Days' prior written notice to the Corporation of
such intended transfer and the Corporation must have waived in writing its
purchase rights under Section 7.4.10 of this Article VII.
(b) Upon the designation by the Trustee of a Permitted
Transferee in accordance with the provisions of this Section 7.4.8, the Trustee
shall cause to be transferred to the Permitted Transferee shares of Excess Stock
acquired by the Trustee pursuant to Section 7.4.4 of this Article VII. Upon such
transfer of shares of Excess Stock to the Permitted Transferee, such shares of
Excess Stock shall be automatically converted into an equal number of shares of
Equity Stock of the same class and series from which such Excess Stock was
converted. Upon the occurrence of such a conversion of shares of Excess Stock
into an equal number of shares of Equity Stock, such shares of Excess Stock
shall be automatically retired and canceled, without any action required by the
Board of Directors of the Corporation, and shall thereupon be restored to the
status of authorized but unissued shares of Excess Stock and may be reissued by
the Corporation as Excess Stock. The Trustee shall (i) cause to be recorded on
the stock transfer books of the Corporation that the Permitted Transferee is the
holder of record of such number of shares of Equity Stock, and (ii) distribute
to the Beneficiary any and all amounts held with respect to such shares of
Excess Stock after making payment to the Prohibited Owner pursuant to Section
7.4.9 of this Article VII.
(c) If the Transfer of shares of Excess Stock to a purported
Permitted Transferee would or does violate any of the transfer restrictions set
forth in Section 9.2 of Article IX, such Transfer shall be void ab initio as to
that number of shares of Excess Stock that cause the violation of any such
restriction when such shares are converted into shares of Equity Stock (as
described in clause (b) above) and the purported Permitted Transferee shall be
deemed to be a Prohibited Owner and shall acquire no rights in such shares of
Excess Stock or Equity Stock. Such shares of Equity Stock shall be automatically
re-converted into Excess Stock and transferred to the Trust from which they were
originally Transferred. Such conversion and transfer to the Trust shall be
effective as of the close of trading on the Trading Day prior to the date of the
Transfer to the purported Permitted Transferee and the provisions of this
Article VII shall apply to such shares, including, without limitation, the
provisions of Sections 7.4.8 through 7.4.10 with respect to any future Transfer
of such shares by the Trust.
7.4.9 Compensation to Record Holder of Shares of Equity Stock
That Are Converted into Shares of Excess Stock. Any Prohibited Owner
shall be entitled (following acquisition of the shares of Excess Stock
and subsequent designation of and sale of Excess Stock to a Permitted
Transferee in accordance with Section 7.4.8 of this Article VII or
following the acceptance of the offer to purchase such shares in
accordance with Section 7.4.10 of this Article VII) to receive from the
Trustee following the sale or other disposition of such shares of
Excess Stock the lesser of (i)
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(a) in the case of a purported Transfer in which the Prohibited Owner
gave value for shares of Equity Stock and which Transfer resulted in
the conversion of such shares into shares of Excess Stock, the product
of (x) the price per share, if any, such Prohibited Owner paid for the
shares of Equity Stock and (y) the number of shares of Equity Stock
which were so converted into Excess Stock and (b) in the case of a
Non-Transfer Event or purported Transfer in which the Prohibited Owner
did not give value for such shares (e.g., if the shares were received
through a gift or devise) and which Non-Transfer Event or purported
Transfer, as the case may be, resulted in the conversion of such
shares into shares of Excess Stock, the product of (x) the price per
share equal to the Market Price on the date of such Non-Transfer Event
or purported Transfer and (y) the number of shares of Equity Stock
which were so converted into Excess Stock or (ii) the proceeds
received by the Trustee from the sale or other disposition of such
shares of Excess Stock in accordance with Section 7.4.8 or Section
7.4.10 of this Article VII. Any amounts received by the Trustee in
respect of such shares of Excess Stock and in excess of such amounts
to be paid to the Prohibited Owner pursuant to this Section 7.4.9
shall be distributed to the Beneficiary in accordance with the
provisions of Section 7.4.8 of this Article VII. Each Beneficiary and
Prohibited Owner shall waive any and all claims that it may have
against the Trustee and the Trust arising out of the disposition of
shares of Excess Stock, except for claims arising out of the gross
negligence or willful misconduct of, or any failure to make payments
in accordance with this Section 7.4 of this Article VII by such
Trustee.
7.4.10 Purchase Right in Excess Stock. Shares of Excess Stock
shall be deemed to have been offered for sale to the Corporation or its
designee, at a price per share equal to the lesser of (i) the price per
share in the transaction that created such shares of Excess Stock (or,
in the case of a Non-Transfer Event or Transfer in which the Prohibited
Owner did not give value for the shares (e.g., if the shares were
received through a gift or devise), the Market Price on the date of
such Non-Transfer Event or Transfer in which the Prohibited Owner did
not give value for the shares) or (ii) the Market Price on the date the
Corporation, or its designee, accepts such offer. The Corporation shall
have the right to accept such offer for a period of 90 days following
the later of (a) the date of the Non-Transfer Event or purported
Transfer which results in such shares of Excess Stock or (b) the date
the Board of Directors first determined that a Transfer or Non-Transfer
Event resulting in shares of Excess Stock has occurred, if the
Corporation does not receive a notice of such Transfer or Non-Transfer
Event pursuant to Section 7.4.3 of this Article VII.
7.5 Classification of Stock. The Board of Directors may classify or
reclassify any unissued shares of Stock from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption for each class or series, including, but not
limited to, the reclassification of unissued shares of Common Stock to shares of
Preferred
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Stock or unissued shares of Preferred Stock to shares of Common Stock or the
issuance of any rights plan or similar plan.
7.6 Issuance of Stock. The Board of Directors may authorize the
issuance from time to time of shares of Stock of any class or series, whether
now or hereafter authorized, or securities or rights convertible into shares of
Stock, for such consideration as the Board of Directors may deem advisable (or
without consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be set forth in these Articles or
the By-laws of the Corporation.
7.7 Dividends or Distributions. The Directors may from time to time
authorize and declare and pay to stockholders such dividends or distributions in
cash, property or other assets of the Corporation or in securities of the
Corporation or from any other source as the Directors in their discretion shall
determine.
7.8 Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Article VII, the Board of Directors shall have the power
to determine the application of the provisions of this Article VII with respect
to any situation based on the facts known to it.
7.9 Legend. Each certificate for shares of Equity Stock shall bear
substantially the following legend:
"The shares of Beacon Capital Partners, Inc. (the
"Corporation") represented by this certificate are subject to
restrictions set forth in the Corporation's Charter which
prohibit in general (a) any Person (other than a Look-Through
Entity) from Beneficially Owning shares of Equity Stock in
excess of the Ownership Limit, (b) any Look-Through Entity
from Beneficially Owning shares of Equity Stock in excess of
the Look-Through Ownership Limit and (c) any Person from
acquiring or maintaining any ownership interest in the stock
of the Corporation that is inconsistent with (i) the
requirements of the Code pertaining to real estate investment
trusts or (ii) the Charter of the Corporation, and the holder
of this certificate by his or acceptance hereof consents to be
bound by such restrictions. Capitalized terms used in this
paragraph and not defined herein are defined in the
Corporation's Charter, as the same may be amended from time to
time.
The Corporation will furnish without charge, to each
stockholder who so requests, a copy of the relevant provisions
of the Charter and By-laws of the Corporation, a copy of the
provisions setting forth the designations, preferences,
privileges and rights of each
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class of stock or series thereof that the Corporation is
authorized to issue and the qualifications, limitations and
restrictions of such preferences and/or rights. Any such
request may be addressed to the Secretary of the Corporation
or to the Transfer Agent and Registrar named on the face
hereof."
7.10 Severability. Each provision of this Article VII shall be
severable and an adverse determination as to any such provision shall in no way
affect the validity of any other provision.
7.11 Articles and By-laws. All persons who shall acquire Stock in the
Corporation shall acquire the same subject to the provisions of these Articles
and the By-laws.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
No holder of any Stock or any other securities of the Corporation,
whether now or hereafter authorized, shall have any preferential or preemptive
rights to subscribe for or purchase any Stock or any other securities of the
Corporation other than such rights, if any, as the Board of Directors, in its
sole discretion, may fix; and any Stock or other securities which the Board of
Directors may determine to offer for subscription may, within the Board of
Directors' sole discretion, be offered to the holders of any class, series or
type of Stock or other securities at the time outstanding to the exclusion of
holders of any or all other classes, series or types of Stock or other
securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP OF EQUITY STOCK
9.1 Definitions. For purposes of this Article IX, the following terms
shall have the meanings set forth below:
"Beneficial Ownership," when used with respect to ownership of
shares of Equity Stock by any Person, shall mean all shares of Equity Stock
which are (i) directly owned by such Person, (ii) indirectly owned by such
Person (if such Person is an "individual" as defined in Section 542(a)(2) of the
Code) taking into account the constructive ownership rules of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code, or (iii) beneficially
owned by such Person pursuant to Rule 13d-3 under the Securities Exchange Act of
1934, as amended, provided that in determining the number of shares Beneficially
Owned by a Person or group, no share shall be counted more than once although
applicable to two or more of clauses (i), (ii) and (iii) of this definition or
(in the case of a group) although
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Beneficially Owned by more than one Person in such group. (Whenever a Person
Beneficially Owns shares of Equity Stock that are not actually outstanding
(e.g., shares issuable upon the exercise of an option or convertible security)
("Option Shares"), then, whenever these Articles require a determination of the
percentage of outstanding shares of a class of Equity Stock Beneficially Owned
by that Person, the Option Shares Beneficially Owned by that Person shall also
be deemed to be outstanding.)
"Beneficiary" shall mean, with respect to any Trust, one or
more organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) and (viii) thereof) and Section 170(c)(2) of the Code that are named by
the Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 7.4.4 of Article VII.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Constructive Ownership" shall mean ownership of shares of
Equity Stock by a Person who is or would be treated as a direct or indirect
owner of such shares of Equity Stock through the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have
correlative meanings.
"Equity Stock" shall mean a particular class (other than
Excess Stock) or series of stock of the Corporation. The use of the term "Equity
Stock" or any term defined by reference to the term "Equity Stock" shall refer
to the particular class or series of stock which is appropriate under the
context.
"Look-Through Entity" shall mean a Person that is either (i) a
trust described in Section 401(a) of the Code and exempt from tax under Section
501(a) of the Code as modified by Section 856(h)(3) of the Code or (ii)
registered under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, with respect to a
class or series of Equity Stock, 15% of the number of outstanding shares of such
Equity Stock.
"Market Price" of Equity Stock on any date shall mean the
average of the Closing Price for shares of such Equity Stock for the five
consecutive Trading Days ending on such date. The "Closing Price" on any date
shall mean (A) where there exists a public market for the Corporation's Equity
Stock, the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Equity Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Equity Stock
are listed or admitted to trading or, if the shares of Equity Stock are not
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listed or admitted to trading on any national securities exchange, the last
quoted price, or if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the Nasdaq Stock Market,
Inc. or, if such system is no longer in use, the principal other automated
quotation system that may then be in use or (B) if no public market for the
Equity Stock exists, the Closing Price will be determined by a single,
independent appraiser selected by a committee composed of Independent Directors
which appraiser shall appraise the Market Price for such Equity Stock within
such guidelines as shall be determined by the committee of Independent
Directors.
"Non-Transfer Event" shall mean an event other than a
purported Transfer that would cause (a) any Person (other than a Look-Through
Entity) to Beneficially Own shares of Equity Stock in excess of the Ownership
Limit or (b) any Look-Through Entity to Beneficially Own shares of Equity Stock
in excess of the Look-Through Ownership Limit. Non-Transfer Events include but
are not limited to (i) the granting of any option or entering into any agreement
for the sale, transfer or other disposition of shares (or of Beneficial
Ownership of shares) of Equity Stock or (ii) the sale, transfer, assignment or
other disposition of interests in any Person or of any securities or rights
convertible into or exchangeable for shares of Equity Stock or for interests in
any Person that results in changes in Beneficial Ownership of shares of Equity
Stock.
"Offering" shall mean the closing of the private placement of
shares of Common Stock to (A) certain Qualified Institutional Buyers (as defined
in Rule 144A of the Securities Act of 1933, as amended (the "Securities Act"))
and (B) certain Accredited Investors (as defined in Rule 501(a) of the
Securities Act) pursuant to the Corporation's Offering Memorandum dated March
1998.
"Operating Partnership" shall mean Beacon Capital Partners,
L.P., a Delaware limited partnership.
"Ownership Limit" shall mean, with respect to a class or
series of Equity Stock, 9.8% of the number of outstanding shares of such Equity
Stock.
"Permitted Transferee" shall mean any Person designated as a
Permitted Transferee in accordance with the provisions of Section 7.4.8 of
Article VII.
"Person" shall mean (a) an individual or any corporation,
partnership, estate, trust, association, private foundation, joint stock
company or any other entity and (b) a "group" as that term is used for purposes
of Section 13(d)(3) of the Exchange Act; but shall not include an underwriter
that participates in a public offering of Equity Stock for a period of 90 days
following purchase by such underwriter of such Equity Stock.
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"Prohibited Owner" shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who is prevented from becoming or
remaining the owner of record title to shares of Equity Stock by the provisions
of Section 7.4.1 of Article VII.
"Related Party Restriction Termination Date" shall mean the
first day on which the Board of Directors, in accordance with Article VI hereof,
determines that it is no longer in the best interests of the Corporation to
attempt to, or continue to, restrict Transfers of Equity Stock that, if
effective, would cause the Corporation to Constructively Own 10% or more of the
ownership interests in a tenant of the real property of the Corporation or any
direct or indirect subsidiary (whether a corporation, partnership, limited
liability company or other entity) of the Corporation (a "Subsidiary"), within
the meaning of Section 856(d)(2)(B) of the Code.
"Restriction Termination Date" shall mean the first day on
which the Board of Directors, in accordance with Article VI hereof, determines
that it is no longer in the best interests of the Corporation to attempt to, or
continue to, qualify under the Code as a REIT.
"Trading Day" shall mean a day on which the principal national
securities exchange on which any of the shares of Equity Stock are listed or
admitted to trading is open for the transaction of business or, if none of the
shares of Equity Stock are listed or admitted to trading on any national
securities exchange, any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift,
assignment, devise or other disposition of shares (or of Beneficial Ownership of
shares) of Equity Stock, whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
"Transfer" (as a verb) shall have the correlative meaning.
"Trust" shall mean any separate trust created and administered
in accordance with the terms of Section 7.4 of Article VII, for the exclusive
benefit of any Beneficiary.
"Trustee" shall mean any Person or entity, unaffiliated with
both the Corporation and any Prohibited Owner (and, if different than the
Prohibited Owner, the Person who would have had Beneficial Ownership of the
Shares that would have been owned of record by the Prohibited Owner), designated
by the Corporation to act as trustee of any Trust, or any successor trustee
thereof.
9.2 Restriction on Ownership and Transfer.
(a) Except as provided in Section 9.4(a) of Article IX, from
and after the date of the Offering and until the Related Party Restriction
Termination Date, any Transfer (whether or not the result of a transaction
entered into through the facilities of the New York
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Stock Exchange) of shares of Equity Stock that, if effective, would cause the
Corporation to Constructively Own 10% or more of the ownership interests in a
tenant of the real property of the Corporation or any direct or indirect
Subsidiary of the Corporation, within the meaning of Section 856(d)(2)(B) of the
Code, shall be void ab initio as to the Transfer of that number of shares of
Equity Stock that would cause the Corporation to Constructively Own 10% or more
of the ownership interests in a tenant of the real property of the Corporation
or a Subsidiary within the meaning of Section 856(d)(2)(B) of the Code, and the
intended transferee shall acquire no rights in such shares of Equity Stock.
(b) (I) Except as provided in Section 9.4(b) of this Article
IX, from and after the date of the Offering and until the Restriction
Termination Date, (i) no Person (other than a Look-Through Entity) shall
Beneficially Own shares of Equity Stock in excess of the Ownership Limit and no
Look-Through Entity shall Beneficially Own shares of Equity Stock in excess of
the Look-Through Ownership Limit.
(II) Except as provided in Section 9.4(b) of this Article IX,
from and after the date of the Offering and until the Restriction Termination
Date, any purported Transfer (whether or not the result of a transaction entered
into through the facilities of the New York Stock Exchange or any other national
securities exchange or the Nasdaq Stock Market, Inc. or any other automated
quotation system) that, if effective, would result in any Person (other than a
Look-Through Entity) Beneficially Owning shares of Equity Stock in excess of the
Ownership Limit shall be void ab initio as to the Transfer of that number of
shares of Equity Stock which would be otherwise Beneficially Owned by such
Person in excess of the Ownership Limit, and the intended transferee shall
acquire no rights in such shares of Equity Stock.
(III) Except as provided in Section 9.4(b) of this Article IX,
from and after the date of the Offering and until the Restriction Termination
Date, any purported Transfer (whether or not the result of a transaction entered
into through the facilities of the New York Stock Exchange or any other national
securities exchange or the Nasdaq Stock Market, Inc. or any other automated
quotation system) that, if effective, would result in any Look-Through Entity
Beneficially Owning shares of Equity Stock in excess of the Look-Through
Ownership Limit shall be void ab initio as to the Transfer of that number of
shares of Equity Stock which would be otherwise Beneficially Owned by such
Look-Through Ownership Entity in excess of the Look-Through Ownership Limit, and
the intended transferee Look-Through Entity shall acquire no rights in such
shares of Equity Stock.
(c) From and after the date of the Offering and until the
Restriction Termination Date, any purported Transfer (whether or not the result
of a transaction entered into through the facilities of the New York Stock
Exchange or any other national securities exchange or the Nasdaq Stock Market,
Inc. or any other automated quotation system) of shares of Equity Stock that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer
of that
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number of shares of Equity Stock that would cause the Corporation to be "closely
held" within the meaning of Section 856(h) of the Code, and the intended
transferee shall acquire no rights in such shares of Equity Stock.
(d) From and after the date of the Offering and until the
Restriction Termination Date, any purported Transfer (whether or not the result
of a transaction entered into through the facilities of the New York Stock
Exchange or any other national securities exchange or the Nasdaq Stock Market,
Inc. or any other automated quotation system) that, if effective, would result
in shares of Equity Stock being beneficially owned by fewer than 100 persons
within the meaning of Section 856(a)(5) of the Code shall be void ab initio and
the intended transferee shall acquire no rights in such shares of Equity Stock.
9.3 Owners Required to Provide Information. Until the Restriction
Termination Date:
(a) Every Beneficial Owner of more than 5%, or such lower
percentages as are then required pursuant to regulations under the Code, of the
outstanding shares of any class or series of Equity Stock of the Corporation as
of any dividend record date on the Corporation's Equity Stock shall, within 30
days after January 1 of each year, provide to the Corporation a written
statement or affidavit stating the name and address of such Beneficial Owner,
the number of shares of Equity Stock Beneficially Owned by such Beneficial Owner
as of each such dividend record date, and a description of how such shares are
held. Each such Beneficial Owner shall provide to the Corporation such
additional information as the Corporation may request in order to determine the
effect, if any, of such Beneficial Ownership on the Corporation's status as a
REIT and to ensure compliance with the Ownership Limit.
(b) Each Person who is a Beneficial Owner of shares of Equity
Stock and each Person (including the stockholder of record) who is holding
shares of Equity Stock for a Beneficial Owner shall provide to the Corporation a
written statement or affidavit stating such information as the Corporation may
request in order to determine the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
9.4. Exceptions. (a) The Board of Directors, upon receipt of a ruling
from the Internal Revenue Service or an opinion of counsel or other evidence or
undertakings acceptable to it and subject to the provisions of Article VI, may,
in its sole discretion, waive the application of Section 9.4(a) to a Person
subject, as the case may be, to any such limitations on Transfer, provided that
(A) the Board of Directors obtains such representations and undertakings from
such Person as are reasonably necessary to ascertain that such Person's
Beneficial Ownership or Constructive Ownership of shares of Equity Stock will
now and in the future not result in the Corporation Constructively Owning 10% or
more of the ownership interests in a tenant of the real property of the
Corporation or any direct or indirect Subsidiary of the Corporation, within the
meaning of Section 856(d)(2)(B) of the Code and (B) such Person agrees in
writing that any violation or attempted violation of (x) such other limitation
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as the Board of Directors may establish at the time of such waiver with respect
to such Person or (y) such other restrictions and conditions as the Board of
Directors may in its sole discretion impose at the time of such waiver with
respect to such Person, will result, as of the time of such violation even if
discovered after such violation, in the conversion of such shares in excess of
the original limit applicable to such Person into shares of Excess Stock
pursuant to Section 7.4.1 of Article VII.
(b) The Board of Directors, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence or undertakings
acceptable to it and subject to the provisions of Article VI, may, in its sole
discretion, waive the application of the Ownership Limit or the Look-Through
Ownership Limit to a Person subject, as the case may be, to any such limit,
provided that (A) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain that such
Person's Beneficial Ownership or Constructive Ownership of shares of Equity
Stock will now and in the future (i) not result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code, (ii) not cause
the Corporation to Constructively Own 10% or more of the ownership interests of
a tenant of the Corporation or a Subsidiary within the meaning of Section
856(d)(2)(B) of the Code and to violate the 95% gross income test of Section
856(c)(2) of the Code, and (iii) not result in the shares of Equity Stock of the
Corporation being beneficially owned by fewer than 100 persons within the
meaning of Section 856(a)(5) of the Code and (B) such Person agrees in writing
that any violation or attempted violation of (x) such other limitation as the
Board of Directors may establish at the time of such waiver with respect to such
Person or (y) such other restrictions and conditions as the Board of Directors
may in its sole discretion impose at the time of such waiver with respect to
such Person, will result, as of the time of such violation even if discovered
after such violation, in the conversion of such shares in excess of the original
limit applicable to such Person into shares of Excess Stock pursuant to Section
7.4.1 of Article VII.
9.5 New York Stock Exchange Transactions. Notwithstanding any provision
contained herein to the contrary, nothing in these Articles shall preclude the
settlement of any transaction entered into through the facilities of the New
York Stock Exchange or any other national securities exchange or the Nasdaq
Stock Market, Inc. or any other automated quotation system. In no event shall
the existence or application of the preceding sentence have the effect of
deterring or preventing the conversion of Equity Stock into Excess Stock as
contemplated herein.
9.6 Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Article IX, including any definition contained in Section
9.1 of this Article IX, the Board of Directors shall have the power to determine
the application of the provisions of this Article IX with respect to any
situation based on the facts known to it.
9.7 Remedies Not Limited. Except as set forth in Section 9.5 of this
Article IX, nothing contained in this Article IX or Article VII shall limit the
authority of the Corporation
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to take such other action as it deems necessary or advisable to protect the
Corporation and the interests of its stockholders by preservation of the
Corporation's status as a REIT and to ensure compliance with the Ownership Limit
or the Look-Through Ownership Limit.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION,
BOARD OF DIRECTORS AND OFFICERS
In carrying on its business, or for the purpose of attaining or
furthering any of its objects, the Corporation shall have all of the rights,
powers and privileges granted to corporations by the laws of the State of
Maryland, as well as the power to do any and all acts and things that a natural
person or partnership could do as now or hereafter authorized by law, either
alone or in partnership or conjunction with others. In furtherance and not in
limitation of the powers conferred by statute, the powers of the Corporation and
of the Directors and stockholders shall include the following:
10.1 Conflicts of Interest. Any Director or officer individually, or
any firm of which any Director or officer may be a member, or any corporation or
association of which any Director or officer may be a director or officer or in
which any Director or officer may be interested as the holder of any amount of
its stock or otherwise, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Corporation, and, in the
absence of fraud, no contract or other transaction shall be thereby affected or
invalidated; provided, however, that (a) such fact shall have been disclosed or
shall have been known to the Board of Directors or the committee thereof that
approved such contract or transaction and such contract or transaction shall
have been approved or satisfied by the affirmative vote of a majority of the
disinterested Directors, or (b) such fact shall have been disclosed or shall
have been known to the stockholders entitled to vote, and such contract or
transaction shall have been approved or ratified by a majority of the votes cast
by the stockholders entitled to vote, other than the votes of shares owned of
record or beneficially by the interested Director or corporation, firm or other
entity, or (c) the contract or transaction is fair and reasonable to the
Corporation. Any Director of the Corporation who is also a director or officer
of or interested in such other corporation or association, or who, or the firm
of which he is a member, is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or transaction, with like
force and effect as if he were not such director or officer of such other
corporation or association or were not so interested or were not a member of a
firm so interested.
10.2 Amendment of Articles. The Corporation reserves the right, from
time to time, to make any amendment of its Articles, now or hereafter authorized
by law, including any amendment which alters the contract rights, as expressly
set forth in its Articles of any outstanding Stock.
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No amendment or repeal of these Articles shall be made unless the same
is first approved by the Board of Directors pursuant to a resolution adopted by
the Board of Directors in accordance with Maryland General Corporation Law, and,
except as otherwise provided by law, thereafter approved by the stockholders.
Whenever any vote of the holders of voting stock is required to amend
or repeal any provision of these Articles, then in addition to any other vote of
the holders of voting stock that is required by these Articles or by law, the
affirmative vote of a majority of the outstanding shares of stock of the
Corporation entitled to vote on such amendment or repeal, voting together as a
single class, and the affirmative vote of a majority of the outstanding shares
of each class entitled to vote thereon as a class, shall be required to amend or
repeal any provision of these Articles; provided, however, that in each case
two-thirds rather than a majority shall be needed if such amendment or repeal is
not approved by more than 75% of the Directors then in office; and provided,
further, that the affirmative vote of not less than 75% of the outstanding
shares entitled to vote on such amendment or repeal, voting together as a single
class, and the affirmative vote of not less than 75% of the outstanding shares
of each class entitled to vote thereon as a class, shall be required to amend or
repeal any of the provisions of Article VI, Article X or Article XII of these
Articles.
ARTICLE XI
INDEMNIFICATION
The Corporation (which for the purpose of this Article XI shall include
predecessor entities of the Corporation as set forth in Section 2-418 of the
Maryland General Corporation Law) shall have the power to the maximum extent
permitted by Maryland law in effect from time to time, to obligate itself to
indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a present or former
Director or officer of the Corporation or (b) any individual who, while a
Director of the Corporation and at the request of the Corporation, serves or has
served as a director, officer, partner or trustee of another corporation, real
estate investment trust, partnership, joint venture, trust, employee benefit
plan or any other enterprise from and against any claim or liability to which
such person may become subject or which such person may incur by reason of his
status as a present or former Director or officer of the Corporation. The
Corporation shall have the power, with the approval of the Board of Directors,
to provide such indemnification and advancement of expenses to a person who
served a predecessor of the Corporation in any of the capacities described in
(a) or (b) above and to any employee or agent of the Corporation or a
predecessor of the Corporation.
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ARTICLE XII
LIMITATION OF LIABILITY
To the fullest extent permitted under the Maryland General Corporation
Law as in effect on the date of filing these Articles or as the Maryland General
Corporation Law is thereafter amended from time to time, no Director or officer
shall be liable to the Corporation or its stockholders for money damages.
Neither the amendment or the repeal of this Article, nor the adoption of any
other provision in the Corporation's Articles inconsistent with this Article,
shall eliminate or reduce the protection afforded by this Article to a Director
or officer of the Corporation with respect to any matter which occurred, or any
cause of action, suit or claim which but for this Article would have accrued or
arisen, prior to such amendment, repeal or adoption.
ARTICLE XIII
EXEMPTION FROM BUSINESS COMBINATION STATUTE
Pursuant to Section 3-603(e)(1)(iii) of the Maryland General
Corporation Law, the Corporation expressly elects not to be governed by the
provisions of Section 3-602 of the Maryland General Corporation Law with respect
to any business combination (as defined in Section 3-601 of the Maryland General
Corporation Law) involving Alan M. Leventhal or Lionel P. Fortin or current or
future affiliates, associates (as such terms are defined in Section 3-601 of the
Maryland General Corporation Law) or other persons acting in concert as a group
with either of Messrs. Leventhal or Fortin.
ARTICLE XIV
EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.
The provisions of Title 3, Subtitle 7 of the Maryland General
Corporation Law shall not apply to any share of Stock of the Corporation now or
hereafter beneficially held (during the period of such beneficial ownership) by
Alan M. Leventhal or Lionel P. Fortin or current or future affiliates,
associates (as such terms are defined in Section 3-701 of the Maryland General
Corporation Law) or other persons acting in concert or as a group with either of
Messrs. Leventhal or Fortin. Such shares of Stock are exempted from Title 3,
Subtitle 7 to the fullest extent permitted by Maryland law.
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ARTICLE XV
MISCELLANEOUS
15.1 Provisions in Conflict with Law or Regulations.
(a) The provisions of these Articles are severable, and if the
Directors shall determine that any one or more of such provisions are in
conflict with the REIT provisions of the Code, or other applicable federal or
state laws, the conflicting provisions shall be deemed never to have constituted
a part of these Articles, even without any amendment of these Articles pursuant
to Section 10.2 hereof; provided, however, that such determination by the
Directors shall not affect or impair any of the remaining provisions of these
Articles or render invalid or improper any action taken or omitted prior to such
determination. No Director shall be liable for making or failing to make such a
determination.
(b) If any provision of these Articles or any application of
such provision shall be held invalid or unenforceable by any federal or state
court having jurisdiction, such holding shall not in any manner affect or render
invalid or unenforceable such provision in any other jurisdiction, and the
validity of the remaining provisions of these Articles shall not be affected.
Other applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court.
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Exhibit 3.2
BEACON CAPITAL PARTNERS, INC.
CERTIFICATE OF CORRECTION
OF
AMENDED ARTICLES OF INCORPORATION
THIS IS TO CERTIFY THAT:
FIRST: The title of the document being corrected is Amended Articles of
Incorporation.
SECOND: The Amended Articles of Incorporation of Beacon Capital
Partners, Inc., a Maryland corporation (the "Corporation"), were filed with the
State Department of Assessments and Taxation of Maryland on March 17, 1998.
THIRD: The provisions of the Amended Articles of Incorporation which
are to be corrected and the corrections thereto are set forth below.
1. Article VI, Section 6.5 Resignation or Removal of
Directors, shall be corrected as follows:
The word "Preferred" shall be deleted from the fifth line of Article
VI, Section 6.5.
2. Article VI, Section 6.6 Vacancies, currently reads as
follows:
6.6 Vacancies. Subject to the rights, if any, of the holders
of any series of Preferred Stock to elect Directors and to fill
vacancies in the Board of Directors relating thereto, any and all
vacancies in the Board of Directors, however occurring, including,
without limitation, by reason of an increase in size of the Board of
Directors, or the death, resignation, disqualification or removal of a
Director, shall be filled solely by the affirmative vote of a majority
of the remaining Directors then in office, even if less than a quorum
of the Board of Directors; provided that any Director appointed to fill
the vacancy for an Independent Director shall also require the vote of
a majority of the Independent Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of Directors in which the new
directorship was created or the vacancy
<PAGE>
occurred and until such Director's successor shall have been duly
elected and qualified or until such Director's earlier resignation or
removal. Subject to the rights, if any, of the holders of any series
of Preferred Stock, when the number of Directors is increased or
decreased, the Board of Directors shall determine the class or classes
to which the increased or decreased number of Directors shall be
apportioned; provided, however, that no decrease in the number of
Directors shall shorten the term of any incumbent Director. In the
event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the
full Board of Directors until such vacancy is filled.
Article VI, Section 6.6 Vacancies, as corrected shall read as
follows:
6.6 Vacancies. Subject to the rights, if any, of the holders
of any series of Stock to elect Directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board
of Directors, however occurring, including, without limitation, by
reason of an increase in size of the Board of Directors, or the death,
resignation, disqualification or removal of a Director, may be filled
by the affirmative vote of a majority of the remaining Directors then
in office, even if less than a quorum of the Board of Directors;
provided that any Director appointed to fill the vacancy for an
Independent Director shall also require the vote of a majority of the
Independent Directors. Subject to the rights, if any, of the holders of
any series of Preferred Stock, when the number of Directors is
increased or decreased, the Board of Directors shall determine the
class or classes to which the increased or decreased number of
Directors shall be apportioned; provided, however, that no decrease in
the number of Directors shall shorten the term of any incumbent
Director. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise
the powers of the full Board of Directors until such vacancy is filled.
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IN WITNESS WHEREOF, I have signed this Certificate of Correction and
acknowledge the same to be my act on this 17 day of March, 1998.
/s/ Nancy H. Duff
-------------------------
Nancy H. Duff
Incorporator
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EX-3.3
By-Laws
BY-LAWS
OF
BEACON CAPITAL PARTNERS, INC.
ARTICLE I
Definitions and Offices
1.1 Definitions For purposes of these By-laws, the following words shall
have the meanings set forth below:
(a) "Articles" shall mean the Articles of Incorporation of the
Corporation, as amended from time to time.
(b) "Affiliate" of a Person shall mean (i) any Person that, directly
or indirectly, controls or is controlled by or is under common control with such
other Person, (ii) any Person that owns, beneficially, directly or indirectly,
5% or more of the outstanding capital stock, shares or equity interests of such
other Person or (iii) any officer, director, employee, partner or trustee of
such other Person or any Person controlling, controlled by or under common
control with such Person (excluding directors and Persons serving in similar
capacities who are not otherwise Affiliates of such Person). For the purposes of
this definition, the term "Person" shall mean, and includes, any natural person,
corporation, partnership, association, trust, limited liability company or any
other legal entity. For the purposes of this definition, "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests.
(c) "Corporation" shall mean Beacon Capital Partners, Inc.
(d) "Equity Stock" shall mean the common stock, par value $.01 per
share, and the preferred stock, par value $.01 per share, of the Corporation.
(e) "Independent Directors" shall mean Directors who are not
officers or employees of the Corporation or any affiliate thereof and who do not
have a material business or professional relationship with the Corporation or
any affiliate thereof.
(f) "Public Announcement" shall mean: (i) disclosure in a press
release reported by the Dow Jones News Service, Associated Press or other
similar national news service, (ii) a report or other document filed publicly
with the Securities and Exchange
<PAGE>
Commission (including, without limitation, a Form 8-K) or (iii) a letter or
report sent to stockholders of record of the Corporation at the time of the
mailing of such letter or report.
(g) "MGCL" shall mean the Maryland General Corporation Law, as
amended from time to time.
1.2 Principal Office. The principal office of the Corporation shall be
located at such place or places as the Board of Directors may designate.
1.3 Additional Offices. The Corporation may have additional offices at
such places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
2.1 Places of Meetings. All meetings of the stockholders shall be held at
such place, either within or without the State of Maryland but within the United
States, as from time to time may be fixed by the majority of the Board of
Directors, the Chairman of the Board, if one is elected, or the President, which
place may subsequently be changed at any time by vote of the Board of Directors.
2.2 Annual Meetings. The annual meeting of the stockholders, for the
election of Directors and transaction of such other business as may come
properly before the meeting, shall be held at such date and time as shall be
determined by a majority of the Board of Directors, the Chairman of the Board,
if one is elected, or the President, which date and time may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
At any annual meeting of stockholders or any special meeting in lieu of
annual meeting of stockholders, only such business shall be conducted, and only
such proposals shall be acted upon, as shall have been properly brought before
such annual meeting. To be considered as properly brought before an annual
meeting, business must be: (a) specified in the notice of meeting, (b) otherwise
properly brought before the meeting by, or at the direction of, the Board of
Directors, or (c) otherwise properly brought before the meeting by any holder of
record (both as of the time notice of such proposal is given by the stockholder
as set forth below and as of the record date for the annual meeting in question)
of any shares of stock of
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the Corporation entitled to vote at such annual meeting who complies with the
requirements set forth in Section 2.9.
2.3 Special Meetings. Except as otherwise required by law and subject to
the rights, if any, of the holders of any series of preferred stock of the
Corporation, special meetings of the stockholders may be called only by the
president or the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the Directors then in office. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law. Special meetings of stockholders shall also be called
by the secretary of the Corporation upon the written request of the holders of
shares entitled to cast not less than a majority of all the votes entitled to be
cast at such meeting. Such request shall state the purpose of such meeting and
the matters proposed to be acted on at such meeting. The secretary shall inform
such stockholders of the reasonably estimated cost of preparing and mailing
notice of the meeting and, upon payment to the Corporation by such stockholders
of such costs, the secretary shall give notice to each stockholder entitled to
notice of the meeting.
2.4 Notice of Meetings; Adjournments. A written notice of each annual
meeting stating the hour, date and place of such annual meeting shall be given
by the Secretary or an Assistant Secretary of the Corporation (or other person
authorized by these By-laws or by law) not less than 10 days nor more than 90
days before the annual meeting, to each stockholder entitled to vote thereat and
to each stockholder who, by law or under the Articles or under these By-laws, is
entitled to such notice, by personally delivering such notice to him or her, by
leaving such notice at his or her residence or usual place of business or by
mailing it, postage prepaid, addressed to such stockholder at the address of
such stockholder as it appears on the stock transfer books of the Corporation.
Such notice shall be deemed to be delivered when hand-delivered to such address
or deposited in the mail so addressed, with postage prepaid.
Notice of all special meetings of stockholders shall be given in the same
manner as provided for annual meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an annual meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously
scheduled annual meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to this Section 2.4
or otherwise. In no event shall the Public Announcement of
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an adjournment, postponement or rescheduling of any previously scheduled meeting
of stockholders commence a new time period for the giving of a stockholder's
notice under Section 2.9 of these By-laws.
When any meeting is convened, the presiding officer of the meeting may
adjourn the meeting if (a) no quorum is present for the transaction of business,
(b) the Board of Directors determines that adjournment is necessary or
appropriate to enable the stockholders to consider fully information that the
Board of Directors determines has not been made sufficiently or timely available
to stockholders or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any annual meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting, other than an announcement at
the meeting at which the adjournment is taken, of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who, by
law or under the Articles or under these By-laws, is entitled to such notice.
2.5 Quorum. Except as otherwise required by the Articles or law, any
number of stockholders together holding at least a majority of the outstanding
shares of capital stock entitled to vote with respect to the business to be
transacted, who shall be present in person or represented by proxy at any
meeting duly called, shall constitute a quorum for the transaction of business.
Where a separate vote by a class or classes is required, a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
matter. If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed. The stockholders present at a
duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
2.6 Voting and Proxies. Stockholders shall have one vote for each share of
stock entitled to vote owned by them of record according to the stock transfer
books of the Corporation, unless otherwise provided by law or by the Articles. A
stockholder may cast the votes entitled to be cast by the shares of stock owned
of record by him either in person or by proxy executed in writing by the
stockholder or by his duly authorized agent. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. Proxies shall be filed with the Secretary of
the meeting before being voted. Except as otherwise limited therein or as
otherwise provided by law, proxies authorizing a person to vote at a specific
meeting shall entitle the persons authorized thereby to vote at any
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adjournment of such meeting, but they shall not be valid after final adjournment
of such meeting. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by or on behalf of any one of them unless at
or prior to the exercise of the proxy the Corporation receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a stockholder shall be deemed valid, and the burden
of proving invalidity shall rest on the challenger.
2.7 Action at Meeting. When a quorum is present, any matter before any
meeting of stockholders shall be decided by the affirmative vote of the majority
of shares present in person or represented by proxy at such meeting and entitled
to vote on such matter, except where a larger vote is required by law, by the
Articles or by these By-laws. Where a separate vote by a class or classes is
required, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class. Any election by stockholders shall be determined by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of Directors, except where a
larger vote is required by law, by the Articles or by these By-laws. The
Corporation shall not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares which it holds in a
fiduciary capacity to the extent permitted by law.
2.8 Stockholder List. The officer or agent having charge of the stock
transfer books of the Corporation shall make, at least 10 days before every
annual meeting or special meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting or any adjournment thereof, in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the hour, date and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
2.9 Stockholder Proposals. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder of record (both as of the time notice of such proposal is given by
the stockholder as set forth below and as of the record date for the annual
meeting in question) of any shares of capital stock entitled to vote at such
annual meeting, such stockholder shall: (i) give timely written notice as
required by this Section 2.9 to the Secretary of the Corporation and (ii) be
present at such meeting, either in person or by a representative. For the first
annual meeting following the initial public offering of the common stock of the
Corporation, a stockholder's notice shall be timely if delivered to, or mailed
to and received by, the Corporation at its principal executive office not later
than the close of business on the later of (x) the 75th day prior to the
scheduled date of such annual meeting or (y) the 15th day following the day on
which the Public Announcement of the date of such annual meeting is first made
by the Corporation. For all subsequent annual meetings,
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a stockholder's notice shall be timely if delivered to, or mailed to and
received by, the Corporation at its principal executive office not less than 75
days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting (the "Anniversary Date"); provided, however, that in
the event the annual meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (1) the 75th day prior to the scheduled date of such
annual meeting or (2) the 15th day following the day on which Public
Announcement of the date of such annual meeting is first made by the
Corporation.
A stockholder's notice to the Secretary of the Corporation shall set forth
as to each matter proposed to be brought before an annual meeting: (i) a brief
description of the business the stockholder desires to bring before such annual
meeting and the reasons for conducting such business at such annual meeting,
(ii) the name and address, as they appear on the stock transfer books of the
Corporation, of the stockholder proposing such business, (iii) the class and
number of shares of the capital stock of the Corporation beneficially owned by
the stockholder proposing such business, (iv) the names and addresses of the
beneficial owners, if any, of any capital stock of the Corporation registered in
such stockholder's name on such books, and the class and number of shares of the
capital stock of the Corporation beneficially owned by such beneficial owners,
(v) the names and addresses of other stockholders known by the stockholder
proposing such business to support such proposal, and the class and number of
shares of the capital stock of the Corporation beneficially owned by such other
stockholders and (vi) any material interest of the stockholder proposing to
bring such business before such meeting (or any other stockholders known to be
supporting such proposal) in such proposal.
If the Board of Directors or a designated committee thereof determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2.9 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2.9 in any material respect, such proposal shall not be presented for
action at the annual meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the annual
meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2.9. If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2.9 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2.9 in any material respect, such proposal shall not be presented for
action at the annual meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2.9, the presiding officer shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
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Notwithstanding the foregoing provisions of this Section 2.9, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder with respect to the matters set forth in this Section
2.9, and nothing in this Section 2.9 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act (or any successor
provision thereof).
2.10 Voting Procedures and Inspectors of Elections. The Corporation shall,
in advance of any meeting of stockholders, appoint one or more inspectors to act
at the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the presiding officer shall appoint one or more inspectors to act
at the meeting. Any inspector may, but need not, be an officer, employee or
agent of the Corporation. Each inspector, before entering upon the discharge of
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall perform such duties as are required by the MGCL,
including the counting of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors. The presiding officer may review all
determinations made by the inspectors, and in so doing the presiding officer
shall be entitled to exercise his or her sole judgment and discretion and he or
she shall not be bound by any determinations made by the inspectors. All
determinations by the inspectors and, if applicable, the presiding officer,
shall be subject to further review by any court of competent jurisdiction.
2.11 Presiding Officer. The Chairman of the Board, if one is elected, or
if not elected or in his or her absence, the President, shall preside at all
annual meetings or special meetings of stockholders and shall have the power,
among other things, to adjourn such meeting at any time and from time to time,
subject to Sections 2.4 and 2.5 of this Article II. The order of business and
all other matters of procedure at any meeting of the stockholders shall be
determined by the presiding officer.
ARTICLE III
Directors
3.1 General Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors and, except as otherwise
expressly provided by law, the Articles or these By-laws, all of the powers of
the Corporation shall be vested in such Board.
3.2 Number of Directors. The number of Directors shall be as provided in
Article VI of the Articles. The Directors shall hold office in the manner
provided in the Articles.
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3.3 Election and Removal of Directors; Quorum.
(a) Directors shall be elected and removed in the manner provided
for in Article VI of the Articles.
(b) Vacancies in the Board of Directors shall be filled in the
manner provided for in Article VI of the Articles.
(c) At any meeting of the Board of Directors, a majority of the
number of Directors then in office shall constitute a quorum for the transaction
of business. However, if less than a quorum is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time, and the
meeting may be held as adjourned without further notice, except as provided in
Section 3.6 of this Article III. Any business which might have been transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
(d) No Director need be a stockholder of the Corporation.
(e) A Director may resign at any time by giving written notice to
the Chairman of the Board, if one is elected, the President or the Secretary. A
resignation shall be effective upon receipt, unless the resignation otherwise
provides.
3.4 Regular Meetings. The regular annual meeting of the Board of Directors
shall be held, without notice other than this Section 3.4, on the same date and
at the same place as the annual meeting following the close of such meeting of
stockholders. Other regular meetings of the Board of Directors may be held at
such hour, date and place as the Board of Directors may by resolution from time
to time determine without notice other than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may be
called, orally or in writing, by or at the request of a majority of the
Directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
3.6 Notice of Meetings. Notice of the hour, date and place of all special
meetings of the Board of Directors shall be given to each Director by the
Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person, by telephone,
or by facsimile, telex, telecopy, telegram, or other written form of electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting, or by written notice mailed to his or her business or
home address, at least 48 hours in advance of the meeting. Such notice shall be
deemed to be delivered when hand delivered to such address,
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read to such Director by telephone, deposited in the mail so addressed, with
postage thereon prepaid if mailed, dispatched or transmitted if faxed, telexed
or telecopied, or when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken of the hour, date and place to which the
meeting is adjourned.
A written waiver of notice signed before or after a meeting by a Director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Articles or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
3.7 Nominations. Nominations of candidates for election as Directors of
the Corporation at any annual meeting may be made only (a) by, or at the
direction of, a majority of the Board of Directors or (b) by any stockholder of
record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the annual meeting
in question) of any shares of the stock of the Corporation entitled to vote at
such annual meeting who complies with the timing, informational and other
requirements set forth in this Section 3.7. Any stockholder who has complied
with the timing, informational and other requirements set forth in this Section
3.7 and who seeks to make such a nomination must be, or his, her or its
representative must be, present in person at the annual meeting. Only persons
nominated in accordance with the procedures set forth in this Section 3.7 shall
be eligible for election as Directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the Board
of Directors shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 3.7. For the first annual
meeting following the initial public offering of the common stock of the
Corporation, a stockholder's notice shall be timely if delivered to, or mailed
to and received by, the Corporation at its principal executive office not later
than the close of business on the later of (i) the 75th day prior to the
scheduled date of such annual meeting or (ii) the 15th day following the day on
which the Public Announcement of the date of such annual meeting is first made
by the Corporation. For all subsequent annual meetings, a stockholder's notice
shall be timely if delivered to, or mailed to and received by, the Corporation
at its principal executive office not less than 75 days nor more than 120 days
prior to the Anniversary Date; provided, however, that in the event the annual
meeting is scheduled to be held on a date more than 30 days before the
Anniversary Date or more than 60 days after
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the Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed and received by, the Corporation at its principal executive office not
later than the close of business on the later of (x) the 75th day prior to the
scheduled date of such annual meeting or (y) the 15th day following the day on
which Public Announcement of the date of such annual meeting is first made by
the Corporation.
A stockholder's notice to the Secretary of the Corporation shall set forth
as to each person whom the stockholder proposes to nominate for election or
re-election as a Director: (1) the name, age, business address and residence
address of such person; (2) the principal occupation or employment of such
person; (3) the class and number of shares of the capital stock of the
Corporation which are beneficially owned by such person on the date of such
stockholder notice; and (4) the consent of each nominee to serve as a Director
if elected. A stockholder's notice to the Secretary of the Corporation shall
further set forth as to the stockholder giving such notice: (a) the name and
address, as they appear on the stock transfer books of the Corporation, of such
stockholder and of the beneficial owners (if any) of the capital stock of the
Corporation registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s);
(b) the class and number of shares of the capital stock of the Corporation which
are held of record, beneficially owned or represented by proxy by such
stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the annual meeting in question
(if such date shall then have been made publicly available and shall be earlier
than the date of such stockholder notice) and on the date of such stockholder's
notice; and (c) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such stockholder.
If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this Section 3.7 or that the information provided in a stockholder's notice does
not satisfy the informational requirements of this Section 3.7 in any material
respect, then such nomination shall not be considered at the annual meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3.7, the presiding officer of the annual meeting
shall determine whether a nomination was made in accordance with such
provisions. If the presiding officer determines that any stockholder nomination
was not made in accordance with the terms of this Section 3.7 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3.7 in any material respect, then
such nomination shall not be considered at the annual meeting in question. If
the Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3.7, the presiding officer shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
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Notwithstanding anything to the contrary in the second paragraph of this
Section 3.7, in the event that the number of Directors to be elected to the
Board of Directors is increased and there is no Public Announcement by the
Corporation naming all of the nominees for Director or specifying the size of
the increased Board of Directors at least 75 days prior to the Anniversary Date,
a stockholder's notice required by this Section 3.7 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if such notice shall be delivered to, or mailed to and received by,
the Corporation at its principal executive office not later than the close of
business on the 15th day following the day on which such Public Announcement is
first made by the Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.7. Election of Directors at an annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set forth in this Section
3.7 shall be provided for use at the annual meeting.
3.8 Action at Meeting and by Consent.
(a) At any meeting of the Board of Directors at which a quorum is
present, a majority of the Directors present may take any action on behalf of
the Board of Directors, unless otherwise required by law, by the Articles or by
these By-laws.
(b) Any action required or permitted to be taken at any meeting of
the Board of Directors may be taken without a meeting if all members of the
Board of Directors consent thereto in writing. Such written consent shall be
filed with the records of the meetings of the Board of Directors and shall be
treated for all purposes as a vote at a meeting of the Board of Directors.
3.9 Manner of Participation. Directors may participate in meetings of the
Board of Directors by means of conference telephone or similar communications
equipment by means of which all Directors participating in the meeting can hear
each other, and participation in a meeting in accordance herewith shall
constitute presence in person at such meeting for purposes of these By-laws.
3.10 Compensation of Directors. By resolution of the Board of Directors,
Directors may be allowed a fee for serving as a Director and a fee and expenses
for attendance at a meeting of the Board, but nothing herein shall preclude
Directors from serving the Corporation in other capacities and receiving
compensation for such other services; provided, however, that Directors who are
not Independent Directors shall not receive any salary or other compensation for
their services as Directors of the Corporation.
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3.11 Reliance. Each Director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a Director.
ARTICLE IV
Committees
4.1 Number, Tenure and Qualifications. The Board of Directors may appoint
from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of one two or more
Directors, to serve at the pleasure of the Board of Directors.
4.2 Powers. The Board of Directors may delegate to committees appointed
under Section 4.1 of this Article any of the powers of the Board of Directors,
except as prohibited by law.
4.3 Meetings. Notice of committee meetings shall be given in the same
manner as notice for special meetings of the Board of Directors. A majority of
the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or any
two members of any committee (if there are at least two members of the
Committee) may fix the time and place of its meeting unless the Board shall
otherwise provide. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint another Director to act in the place of such absent member. Each
committee shall keep minutes of its proceedings.
4.4 Telephone Meetings. Members of a committee of the Board of Directors
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
4.5 Informal Action by Committees. Any action required or permitted to be
taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
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4.6 Vacancies. Subject to the provisions hereof, the Board of Directors
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member or to dissolve any such committee.
4.7 Executive Committee. The Board of Directors, by resolution duly
adopted, may designate an Executive Committee which shall consist of not less
than two Directors, including the Chairman of the Board. The members of the
Executive Committee shall serve until their successors are designated by the
Board of Directors, until removed, or until the Executive Committee is dissolved
by the Board of Directors. All vacancies that may occur in the Executive
Committee shall be filled by the Board of Directors.
When the Board of Directors is not in session, the Executive Committee
shall have all power vested in the Board of Directors by law, by the Articles,
or by these By-laws, except as otherwise provided in the MGCL or by a resolution
adopted by the Board of Directors. The Executive Committee shall report at the
next regular or special meeting of the Board of Directors all action that the
Executive Committee may have taken on behalf of the Board of Directors since the
last regular or special meeting of the Board of Directors.
Meetings of the Executive Committee shall be held at such places and at
such times fixed by resolution of the Executive Committee, or upon call of the
Chairman of the Board. Not less than 12 hours' notice shall be given by letter,
facsimile, telegraph or telephone (or in person) of all meetings of the
Executive Committee; provided, however, that notice need not be given of regular
meetings held at times and places fixed by resolution of the Executive Committee
and that meetings may be held at any time without notice if all of the members
of the Executive Committee are present or if those not present waive notice in
writing either before or after the meeting; provided, further, that attendance
at a meeting for the express purpose of objecting at the beginning of a meeting
to the transaction of any business because the meeting is not lawfully convened
shall not be considered a waiver of notice. A majority of the members of the
Executive Committee then serving shall constitute a quorum for the transaction
of business at any meeting of the Executive Committee.
4.8 Compensation Committee. The Board of Directors, by resolution duly
adopted, may designate a Compensation Committee which shall consist of two or
more Independent Directors. In addition, the Board of Directors at any time may
designate one or more alternate members of the Compensation Committee, who shall
be Independent Directors, who may act in place of any absent regular member upon
invitation by the chairman or secretary of the Compensation Committee.
With respect to bonuses, the Compensation Committee shall have and may
exercise the powers to determine the amounts annually available for bonuses
pursuant to any bonus plan or formula approved by the Board of Directors, to
determine bonus awards to executive officers and to exercise such further powers
with respect to bonuses as may from time to time be conferred by the Board of
Directors.
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With respect to salaries, the Compensation Committee shall have and may
exercise the power to fix and determine from time to time all salaries of the
executive officers of the Corporation, and such further powers with respect to
salaries as may from time to time be conferred by the Board of Directors.
The Compensation Committee shall administer the Corporation's stock and
other incentive plans and from time to time may grant, consistent with the
plans, stock options and other awards permissible under such plans.
Vacancies in the Compensation Committee shall be filled by the Board of
Directors, and members of the Compensation Committee shall be subject to removal
by the Board of Directors at any time.
The Compensation Committee shall fix its own rules of procedure. A
majority of the number of regular members then serving on the Compensation
Committee shall constitute a quorum; and regular and alternate members present
shall be counted to determine whether there is a quorum. The Compensation
Committee shall keep minutes of its meetings, and all action taken by it shall
be reported to the Board of Directors.
4.9 Audit Committee. The Board of Directors, by resolution duly adopted,
may designate an Audit Committee which shall consist of two or more Independent
Directors whose membership on the Audit Committee shall meet the requirements
set forth in the rules of the New York Stock Exchange, as amended from time to
time. Vacancies in the Audit Committee shall be filled by the Board of Directors
with Directors meeting the requirements set forth above, giving consideration to
continuity of the Audit Committee, and members shall be subject to removal by
the Board of Directors at any time. The Audit Committee shall fix its own rules
of procedure and a majority of the members serving shall constitute a quorum.
The Audit Committee shall meet at least twice per year with both the internal
and the Corporation's outside auditors present at each meeting and shall keep
minutes of its meetings and all action taken shall be reported to the Board of
Directors. The Audit Committee shall review the reports and minutes of any audit
committees of the Corporation's subsidiaries. The Audit Committee shall review
the Corporation's financial reporting process, including accounting policies and
procedures. The Audit Committee shall examine the report of the Corporation's
outside auditors, consult with them with respect to their report and the
standards and procedures employed by them in their audit, report to the Board of
Directors the results of its study and recommend the selection of auditors for
each fiscal year.
4.10 Nominating Committee. The Board of Directors, by resolution duly
adopted, may designate a Nominating Committee which shall consist of two or more
Directors. The Nominating Committee shall make recommendations to the Board of
Directors regarding nominees for election as Directors by the stockholders at
each annual meeting of stockholders and make such other recommendations
regarding tenure, and classification of Directors as the Nominating Committee
may deem advisable from time to time. The Nominating Committee
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shall fix its own rules of procedure and a majority of the members then serving
shall constitute a quorum.
4.11 Other Committees. The Board of Directors, by resolution adopted, may
establish such other standing or special committees of the Board of Directors as
it may deem advisable, and the members, terms and authority of such committees
shall be as set forth in the resolutions establishing the same.
ARTICLE V
Officers
5.1 Enumeration. The officers of the Corporation shall consist of a
President, a Treasurer, a Secretary and such other officers, including, without
limitation, a Chairman of the Board of Directors, a Chief Executive Officer, a
Chief Operating Officer and one or more Vice Presidents (including Executive
Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant
Treasurers and Assistant Secretaries, and such other officers as the Board of
Directors may determine.
5.2 Election. At the regular annual meeting of the Board following the
annual meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by the
Board of Directors at such regular annual meeting of the Board of Directors or
at any other regular or special meeting.
5.3 Qualification. No officer need be a stockholder or a Director. Any
person may occupy more than one office of the Corporation at any time; provided,
that such officer does not serve concurrently as both President and Vice
President. Any officer may be required by the Board of Directors to give bond
for the faithful performance of his or her duties in such amount and with such
sureties as the Board of Directors may determine.
5.4 Tenure. Except as otherwise provided by the Articles or by these
By-laws, each of the officers of the Corporation shall hold office until the
regular annual meeting of the Board of Directors following the next annual
meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
5.5 Resignation. Any officer may resign by delivering his or her written
resignation to the Corporation addressed to the President or the Secretary, and
such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
5.6 Removal. Except as otherwise provided by law, if the Board of
Directors in its judgement finds that the best interests of the Corporation will
be served, it may remove any officer by the affirmative vote of a majority of
the Directors then in office; provided however,
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that such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
5.7 Absence or Disability. In the event of the absence or disability of
any officer, the Board of Directors may designate another officer to act
temporarily in place of such absent or disabled officer.
5.8 Vacancies. Any vacancy in any office may be filled for the unexpired
portion of the term by the Board of Directors.
5.9 President. The President shall, subject to the direction of the Board
of Directors, have general supervision and control of the Corporation's
business. If there is no Chairman of the Board or if he or she is absent, the
President shall preside, when present, at all meetings of stockholders and of
the Board of Directors. The President shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
5.10 Chairman of the Board. The Chairman of the Board, if one is elected,
shall preside, when present, at all meetings of the stockholders and of the
Board of Directors. The Chairman of the Board shall have such other powers and
shall perform such other duties as the Board of Directors may from time to time
designate.
5.11 Chief Executive Officer. The Chief Executive Officer, if one is
elected, shall have such powers and shall perform such duties as the Board of
Directors may from time to time designate. If there shall be a Chief Executive
Officer at any time, such officer shall have authority to take any action that
the President is authorized to take.
5.12 Vice Presidents and Assistant Vice Presidents. Any Vice President
(including any Executive Vice President or Senior Vice President) and any
Assistant Vice President shall have such powers and shall perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.13 Treasurer and Assistant Treasurers. The Treasurer shall, subject to
the direction of the Board of Directors and except as the Board of Directors or
the President may otherwise provide, have general charge of the financial
affairs of the Corporation and shall cause to be kept accurate books of account.
The Treasurer shall have custody of all funds, securities, and valuable
documents of the Corporation. He or she shall have such other duties and powers
as may be designated from time to time by the Board of Directors or the Chief
Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
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5.14 Secretary and Assistant Secretaries. The Secretary shall record all
the proceedings of the meetings of the stockholders and the Board of Directors
(including committees of the Board) in books kept for that purpose. In his or
her absence from any such meeting, a temporary secretary chosen at the meeting
shall record the proceedings thereof. The Secretary shall have charge of the
stock ledger (which may, however, be kept by any transfer or other agent of the
Corporation). The Secretary shall have custody of the seal of the Corporation,
and the Secretary, or an Assistant Secretary, shall have authority to affix it
to any instrument requiring it, and, when so affixed, the seal may be attested
by his or her signature or that of an Assistant Secretary. The Secretary shall
have such other duties and powers as may be designated from time to time by the
Board of Directors or the Chief Executive Officer. In the absence of the
Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.15 Other Powers and Duties. Subject to these By-laws and to such
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors, the Chairman of the
Board or the President.
ARTICLE VI
Stock
6.1 Certificates. Each stockholder shall be entitled to a certificate of
the stock of the Corporation, which shall represent and certify the number of
shares of each class held by such stockholder in the Corporation, in such form
as may from time to time be prescribed by the Board of Directors. Such
certificate shall be signed by the Chairman of the Board, the President or a
Vice President and countersigned by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary. The Corporation seal and the signatures
by the Corporation's officers, the transfer agent or the registrar may be either
manual or facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, the certificate may be issued by the Corporation with the
same effect as if he or she were such officer, transfer agent or registrar at
the time of its issue. Each certificate representing shares which are restricted
as to their transferability or voting powers, which are preferred or limited as
to their dividends or as to their allocable portion of the assets upon
liquidation or which are redeemable at the option of the Corporation, shall have
a statement of such restriction, limitation, preference or redemption provision,
or a summary thereof, plainly stated on the certificate. If the Corporation has
authority to issue stock of more than one class, the certificate shall contain
on the face or back a full statement or summary of the designations and any
preferences, conversion on other rights, voting powers,
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restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class of stock
and, if the Corporation is authorized to issue any preferred or special class in
series, the differences in the relative rights and preferences between the
shares of each series to the extent they have been set and the authority of the
Board of Directors to set the relative rights and preferences of subsequent
series. In lieu of such statement or summary, the certificate may state that the
Corporation will furnish a full statement of such information to any stockholder
upon request and without charge. If any class of stock is restricted by the
Corporation as to transferability, the certificate shall contain a full
statement of the restriction or state that the Corporation will furnish
information about the restrictions to the stockholder on request and without
charge. Every certificate for shares of stock which are subject to a restriction
on transfer (as provided in Article IX of the Articles) and every certificate
issued when the Corporation is authorized to issue more than one class or series
of stock shall contain such legend (as provided in Article VII of the Articles)
with respect thereto as is required by law.
6.2 Lost, Destroyed and Mutilated Certificates. Holders of the shares of
the stock of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may in its discretion cause one or more new certificates for the same
number of shares in the aggregate to be issued to such stockholder upon the
surrender of the mutilated certificate or upon satisfactory proof of such loss
or destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
6.3 Transfer of Stock. Subject to the restrictions on transfer of stock
described in Article IX of the Articles, shares of stock of the Corporation
shall be transferable or assignable only on the stock transfer books of the
Corporation by the holder in person or by attorney upon surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or, if sought to be transferred by attorney, accompanied by a written
assignment or power of attorney properly executed, with transfer stamps (if
necessary) affixed, and with such proof of the authenticity of signatures as the
Corporation or its transfer agent may reasonably require.
6.4 Record Holders. Except as may otherwise be required by law, by the
Articles or by these By-laws, the Corporation shall be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other disposition of such stock,
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her postal address and any changes thereto.
6.5 Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or
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entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date: (a) in the case of determination
of stockholders entitled to vote at any meeting of stockholders, shall, unless
otherwise required by law, not be more than ninety nor less than ten days before
the date of such meeting and (b) in the case of any other action, shall not be
more than ninety days prior to such other action. If no record date is fixed:
(i) the record date for determining stockholders entitled to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is held
and (ii) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
ARTICLE VII
Indemnification
7.1 Indemnification. To the maximum extent permitted by Maryland law in
effect from time to time, the Corporation shall indemnify and, without requiring
a preliminary determination of the ultimate entitlement to indemnification,
shall pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former Director or officer
of the Corporation and who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a Director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served a predecessor of
the Corporation in any of the capacitates described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect any act
or failure to act which occurred prior to such amendment, repeal or adoption.
7.2 Contractual Nature of Rights. The foregoing provision of this Article
VII shall be deemed to be a contract between the Corporation and each Director
and Officer entitled to the benefits hereof at any time while this Article VII
is in effect, and any repeal or modification thereof shall not affect any rights
or obligations then existing with respect to any
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state of facts then or theretofore existing or any Proceeding theretofore or
thereafter brought based in whole or in part upon any such state of facts. If a
claim for indemnification or advancement of Expenses hereunder by a Director or
Officer is not paid in full by the Corporation within (a) 60 days after the
receipt by the Corporation of a written claim for indemnification or (b) in the
case of a Director, 10 days after the receipt by the Corporation of
documentation of Expenses and the required undertaking, such Director or Officer
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim, and if successful in whole or in part, such Director
or Officer shall also be entitled to be paid the expenses of prosecuting such
claim. The failure of the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) to make a
determination concerning the permissibility of such indemnification or, in the
case of a Director, advancement of Expenses, under this Article VII shall not be
a defense to the action and shall not create a presumption that such
indemnification or advancement is not permissible. It is the parties' intention
that if the Corporation contests any Director's, Officer's or Non-Officer
Employee's right to indemnification, the question of such Director's, Officer's
or Non-Officer Employee's right to indemnification shall be for the court to
decide, and neither the failure of the Corporation (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made a determination that
indemnification of such Director, Officer or Non-Officer Employee is proper in
the circumstances because the Director, Officer or Non-Officer Employee has met
the applicable standard of conduct required by applicable law, nor an actual
determination by the Corporation (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that the Director, Officer or Non-Officer Employee has not met
such applicable standard of conduct, shall create a presumption that such
Director, Officer or Non-Officer Employee has or has not met the applicable
standard of conduct.
7.3 Non-Exclusivity of Rights. The rights to indemnification and
advancement of Expenses set forth in this Article VII shall not be exclusive of
any other right which any Director, Officer or Non-Officer Employee may have or
hereafter acquire under any statute, provision of the Articles or these By-laws,
agreement, vote of stockholders or Disinterested Directors or otherwise.
7.4 Partial Indemnification. If any Director, Officer or Non-Officer
Employee is entitled under any provision of these By-laws to indemnification by
the Corporation for some or a portion of the expenses, judgments, fines or
penalties actually or reasonably incurred by him in the investigation, defense,
appeal or settlement of any civil or criminal action or proceeding, but not,
however, for the total amount thereof, the Corporation shall nevertheless
indemnify such Director, Officer or Non-Officer Employee for the portion of such
expenses, judgments, fines or penalties to which such Director, Officer or
Non-Officer Employee is entitled.
7.5 Mutual Acknowledgment. By accepting any potential benefits under this
Article VII each Director, Officer or Non-Officer Employee acknowledges that in
certain instances,
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Federal law or applicable public policy may prohibit the Corporation from
indemnifying its Directors, officers and employees under these By-laws or
otherwise. The Director, Officer or Non-Officer Employee understands and
acknowledges that the Corporation has undertaken and may be required in the
future to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Corporation's right under public policy to indemnify
Director, Officer or Non-Officer Employee.
7.6 Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer or Non-Officer Employee against any
liability of any character asserted against or incurred by the Corporation or
any such Director, Officer or Non-Officer Employee, or arising out of any such
person's Corporate Status, whether or not the Corporation would have the power
to indemnify such person against such liability under the MGCL or the provisions
of this Article VII.
ARTICLE VIII
Miscellaneous Provisions
8.1 Seal. The seal of the Corporation shall consist of a flat-faced
circular die, of which there may be any number of counterparts, on which there
shall be engraved the word "Seal" and the name of the Corporation. The Board of
Directors shall have the power to adopt and alter the seal of the Corporation.
8.2 Fiscal Year. The fiscal year of the Corporation shall be a calendar
year or as may otherwise be fixed by the Board of Directors.
8.3 Checks, Notes and Drafts. Checks, notes, drafts and other orders for
the payment of money shall be signed by such persons as the Board of Directors
from time to time may authorize. When the Board of Directors so authorizes,
however, the signature of any such person may be a facsimile.
8.4 Execution of Instruments. All deeds, leases, transfers, contracts,
bonds, notes and other obligations to be entered into by the Corporation in the
ordinary course of its business without Director action may be executed on
behalf of the Corporation by the Chairman of the Board, if one is elected, the
President or the Treasurer or any other officer, employee or agent of the
Corporation as the Board of Directors or Executive Committee may authorize.
8.5 Resident Agent. The Board of Directors may appoint a resident agent
upon whom legal process may be served in any action or proceeding against the
Corporation.
8.6 Corporate Records. The original or attested copies of the Articles,
By-laws and records of all meetings of the incorporators, stockholders and the
Board of Directors and the
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stock transfer books, which shall contain the names of all stockholders, their
record addresses and the amount of stock held by each, may be kept outside the
State of Maryland and shall be kept at the principal office of the Corporation,
at the office of its counsel or at an office of its transfer agent or at such
other place or places as may be designated from time to time by the Board of
Directors.
8.7 Amendment of By-laws. Except as provided otherwise by law, these
By-laws may be amended or repealed solely by the Board of Directors by the
affirmative vote of a majority of the Directors then in office.
8.8 Voting of Stock Held. Unless otherwise provided by resolution of the
Board of Directors or of the Executive Committee, if any, the Chairman of the
Board, if one is elected, the President or the Treasurer may from time to time
waive notice of and act on behalf of this Corporation, or appoint an attorney or
attorneys or agent or agents of the Corporation, in the name and on behalf of
the Corporation, to cast the vote that the Corporation may be entitled to cast
as a stockholder or otherwise in any other corporation, any of whose securities
may be held by the Corporation, at meetings of the holders of the shares or
other securities of such other corporation, or to consent in writing to any
action by any such other corporation; and the Chairman of the Board, if one is
elected, the President or the Treasurer shall instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent and may
execute or cause to be executed on behalf of the Corporation, and under its
corporate seal or otherwise, such written proxies, consents, waivers or other
instruments as may be necessary or proper in the premises. In lieu of such
appointment, the Chairman of the Board, if one is elected, the President or the
Treasurer may himself or herself attend any meetings of the holders of shares or
other securities of any such other corporation and there vote or exercise any or
all power of the Corporation as the holder of such shares or other securities of
such other corporation.
Adopted and effective as of March 17, 1998.
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COMMON STOCK
NUMBER SHARES
BCPG
BEACON CAPITAL PARTNERS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
CUSIP 073561 10 2
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR IMPORTANT NOTICE ON
IN BOSTON, MA OR NEW YORK, NY TRANSFER RESTRICTIONS AND OTHER INFORMATION
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
is the owner of
- --------------------------------------------------------------------------------
fully-paid and non-assessable shares of the COMMON STOCK, $.01 par value, of
==========================BEACON CAPITAL PARTNERS, INC.=========================
(hereinafter called the "Corporation") transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed or assigned. This Certificate
and the shares represented hereby are issued and held subject to the laws of the
State of Maryland and the Charter and Bylaw of the Corporation as from time to
time amended (copies of which are on file with the Corporation), to all of which
the holder, by acceptance hereof assents. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
SPECIMEN
3.18.98
ABN SECOL
/s/ Nancy J. Broderick
Treasurer
[CORPORATE SEAL]
/s/ Alan M. Leventhal
CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
BY BankBoston, N.A.
TRANSFER AGENT
AND REGISTRAR,
AUTHORIZED SIGNATURE
<PAGE>
BEACON CAPITAL PARTNERS, INC.
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of the
Corporations and Associations Article of the Annotated Code of Maryland with
respect to the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series, (i)
the differences in the relative rights and preferences between the shares of
each series to the extent set, and (ii) the authority of the Board of Directors
to set such rights and preferences of subsequent series. The foregoing summary
does not purport to be complete and is subject to and qualified in its entirety
by reference to the Corporation's Charter, as may be amended from time to time,
a copy of which will be sent without charge to each stockholder who so requests.
Such request must be made to the Secretary of the Corporation at its principal
office or to the Transfer Agent and Registrar.
The shares of the Corporation represented by this certificate are subject
to restrictions set forth in the Corporation's Charter which prohibit in general
(a) any Person (other than a Look-Through Entity) from Beneficially Owning
shares of Equity Stock in excess of the Ownership Limit, (b) any Look-Through
Entity from Beneficially Owning shares of Equity Stock in excess of the
Look-Through Ownership Limit and (c) any Person from acquiring or maintaining
any ownership interest in the stock of the Corporation that is inconsistent with
(i) the requirements of the Code pertaining to real estate investment trusts or
(ii) the Charter of the Corporation, and the holder of this certificate by his
acceptance hereof consents to be bound by such restrictions. Capitalized terms
used in this paragraph and not defined herein are defined in the Corporation's
Charter.
The Corporation will furnish without charge, to each stockholder who so
requests, a copy of the relevant provisions of the Charter and Bylaws of the
Corporation, a copy of the provisions setting forth the designations,
preferences, privileges and rights of each class of stock or series thereof that
the Corporation is authorized to issue and the qualifications, limitations and
restrictions of such preferences and/or rights. Any such request may be
addressed to the Secretary of the Corporation or to the Transfer Agent and
Registrar named on the face hereof.
The shares of Common Stock of the Corporation represented by this
certificate are subject to a Registration Rights Agreement (the "Registration
Rights Agreement") by and between the Corporation and NationsBanc Montgomery
Securities LLC. By its acquisition hereof, the holder of this certificate agrees
to be bound by the provisions of the Registration Rights Agreement, a copy of
which will be sent without charge to each stockholder who so requests. Such
request must be made to the Secretary of the Corporation at its principal office
or to the Transfer Agent and Registrar.
This security has not been registered under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and may not be offered or sold except
as set forth below. By its acquisition hereof, the holder (1) represents that
(A) it is a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act), (B) it is an institutional "Accredited Investor" (as defined in
Rule 501(a) (1), (2), (3) or (7) under the Securities Act), or (C) it is an
individiual "Accredited Investor" (as defined in Rule 501(a)(4), (5) or (6)
under the Securities Act), (2) agrees that it will not within two years after
the original issuance of this security resell or otherwise transfer this
security except (A) to the issuer thereof or any subsidiary thereof, (B) to a
qualified institutional buyer in compliance with Rule 144A under the Securities
Act, (C) pursuant to an effective registration statement under the Securities
Act or (D) in a transaction exempt from, or not subject to the registration
requirements of the Securities Act and (3) agrees that it will give to each
person to whom this security is transferred a notice substantially to the effect
of this legend.
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Corporation
or its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co. has an interest herein.
The following abbreviations, when used in the inscription on the face of
<PAGE>
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT--__________ Custodian__________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _______________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated________________________
(Signature) ____________________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPONO WITH THE NAME AS
WRITEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature Guaranteed: __________________________________________________________
ALL GUARANTEES MUST BE MADE BY A FINANCIAL INSTITUTION
(SUCH AS A BANK OR BROKER) WHICH IS A PARTICIPANT IN THE
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM ("STAMP"),
THE NEW YORK STOCK EXCHANGE, INC. MEDALLION SIGNATURE
PROGRAM ("MSP") OR THE STOCK EXCHANGES MEDALLION PROGRAM
("SEMP") AND MUST NOT BE DATED. GUARANTEES BY A NOTARY
PUBLIC ARE NOT ACCEPTABLE.
<PAGE>
EX-10.1
Employment And Noncompetition Agreement
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This EMPLOYMENT AND NONCOMPETITION AGREEMENT ("Agreement") is
made as of the 20th day of March, 1998 by and between Alan M. Leventhal of
Chestnut Hill, Massachusetts ("Executive"), and Beacon Capital Partners, Inc., a
Maryland corporation with a principal place of business at 50 Rowes Wharf,
Boston, MA 02110 (the "Company").
1. Term. The term of this Agreement shall commence on the date first above
written and, unless earlier terminated as provided in Paragraph 7 below, shall
terminate on the third anniversary of such date. The Original Term may be
extended for such period or periods, if any, as agreed to by Executive and the
Company (each a "Renewal Term"). The period of Executive's employment hereunder
consisting of the Original Term and all Renewal Terms is herein referred to as
the "Employment Period."
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Company and its affiliates. Executive shall serve the Company as
a senior corporate executive with the title Chairman of the Board of Directors
and Chief Executive Officer of the Company. Executive's duties and authority
shall be as set forth in the By-laws of the Company and as otherwise established
by the Board of Directors of the Company and shall be commensurate with his
title and position with the Company.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his efforts related to
real estate investment and development activities in furtherance of his duties
under this Agreement, except as otherwise approved by the Board of Directors of
the Company; provided, however, that nothing herein shall be interpreted to
preclude Executive from (i) participating as an officer or director of, or
advisor to, other for-profit enterprises, or (ii) participating as an officer or
director of, or advisor to, any charitable or other tax exempt organization or
otherwise engaging in charitable, fraternal or trade group activities, or (iii)
investing his assets as an investor in other entities or business ventures,
provided that such investment does not violate Section 9 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Company's business require. Executive
shall be based in the greater Boston metropolitan area.
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Company shall compensate Executive as provided in this Section 3.
(a) Base Salary. The Company shall pay Executive an aggregate annual
salary at the rate of $200,000 per annum during the Employment Period ("Base
Salary"), subject to withholding for applicable federal, state and local taxes.
Base Salary shall be payable in accordance with the Company's normal business
practices, but in no event less
<PAGE>
frequently than monthly. Executive's Base Salary shall be reviewed no less
frequently than annually by the Company and may be increased, but not decreased,
by the Company during the Employment Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period, Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, subject to Executive's
compliance with such criteria as the Company's Board of Directors or
Compensation Committee thereof may establish for Executive's participation in
such plans from time to time. Any awards to Executive under such plans will be
established in the sole discretion of the Company's Board of Directors or
Compensation Committee thereof.
(c) Stock Incentive Plans. During the Employment Period, Executive
shall be eligible to participate in stock incentive plans established from time
to time for the benefit of senior executive officers and other employees of the
Company in accordance with the terms and conditions of such plans. All decisions
regarding awards to Executive under the Company's stock incentive plans shall be
made in the sole discretion of the Company's Board of Directors or Compensation
Committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Company.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Company shall maintain from time to
time for the benefit of senior executive officers of the Company and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Company shall provide Executive with life insurance and
comprehensive disability insurance coverage pursuant to plans maintained by the
Company from time to time for the benefit of senior executive officers of the
Company and their families, on the terms and subject to the conditions set forth
in such plans.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Company
governing senior executive officers.
(h) Other Benefits. During the Employment Period, the Company shall
provide to Executive such other benefits, including sick leave and the right to
participate in
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<PAGE>
such retirement or pension plans, as are made generally available to senior
executive officers and employees of the Company from time to time.
4. Indemnification and Liability Insurance. The Company shall enter into
an indemnity agreement with Executive in form and substance substantially
similar to the indemnity agreements entered into between the Company and its
directors, pursuant to which the Company shall agree to indemnify Executive with
respect to any actions commenced against Executive in his capacity as an officer
or director, or former officer or director, of the Company or any affiliate
thereof for which he may serve in such capacity. The Company also agrees to use
its best efforts to secure and maintain officers and directors liability
insurance providing coverage for Executive.
5. Company's Policies. Executive agrees to observe and comply with the
rules and regulations of the Company as adopted by the Board of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Board of
Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Company, whether or not confidential information or
trade secrets, shall be the exclusive property of the Company. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain in competing, directly or indirectly, with the Company, any
confidential information of the Company obtained by him incident to his
employment with the Company. The term "confidential information" includes,
without limitation, financial information, business plans, prospects and
opportunities which have been discussed or considered by the management of the
Company but does not include any information which has become part of the public
domain by means other than Executive's non-observance of his obligations
hereunder. This paragraph shall survive the termination of this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Company with 30 days' advance written notice
with or without Cause (as defined in Section 7(e) below), by a majority vote of
all of the members of the Board of Directors upon written notice to Executive,
subject only to the severance provisions specifically set forth in this Section
7.
3
<PAGE>
(b) Termination by Executive. Executive's employment hereunder may
be terminated effective upon 30 days' advance written notice by Executive with
or without Good Reason (as defined in Section 7(e) below). In the case of
termination of Executive's employment for Good Reason, Executive shall be
entitled to receive severance pursuant to Section 7(c) below.
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of Executive's employment. Notwithstanding the
foregoing, in the event of Executive's termination of employment for Good Reason
pursuant to Section 7(b) or termination of Executive's employment by the Company
other than for Cause, Executive shall be entitled to the following benefits:
(i) The Company shall pay Executive an amount in a lump sum
equal to three (3) times the sum of the Executive's Base Salary and the
highest potential cash bonus that could be earned by Executive in the year
of termination;
(ii) For 36 months, Executive shall continue to receive all
benefits described in Section 3 existing on the date of termination. For
purposes of the application of such benefits, Executive shall be treated
as if he had remained in the employ of the Company with a Base Salary at
the rate in effect on the date of termination;
(iii) Executive shall vest fully in all outstanding stock
option and other stock-based awards;
(iv) Executive shall be entitled to receive payments under all
long-term incentive programs of the Company, including the Incentive
Return (as described in the offering memorandum dated March __, 1998), as
if he had remained employed for the duration of the performance period
under the long-term incentive programs; and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any amounts
earned or benefits received from such other employment will not serve to
reduce in any way the amounts and benefits payable in accordance herewith.
(d) Termination by the Company for Cause. If (i) Executive is
terminated for Cause or (ii) Executive shall voluntarily terminate his
employment hereunder other than for Good Reason, then the Employment Period
shall terminate as of the effective date set forth in the written notice of such
termination (the "Termination Date") and Executive shall be entitled to receive
only his Base Salary at the rate then in effect until the Termination Date and
any
4
<PAGE>
outstanding stock-based award held by Executive shall expire in accordance with
the terms of the stock incentive plan or applicable award agreement.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) "Cause" shall mean a finding by the Board of Directors
that Executive has (A) acted with gross negligence or willful misconduct
in connection with the performance of his material duties hereunder, (B)
defaulted in the performance of his material duties hereunder and has not
corrected such action within 30 days of receipt of written notice thereof;
(C) willfully acted against the best interests of the Company, which act
has had a material and adverse impact on the financial affairs of the
Company; or (D) been convicted of a felony or committed a material act of
common law fraud against the Company or its employees and such act or
conviction has, or the Board of Directors reasonably determines will have,
a material adverse effect on the interests of the Company.
(ii) A "Good Reason" shall be deemed to have occurred in the
event of:
(A) an adverse change in duties, responsibilities,
status or positions with the Company from the duties,
responsibilities, status or positions set forth in Section 2;
(B) a failure of the Board of Directors to elect
Executive to serve as the Chairman of the Board of Directors and
Chief Executive Officer;
(C) a material failure by the Company to comply with any
of the provisions of this Agreement;
(D) a reduction by the Company in Executive's Base
Salary;
(E) the failure by the Company to provide and credit
Executive with the number of paid vacation days to which Executive
is then entitled in accordance with the Company's normal vacation
policies;
(F) the Company's requirement of Executive to be based
in an office located beyond 25 miles from Executive's residence,
except for required travel relating to the Company's business
substantially consistent with Executive's business travel
obligations; or
(G) the failure by the Company to obtain from any
successor to the Company an agreement to be bound by this Agreement
pursuant to Section 12 hereof.
5
<PAGE>
(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Company shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Board of Directors may determine, to
Executive's estate or to a beneficiary designated by Executive in writing prior
to his death. Any unexercised or unvested stock options or other stock-based
awards shall become fully exercisable or vest upon Executive's death. Executive
shall be entitled to receive payments under all long-term incentive programs of
the Company, including the Incentive Return, as if he had remained employed for
the duration of the performance period under the long-term incentive programs.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Company (the "Disability Period"). Following the expiration of
the Disability Period, the Company may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options or other
stock-based awards shall become fully exercisable or vest upon such termination.
Executive shall be entitled to receive payments under all long-term incentive
programs of the Company, including the Incentive Return, as if he had remained
employed for the duration of the performance period under the long-term
incentive programs.
(h) Mediation of Disputes. The parties shall endeavor in good faith
to settle within 90 days any controversy or claim arising out of or relating to
this Agreement or the breach thereof through mediation with JAMS, Endispute or
similar organizations. If the controversy or claim is not resolved within 90
days, the parties shall be free to pursue other legal remedies in law or equity.
8. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any compensation, payment or distribution
by the Company to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Severance Payments"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any federal, state, and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
6
<PAGE>
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by a
nationally recognized accounting firm selected by the Company (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the Date of Termination, if
applicable, or at such earlier time as is reasonably requested by the Company or
the Executive. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation applicable to individuals for the
calendar year in which the Gross-Up Payment is to be made, and state and local
income taxes at the highest marginal rates of individual taxation in the state
and locality of the Executive's residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 8(b), shall be paid to the Executive within
five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, the
Company shall furnish the Executive with an opinion of counsel that failure to
report the Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"). In the event that the
Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred, consistent
with the calculations required to be made hereunder, and any such Underpayment,
and any interest and penalties imposed on the Underpayment and required to be
paid by the Executive in connection with the proceedings described in Section
8(c), shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, provided that
7
<PAGE>
the Company has set aside adequate reserves to cover the Underpayment and any
interest and penalties thereon that may accrue, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
8(c), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issues raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with
8
<PAGE>
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 8(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Noncompetition Covenant.
(a) Because Executive's services to the Company are essential and
because Executive has access to the Company's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Company for Cause or by
Executive other than for Good Reason, during the Noncompetition Period,
Executive will not, without the prior written consent of the Board of Directors
of the Company which shall include the unanimous consent of the Directors who
are not officers of the Company, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any business
that engages or attempts to engage in, directly or indirectly, the
acquisition, development, construction, operation, management or leasing
of any commercial office real estate property anywhere in the United
States that the Company conducts its affairs, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the Company or
its affiliates and any tenant, supplier, contractor, lender, employee or
governmental agency or authority.
(b) For purposes of this Section 9, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the first anniversary thereof.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 9 from making investments in any
entity that engages, directly or indirectly, in the acquisition, development,
construction, operation, management or leasing of commercial office real estate
properties, regardless of where they are located, if the shares or other
ownership interests of such entity are publicly traded and Executive's aggregate
investment in such entity constitutes less than five percent (5%) of the equity
ownership of such entity.
9
<PAGE>
(d) The provisions of this Section 9 shall survive the termination
of this Agreement.
10. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
11. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Company or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
12. Legal Fees. The Company shall pay to Executive all reasonable
legal and mediation fees and expenses incurred by Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation initiated by Executive.
13. Miscellaneous. This Agreement (i) constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes any and all prior agreements or understandings, (ii) may not be
assigned by Executive without the prior written consent of the Company, and
(iii) may be assigned by the Company and shall be binding upon, and inure to the
benefit of, the Company's successors and assigns. Headings herein are for
convenience of reference only and shall not define, limit or interpret the
contents hereof.
14. Amendment. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
15. Specific Enforcement. The provisions of Sections 6 and 9 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Company would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 9 of this Agreement and
further acknowledge that the Company may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
16. Severability. If a court of competent jurisdiction adjudicates
any one or more of the provisions hereof as invalid, illegal or unenforceable in
any respect, such provision(s) shall be ineffective only to the extent and
duration of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining
10
<PAGE>
substance of such provision or any other provision of this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had been limited or modified (consistent with its general intent) to
the extent necessary so that it shall be valid, legal and enforceable. If it
shall not be possible to so limit or modify such invalid, illegal or
unenforceable provision, this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, and the
parties will use their best efforts to substitute a valid, legal and enforceable
provision which, insofar as practicable, implements the purpose and intent of
the provision originally contained herein.
17. Governing Law. This Agreement shall be construed and governed
by the laws of the Commonwealth of Massachusetts excluding its conflicts of laws
provisions.
11
<PAGE>
IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
BEACON CAPITAL PARTNERS, INC.
/s/ Alan M. Leventhal /s/ Lionel P. Fortin
__________________________________ By: _____________________________________
Alan M. Leventhal Lionel P. Fortin
President and Chief Operating Officer
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<PAGE>
EX-10.2
Employment and Noncompetition Agreement
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This EMPLOYMENT AND NONCOMPETITION AGREEMENT ("Agreement") is made as of
the 20th day of March, 1998 by and between Lionel P. Fortin of Boston,
Massachusetts ("Executive"), and Beacon Capital Partners, Inc., a Maryland
corporation with a principal place of business at 50 Rowes Wharf, Boston, MA
02110 (the "Company").
1. Term. The term of this Agreement shall commence on the date first above
written and, unless earlier terminated as provided in Paragraph 7 below, shall
terminate on the third anniversary of such date. The Original Term may be
extended for such period or periods, if any, as agreed to by Executive and the
Company (each a "Renewal Term"). The period of Executive's employment hereunder
consisting of the Original Term and all Renewal Terms is herein referred to as
the "Employment Period."
2. Employment and Duties.
(a) During the Employment Period, Executive shall be employed in the
business of the Company and its affiliates. Executive shall serve the Company as
a senior corporate executive with the title President and Chief Operating
Officer of the Company. Executive's duties and authority shall be as set forth
in the By-laws of the Company and as otherwise established by the Board of
Directors of the Company and shall be commensurate with his title and position
with the Company.
(b) Executive agrees to his employment as described in this
Paragraph 2 and agrees to devote substantially all of his efforts related to
real estate investment and development activities in furtherance of his duties
under this Agreement, except as otherwise approved by the Board of Directors of
the Company; provided, however, that nothing herein shall be interpreted to
preclude Executive from (i) participating as an officer or director of, or
advisor to, other for-profit enterprises, or (ii) participating as an officer or
director of, or advisor to, any charitable or other tax exempt organization or
otherwise engaging in charitable, fraternal or trade group activities, or (iii)
investing his assets as an investor in other entities or business ventures,
provided that such investment does not violate Section 9 hereof.
(c) In performing his duties hereunder, Executive shall be available
for reasonable travel as the needs of the Company's business require. Executive
shall be based in the greater Boston metropolitan area.
3. Compensation and Benefits. In consideration of Executive's services
hereunder, the Company shall compensate Executive as provided in this Section 3.
(a) Base Salary. The Company shall pay Executive an aggregate annual
salary at the rate of $200,000 per annum during the Employment Period ("Base
Salary"), subject to withholding for applicable federal, state and local taxes.
Base Salary shall be payable in accordance with the Company's normal business
practices, but in no event less
<PAGE>
frequently than monthly. Executive's Base Salary shall be reviewed no less
frequently than annually by the Company and may be increased, but not decreased,
by the Company during the Employment Period.
(b) Incentive Compensation. In addition to the Base Salary payable
to Executive pursuant to Section 3(a), during the Employment Period, Executive
shall be eligible to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, subject to Executive's
compliance with such criteria as the Company's Board of Directors or
Compensation Committee thereof may establish for Executive's participation in
such plans from time to time. Any awards to Executive under such plans will be
established in the sole discretion of the Company's Board of Directors or
Compensation Committee thereof.
(c) Stock Incentive Plans. During the Employment Period, Executive
shall be eligible to participate in stock incentive plans established from time
to time for the benefit of senior executive officers and other employees of the
Company in accordance with the terms and conditions of such plans. All decisions
regarding awards to Executive under the Company's stock incentive plans shall be
made in the sole discretion of the Company's Board of Directors or Compensation
Committee thereof.
(d) Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company, subject to such reasonable requirements with respect to
substantiation and documentation as may be specified by the Company.
(e) Medical and Dental Insurance. During the Employment Period,
Executive and Executive's immediate family shall be entitled to participate in
such medical and dental benefit plans as the Company shall maintain from time to
time for the benefit of senior executive officers of the Company and their
families, on the terms and subject to the conditions set forth in such plans.
(f) Life Insurance and Disability Insurance. During the Employment
Period, the Company shall provide Executive with life insurance and
comprehensive disability insurance coverage pursuant to plans maintained by the
Company from time to time for the benefit of senior executive officers of the
Company and their families, on the terms and subject to the conditions set forth
in such plans.
(g) Vacations. Executive shall be entitled to reasonable paid
vacations in accordance with the then regular procedures of the Company
governing senior executive officers.
(h) Other Benefits. During the Employment Period, the Company shall
provide to Executive such other benefits, including sick leave and the right to
participate in
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such retirement or pension plans, as are made generally available to senior
executive officers and employees of the Company from time to time.
4. Indemnification and Liability Insurance. The Company shall enter into
an indemnity agreement with Executive in form and substance substantially
similar to the indemnity agreements entered into between the Company and its
directors, pursuant to which the Company shall agree to indemnify Executive with
respect to any actions commenced against Executive in his capacity as an officer
or director, or former officer or director, of the Company or any affiliate
thereof for which he may serve in such capacity. The Company also agrees to use
its best efforts to secure and maintain officers and directors liability
insurance providing coverage for Executive.
5. Company's Policies. Executive agrees to observe and comply with the
rules and regulations of the Company as adopted by the Board of Directors
regarding the performance of his duties and to carry out and perform orders,
directions and policies communicated to him from time to time by the Board of
Directors.
6. Nondisclosure Covenant.
(a) General. All records, financial statements and similar documents
obtained, reviewed or compiled by Executive in the course of the performance by
him of services for the Company, whether or not confidential information or
trade secrets, shall be the exclusive property of the Company. Executive shall
have no rights in such documents upon any termination of this Agreement.
(b) Confidential Information. Executive will not disclose to any
person or entity (except as required by applicable law or in connection with the
performance of his duties and responsibilities hereunder), or use for his own
benefit or gain in competing, directly or indirectly, with the Company, any
confidential information of the Company obtained by him incident to his
employment with the Company. The term "confidential information" includes,
without limitation, financial information, business plans, prospects and
opportunities which have been discussed or considered by the management of the
Company but does not include any information which has become part of the public
domain by means other than Executive's non-observance of his obligations
hereunder. This paragraph shall survive the termination of this Agreement.
7. Termination and Severance Payments.
(a) At-Will Employment. Executive's employment hereunder is "at
will" and may be terminated by the Company with 30 days' advance written notice
with or without Cause (as defined in Section 7(e) below), by a majority vote of
all of the members of the Board of Directors upon written notice to Executive,
subject only to the severance provisions specifically set forth in this Section
7.
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(b) Termination by Executive. Executive's employment hereunder may
be terminated effective upon 30 days' advance written notice by Executive with
or without Good Reason (as defined in Section 7(e) below). In the case of
termination of Executive's employment for Good Reason, Executive shall be
entitled to receive severance pursuant to Section 7(c) below.
(c) Certain Benefits upon Termination by Executive. Except as
specifically provided in this Section 7 or otherwise required by law, all
compensation and benefits to Executive under this Agreement shall terminate on
the date of termination of Executive's employment. Notwithstanding the
foregoing, in the event of Executive's termination of employment for Good Reason
pursuant to Section 7(b) or termination of Executive's employment by the Company
other than for Cause, Executive shall be entitled to the following benefits:
(i) The Company shall pay Executive an amount in a lump sum
equal to three (3) times the sum of the Executive's Base Salary and the
highest potential cash bonus that could be earned by Executive in the year
of termination;
(ii) For 36 months, Executive shall continue to receive all
benefits described in Section 3 existing on the date of termination. For
purposes of the application of such benefits, Executive shall be treated
as if he had remained in the employ of the Company with a Base Salary at
the rate in effect on the date of termination;
(iii) Executive shall vest fully in all outstanding stock
option and other stock-based awards;
(iv) Executive shall be entitled to receive payments under all
long-term incentive programs of the Company, including the Incentive
Return (as described in the offering memorandum dated March __, 1998), as
if he had remained employed for the duration of the performance period
under the long-term incentive programs; and
(v) Nothing herein shall be deemed to obligate Executive to
seek other employment in the event of any such termination and any amounts
earned or benefits received from such other employment will not serve to
reduce in any way the amounts and benefits payable in accordance herewith.
(d) Termination by the Company for Cause. If (i) Executive is
terminated for Cause or (ii) Executive shall voluntarily terminate his
employment hereunder other than for Good Reason, then the Employment Period
shall terminate as of the effective date set forth in the written notice of such
termination (the "Termination Date") and Executive shall be entitled to receive
only his Base Salary at the rate then in effect until the Termination Date and
any
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outstanding stock-based award held by Executive shall expire in accordance with
the terms of the stock incentive plan or applicable award agreement.
(e) Definitions. The following terms shall be defined as set forth
below.
(i) "Cause" shall mean a finding by the Board of Directors
that Executive has (A) acted with gross negligence or willful misconduct
in connection with the performance of his material duties hereunder, (B)
defaulted in the performance of his material duties hereunder and has not
corrected such action within 30 days of receipt of written notice thereof;
(C) willfully acted against the best interests of the Company, which act
has had a material and adverse impact on the financial affairs of the
Company; or (D) been convicted of a felony or committed a material act of
common law fraud against the Company or its employees and such act or
conviction has, or the Board of Directors reasonably determines will have,
a material adverse effect on the interests of the Company.
(ii) A "Good Reason" shall be deemed to have occurred in the
event of:
(A) an adverse change in duties, responsibilities,
status or positions with the Company from the duties,
responsibilities, status or positions set forth in Section 2;
(B) a failure of the Board of Directors to elect
Executive to serve as the Chairman of the Board of Directors and
Chief Executive Officer;
(C) a material failure by the Company to comply with any
of the provisions of this Agreement;
(D) a reduction by the Company in Executive's Base
Salary;
(E) the failure by the Company to provide and credit
Executive with the number of paid vacation days to which Executive
is then entitled in accordance with the Company's normal vacation
policies;
(F) the Company's requirement of Executive to be based
in an office located beyond 25 miles from Executive's residence,
except for required travel relating to the Company's business
substantially consistent with Executive's business travel
obligations; or
(G) the failure by the Company to obtain from any
successor to the Company an agreement to be bound by this Agreement
pursuant to Section 12 hereof.
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(f) Termination by Reason of Death. The Employment Period shall
terminate upon Executive's death and in such event, the Company shall pay
Executive's Base Salary for a period of six (6) months from the date of his
death, or such longer period as the Board of Directors may determine, to
Executive's estate or to a beneficiary designated by Executive in writing prior
to his death. Any unexercised or unvested stock options or other stock-based
awards shall become fully exercisable or vest upon Executive's death. Executive
shall be entitled to receive payments under all long-term incentive programs of
the Company, including the Incentive Return, as if he had remained employed for
the duration of the performance period under the long-term incentive programs.
(g) Termination by Reason of Disability. In the event that Executive
shall become unable to efficiently perform his duties hereunder because of any
physical or mental disability or illness, Executive shall be entitled to be paid
his Base Salary until the later of such time when (i) the period of disability
or illness (whether or not the same disability or illness) shall exceed 180
consecutive days during the Employment Period and (ii) Executive becomes
eligible to receive benefits under a comprehensive disability insurance policy
obtained by the Company (the "Disability Period"). Following the expiration of
the Disability Period, the Company may terminate this Agreement upon written
notice of such termination. Any unexercised or unvested stock options or other
stock-based awards shall become fully exercisable or vest upon such termination.
Executive shall be entitled to receive payments under all long-term incentive
programs of the Company, including the Incentive Return, as if he had remained
employed for the duration of the performance period under the long-term
incentive programs.
(h) Mediation of Disputes. The parties shall endeavor in good faith
to settle within 90 days any controversy or claim arising out of or relating to
this Agreement or the breach thereof through mediation with JAMS, Endispute or
similar organizations. If the controversy or claim is not resolved within 90
days, the parties shall be free to pursue other legal remedies in law or equity.
8. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any compensation, payment or distribution
by the Company to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Severance Payments"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any federal, state, and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
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<PAGE>
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by a
nationally recognized accounting firm selected by the Company (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the Date of Termination, if
applicable, or at such earlier time as is reasonably requested by the Company or
the Executive. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation applicable to individuals for the
calendar year in which the Gross-Up Payment is to be made, and state and local
income taxes at the highest marginal rates of individual taxation in the state
and locality of the Executive's residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 8(b), shall be paid to the Executive within
five days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, the
Company shall furnish the Executive with an opinion of counsel that failure to
report the Excise Tax on the Executive's applicable federal income tax return
would not result in the imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (an "Underpayment"). In the event that the
Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred, consistent
with the calculations required to be made hereunder, and any such Underpayment,
and any interest and penalties imposed on the Underpayment and required to be
paid by the Executive in connection with the proceedings described in Section
8(c), shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Executive knows of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which he gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, provided that
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<PAGE>
the Company has set aside adequate reserves to cover the Underpayment and any
interest and penalties thereon that may accrue, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
8(c), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless,
on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issues raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), the Executive becomes entitled to receive
any refund with
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respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 8(c)) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Noncompetition Covenant.
(a) Because Executive's services to the Company are essential and
because Executive has access to the Company's confidential information,
Executive covenants and agrees that (i) during the Employment Period and (ii) in
the event that this Agreement is terminated by the Company for Cause or by
Executive other than for Good Reason, during the Noncompetition Period,
Executive will not, without the prior written consent of the Board of Directors
of the Company which shall include the unanimous consent of the Directors who
are not officers of the Company, directly or indirectly:
(A) engage, participate or assist, as an owner, partner,
employee, consultant, director, officer, trustee or agent, in any business
that engages or attempts to engage in, directly or indirectly, the
acquisition, development, construction, operation, management or leasing
of any commercial office real estate property anywhere in the United
States that the Company conducts its affairs, or
(B) intentionally interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between the Company or
its affiliates and any tenant, supplier, contractor, lender, employee or
governmental agency or authority.
(b) For purposes of this Section 9, the Noncompetition Period shall
mean the period commencing on the date of termination of Executive's employment
under this Agreement and ending on the first anniversary thereof.
(c) Notwithstanding anything contained herein to the contrary,
Executive is not prohibited by this Section 9 from making investments in any
entity that engages, directly or indirectly, in the acquisition, development,
construction, operation, management or leasing of commercial office real estate
properties, regardless of where they are located, if the shares or other
ownership interests of such entity are publicly traded and Executive's aggregate
investment in such entity constitutes less than five percent (5%) of the equity
ownership of such entity.
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(d) The provisions of this Section 9 shall survive the termination
of this Agreement.
10. Conflicting Agreements. Executive hereby represents and warrants
that the execution of this Agreement and the performance of his obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar covenants which would affect the performance of his
obligations hereunder.
11. Notices. Any notice required or permitted hereunder shall be in
writing and shall be deemed sufficient when given by hand, by nationally
recognized overnight courier or by express, registered or certified mail,
postage prepaid, return receipt requested, and addressed to the Company or
Executive, as applicable, at the address indicated above (or to such other
address as may be provided by notice).
12. Legal Fees. The Company shall pay to Executive all reasonable
legal and mediation fees and expenses incurred by Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation initiated by Executive.
13. Miscellaneous. This Agreement (i) constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes any and all prior agreements or understandings, (ii) may not be
assigned by Executive without the prior written consent of the Company, and
(iii) may be assigned by the Company and shall be binding upon, and inure to the
benefit of, the Company's successors and assigns. Headings herein are for
convenience of reference only and shall not define, limit or interpret the
contents hereof.
14. Amendment. This Agreement may be amended, modified or
supplemented by the mutual consent of the parties in writing, but no oral
amendment, modification or supplement shall be effective.
15. Specific Enforcement. The provisions of Sections 6 and 9 of this
Agreement are to be specifically enforced if not performed according to their
terms. Without limiting the generality of the foregoing, the parties acknowledge
that the Company would be irreparably damaged and there would be no adequate
remedy at law for Executive's breach of Sections 6 and 9 of this Agreement and
further acknowledge that the Company may seek entry of a temporary restraining
order or preliminary injunction, in addition to any other remedies available at
law or in equity, to enforce the provisions thereof.
16. Severability. If a court of competent jurisdiction adjudicates
any one or more of the provisions hereof as invalid, illegal or unenforceable in
any respect, such provision(s) shall be ineffective only to the extent and
duration of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining
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<PAGE>
substance of such provision or any other provision of this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had been limited or modified (consistent with its general intent) to
the extent necessary so that it shall be valid, legal and enforceable. If it
shall not be possible to so limit or modify such invalid, illegal or
unenforceable provision, this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein, and the
parties will use their best efforts to substitute a valid, legal and enforceable
provision which, insofar as practicable, implements the purpose and intent of
the provision originally contained herein.
17. Governing Law. This Agreement shall be construed and governed
by the laws of the Commonwealth of Massachusetts excluding its conflicts of laws
provisions.
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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year
first above written.
BEACON CAPITAL PARTNERS, INC.
/s/ Lionel P. Fortin /s/ William A. Bonn
__________________________________ By: ______________________________________
Lionel P. Fortin William A. Bonn
Senior Vice President and General
Counsel
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EX-10.3
Stock Option And Incentive Plan
BEACON CAPITAL PARTNERS, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Beacon Capital Partners, Inc. 1998 Stock
Option and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage
and enable the officers, employees, Independent Directors and other key persons
(including consultants) of Beacon Capital Partners, Inc. (the "Company"), the
employees and other key persons of Beacon Capital Partners, L.P. (the "Operating
Partnership") and the Company's other Subsidiaries, upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company. It is anticipated
that providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock
Awards, Performance Share Awards, Dividend Equivalent Rights and Other
Stock-Based Awards.
"Board" means the Board of Directors of the Company.
"Change of Control" is defined in Section 17.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Compensation Committee of the Board.
"Deferred Stock Award" means Awards granted pursuant to Section 7.
"Dividend Equivalent Right" means Awards granted pursuant to Section 10.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 18.
"Fair Market Value" of the Stock on any given date means the fair market
value of the Stock determined in good faith by the Committee; provided, however,
that (i) if the Stock is admitted to quotation on the National Association of
Securities Dealers Automated Quotation
<PAGE>
System ("NASDAQ"), the Fair Market Value on any given date shall not be less
than the average of the highest bid and lowest asked prices of the Stock
reported for such date or, if no bid and asked prices were reported for such
date, for the last day preceding such date for which such prices were reported,
or (ii) if the Stock is admitted to trading on a national securities exchange or
the NASDAQ National Market System, the Fair Market Value on any date shall not
be less than the closing price reported for the Stock on such exchange or system
for such date or, if no sales were reported for such date, for the last date
preceding the date for such a sale was reported. Notwithstanding the foregoing,
the Fair Market Value on the first day of the Initial Public Offering of Stock
shall be the initial offering price as set forth in the final prospectus for the
Company's initial public offering.
"Incentive Stock Option" means any Stock Option that is designated and
qualifies as an "incentive stock option" as defined in Section 422 of the Code.
"Independent Director" means a member of the Board who is not an officer
or employee of the Corporation or any affiliate thereof and who does not have a
material business or professional relationship with the Corporation or any
affiliate thereof.
"Initial Public Offering" means the Company's initial public offering of
Stock.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Operating Partnership" means Beacon Capital Partners, L.P., a Delaware
limited partnership, and any successor thereto.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Other Stock-Based Award" means Awards granted pursuant to Section 11.
"Performance Share Award" means Awards granted pursuant to Section 9.
"Restricted Stock Award" means Awards granted pursuant to Section 6.
"Stock" means the Common Stock, par value $0.01 per share, of the Company,
subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50 percent or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.
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"Unrestricted Stock Award" means any Award granted pursuant to Section 8.
SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by the Committee of the
Board.
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the individuals to whom Awards may from time to time
be granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted
Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards,
Performance Share Awards, Dividend Equivalent Rights and Other Stock-Based
Awards, or any combination of the foregoing, granted to any one or more
participants;
(iii) to determine the number of shares of Stock to be covered by
any Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all
or any portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend at any
time the period in which Stock Options may be exercised;
(vii) to determine at any time whether, to what extent, and under
what circumstances distribution or the receipt of Stock and other amounts
payable with respect to an Award shall be deferred either automatically or
at the election of the participant and whether and to what extent the
Company shall pay or credit amounts constituting interest (at rates
determined by the Committee) or dividends or deemed dividends on such
deferrals; and
(viii) at any time to adopt, alter and repeal such rules, guidelines
and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
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administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. Any such delegation by the Committee
shall include a limitation as to the amount of Awards that may be granted during
the period of the delegation and shall contain guidelines as to the
determination of the exercise price of any Option, the conversion ratio or price
of other Awards and the vesting criteria. The Committee may revoke or amend the
terms of a delegation at any time but such action shall not invalidate any prior
actions of the Committee's delegate or delegates that were consistent with the
terms of the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be such aggregate number of shares
of Stock as does not exceed the sum of (i) 2,543,895 shares; plus (ii) as of the
last business date of each calendar quarter ending after the closing of the
Company's offering of Common Stock pursuant to the Offering Memorandum dated
March 17, 1998, 10 percent of any net increase in the total number of shares of
Stock outstanding (assuming all units of partnership interests in the Operating
Partnership that are subject to redemption rights are converted into Stock). For
purposes of this limitation, the shares of Stock underlying any Awards which are
forfeited, cancelled, reacquired by the Company, satisfied without the issuance
of Stock or otherwise terminated (other than by exercise) shall be added back to
the shares of Stock available for issuance under the Plan. Subject to such
overall limitation, shares of Stock may be issued up to such maximum number
pursuant to any type or types of Award. The shares available for issuance under
the Plan may be authorized but unissued shares of Stock or shares of Stock
reacquired by the Company and held in its treasury.
(b) Changes in Stock. If, as a result of any reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, the Committee shall make an appropriate or proportionate adjustment
in (i) the maximum number of shares reserved for issuance under the Plan, (ii)
the number of Stock Options that can be granted to any one individual
participant, (iii) the number and kind of shares or other securities
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subject to any then outstanding Awards under the Plan, and (iv) the price for
each share subject to any then outstanding Stock Options under the Plan, without
changing the aggregate exercise price (i.e., the exercise price multiplied by
the number of Stock Options) as to which such Stock Options remain exercisable.
The adjustment by the Committee shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan resulting from any
such adjustment, but the Committee in its discretion may make a cash payment in
lieu of fractional shares.
The Committee may also adjust the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding Awards to take into
consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Committee that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification, extension
or renewal of the Option within the meaning of Section 424(h) of the Code.
(c) Mergers. In the case of (i) the dissolution or liquidation of the
Company, (ii) a merger, reorganization or consolidation in which a majority of
the outstanding voting power of the Company is acquired by another person or
entity (other than a holding company formed by the Company), (iii) the sale of
all or substantially all of the assets of the Company to an unrelated person or
entity, or (iv) the sale of all or substantially all of the Stock of the Company
to an unrelated person or entity (in each case, a "Transaction"), all
outstanding Awards shall become fully vested and nonforfeitable as of the
closing or consummation of such Transaction (except as may be otherwise provided
in the Award agreement). In contemplation of and subject to the consummation of
the Transaction, the Board, or the board of directors of any corporation
assuming the obligations of the Company, may, in its discretion, take any one or
more of the following actions, as to outstanding Awards: (i) provide that such
Awards shall be assumed or equivalent awards shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), and/or (ii) upon
written notice to the participants, provide that all Awards will terminate
immediately prior to the consummation of the Transaction. In the event that,
pursuant to clause (ii) above, Awards will terminate immediately prior to the
consummation of the Transaction, all Awards, other than Stock Options, shall be
fully settled in cash or in kind at such appropriate consideration as determined
by the Committee in its sole discretion after taking into account the
consideration payable per share of Stock pursuant to the business combination
(the "Transaction Price") and all Stock Options shall be fully settled, in cash
or in kind, in an amount equal to the difference between (A) the Transaction
Price times the number of shares of Stock subject to such outstanding Stock
Options (to the extent then exercisable at prices not in excess of the
Transaction Price) and (B) the aggregate exercise price of all such outstanding
Stock Options; provided, however, that each participant shall be permitted,
within a specified period determined by the Committee prior to the consummation
of the Transaction, to exercise all outstanding Stock Options, including those
that are not then exercisable, subject to the consummation of the Transaction.
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(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company, the Operating Partnership and the Company's other
Subsidiaries as are selected from time to time by the Committee in its sole
discretion.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or NonQualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after March 16,
2008.
(a) Stock Options. The Committee in its discretion may grant Stock Options
to eligible employees, Independent Directors and key persons of the Company or
any Subsidiary. Stock Options granted pursuant to this Section 5(a) shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable. If the Committee so determines, Stock Options
may be granted in lieu of cash compensation at the participant's election,
subject to such terms and conditions as the Committee may establish, as well as
in addition to other compensation.
(i) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less
than 100 percent of the Fair Market Value on the date of grant in the case
of Incentive Stock Options, or 25 percent of the Fair Market Value on the
date of grant, in the case of Non-Qualified Stock Options. If an employee
owns or is deemed to own (by reason of the attribution rules of Section
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424(d) of the Code) more than 10 percent of the combined voting power of
all classes of stock of the Company or any parent or subsidiary
corporation and an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option shall be not less than 110
percent of the Fair Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Incentive Stock Option shall be exercisable more
than ten years after the date the option is granted. If an employee owns
or is deemed to own (by reason of the attribution rules of Section 424(d)
of the Code) more than 10 percent of the combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation
and an Incentive Stock Option is granted to such employee, the term of
such option shall be no more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
become exercisable at such time or times, whether or not in installments,
as shall be determined by the Committee at or after the grant date;
provided, however, that Stock Options granted in lieu of compensation
shall be exercisable in full as of the grant date. The Committee may at
any time accelerate the exercisability of all or any portion of any Stock
Option. An optionee shall have the rights of a stockholder only as to
shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods to the extent provided in the
Option Award agreement:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) Through the delivery (or attestation to the ownership) of
shares of Stock that have been purchased by the optionee on the open
market or that have been beneficially owned by the optionee for at
least six months and are not then subject to restrictions under any
Company plan, if permitted by the Committee in its discretion. Such
surrendered shares shall be valued at Fair Market Value on the
exercise date;
(C) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable
and acceptable to the Company for the purchase price; provided that
in the event the optionee chooses to pay the purchase price as so
provided, the optionee and the broker shall comply with such
procedures and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition of such
payment procedure; or
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(D) By the optionee delivering to the Company a promissory
note if the Board has expressly authorized the loan of funds to the
optionee for the purpose of enabling or assisting the optionee to
effect the exercise of his Stock Option; provided that at least so
much of the exercise price as represents the par value of the Stock
shall be paid other than with a promissory note.
Payment instruments will be received subject to collection. The delivery
of certificates representing the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws. In the event an
optionee chooses to pay the purchase price by previously-owned shares of
Stock through the attestation method, the shares of Stock transferred to
the optionee upon the exercise of the Stock Option shall be net of the
number of shares attested to.
(v) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted
under this Plan and any other plan of the Company or its parent and
subsidiary corporations become exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. To the extent
that any Stock Option exceeds this limit, it shall constitute a
Non-Qualified Stock Option.
(b) Reload Options. At the discretion of the Committee, Options granted
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Committee may provide) to purchase that number of shares of Stock equal to
the number delivered to exercise the original Option with an Option term equal
to the remainder of the original Option term unless the Committee otherwise
determines in the Award agreement for the original Option grant.
(c) Non-transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Notwithstanding the foregoing, the Committee, in
its sole discretion, may provide in the Award agreement regarding a given Option
that the optionee may transfer, without consideration for the transfer, his
Non-Qualified Stock Options to members of his immediate family, to trusts for
the benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Option.
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SECTION 6. RESTRICTED STOCK AWARDS
(a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Committee, shares of Stock subject to such
restrictions and conditions as the Committee may determine at the time of grant
("Restricted Stock"). Conditions may be based on continuing employment (or other
business relationship) and/or achievement of pre-established performance goals
and objectives. The grant of a Restricted Stock Award is contingent on the
participant executing the Restricted Stock Award agreement. The terms and
conditions of each such agreement shall be determined by the Committee, and such
terms and conditions may differ among individual Awards and participants.
(b) Rights as a Stockholder. Upon execution of a written instrument
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(d) below, and the participant shall be required, as a
condition of the grant, to deliver to the Company a stock power endorsed in
blank.
(c) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a participant's employment
(or other business relationship) with the Company and its Subsidiaries
terminates for any reason, the Company shall have the right to repurchase
Restricted Stock that has not vested at the time of termination at its original
purchase price, from the participant or the participant's legal representative.
(d) Vesting of Restricted Stock. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have lapsed shall no longer be Restricted Stock and
shall be deemed "vested." Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in any shares of
Restricted Stock that have not vested shall automatically terminate upon the
participant's termination of employment (or other business relationship) with
the Company and its Subsidiaries and such shares shall be subject to the
Company's right of repurchase as provided in Section 6(c) above.
(e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.
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SECTION 7. DEFERRED STOCK AWARDS
(a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of
phantom stock units to a participant, subject to restrictions and conditions as
the Committee may determine at the time of grant. Conditions may be based on
continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the participant executing the Deferred Stock Award
agreement. The terms and conditions of each such agreement shall be determined
by the Committee, and such terms and conditions may differ among individual
Awards and participants. At the end of the deferral period, the Deferred Stock
Award, to the extent vested, shall be paid to the participant in the form of
shares of Stock.
(b) Election to Receive Deferred Stock Awards in Lieu of Compensation. The
Committee may, in its sole discretion, permit a participant to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such participant in the form of a Deferred Stock Award. Any such election shall
be made in writing and shall be delivered to the Company no later than the date
specified by the Committee and in accordance with rules and procedures
established by the Committee. The Committee shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the Committee
deems appropriate.
(c) Rights as a Stockholder. During the deferral period, a participant
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Committee may determine.
(d) Restrictions. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) Termination. Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's right in all Deferred Stock
Awards that have not vested shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.
SECTION 8. UNRESTRICTED STOCK AWARDS
Grant or Sale of Unrestricted Stock. The Committee may, in its sole
discretion, grant (or sell at par value or such higher purchase price determined
by the Committee) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.
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SECTION 9. PERFORMANCE SHARE AWARDS
(a) Nature of Performance Share Awards. A Performance Share Award is an
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Committee in its sole discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals, the periods
during which performance is to be measured, and all other limitations and
conditions.
(b) Rights as a Stockholder. A participant receiving a Performance Share
Award shall have the rights of a stockholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the Performance Share Award agreement (or in a performance plan
adopted by the Committee).
(c) Termination. Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in all Performance Share
Awards shall automatically terminate upon the participant's termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
(d) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Committee may in its sole discretion accelerate, waive or,
subject to Section 14, amend any or all of the goals, restrictions or conditions
applicable to a Performance Share Award.
SECTION 10. DIVIDEND EQUIVALENT RIGHTS
(a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient. A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or shares
of Stock or a combination thereof, in a single installment or installments. A
Dividend Equivalent Right granted as a component of another Award may
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provide that such Dividend Equivalent Right shall be settled upon exercise,
settlement, or payment of, or lapse of restrictions on, such other award, and
that such Dividend Equivalent Right shall expire or be forfeited or annulled
under the same conditions as such other award. A Dividend Equivalent Right
granted as a component of another Award may also contain terms and conditions
different from such other award.
(b) Interest Equivalents. Any Award under this Plan that is settled in
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) Termination. Except as may otherwise be provided by the Committee
either in the Award agreement or, subject to Section 14 below, in writing after
the Award agreement is issued, a participant's rights in all Dividend Equivalent
Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
SECTION 11. OTHER STOCK-BASED AWARDS
(a) Nature of Other Stock-Based Awards. An Other Stock-Based Award
includes other Awards of Stock and other Awards that are valued in whole or in
part by reference to, or are otherwise based on, Stock or units (or other
interest) in the Company or the Operating Partnership, as the case may be,
including without limitation, convertible preferred stock, convertible
debentures, exchangeable securities and Awards valued by reference to book value
or subsidiary performance. An Other Stock-Based Award may be granted to any
participant either along side or in addition to or in tandem with any other
Award granted under the Plan and/or cash awards made outside of the Plan. Stock
(including securities convertible into Stock) issued on a bonus basis under this
Section 11 may be issued for no cash consideration. Stock (including securities
convertible into Stock) purchased with a purchase right awarded under this
Section 11 shall be priced at least 25 percent of the Fair Market Value of the
Stock on the date of grant. The grant of an Other Stock-Based Award may be
subject to restrictions and conditions as the Committee may determine at the
time of grant, including conditions based on continuing employment (or other
business relationship) and/or achievement of pre-established performance goals
and objectives. The grant of an Other Stock-Based Award is contingent on the
participant executing the Award agreement. The terms and conditions of each such
agreement shall be determined by the Committee, and such terms and conditions
may differ among individual Awards and participants. An Other Stock-Based Award
may be settled in shares of Stock or units (or other interests) in the Company
or the Operating Partnership, as the case may be.
(b) Rights as a Stockholder. Until such time as an Other Stock-Based Award
is actually paid out in shares of Stock, a participant shall have no rights as a
holder of Stock.
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(c) Restrictions. An Other Stock-Based Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Award agreement.
(d) Termination. Except as may otherwise be provided by the Committee in
the Award agreement or, subject to Section 14 below, in writing after the Award
agreement is issued, a participant's right in his Other Stock-Based Awards that
have not vested shall automatically terminate upon the participant's termination
of employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.
SECTION 12. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. The Company's obligation to deliver stock certificates to any
participant is subject to and conditioned on tax obligations being satisfied by
the participant.
(b) Payment in Stock. Subject to approval by the Committee, a participant
may elect to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to any Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of Stock
owned by the participant with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due.
SECTION 13. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
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SECTION 14. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. The Committee may provide substitute Awards at the same or
reduced exercise or purchase price or with no exercise or purchase price in a
manner not inconsistent with the terms of the Plan, but such price, if any, must
satisfy the requirements which would apply to the substitute or amended Award if
it were then initially granted under this Plan, but no such action shall
adversely affect rights under any outstanding Award without the holder's
consent. If and to the extent determined by the Committee to be required by the
Code to ensure that Incentive Stock Options granted under the Plan are qualified
under Section 422 of the Code or to ensure that compensation earned under Awards
qualifies as performance-based compensation under Section 162(m) of the Code, if
and to the extent intended to so qualify, Plan amendments shall be subject to
approval by the Company stockholders entitled to vote at a meeting of
stockholders. Nothing in this Section 14 shall limit the Board's authority to
take any action permitted pursuant to Section 3(c).
SECTION 15. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.
SECTION 16. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Delivery of Stock Certificates. Stock certificates to participants
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the
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Company shall have mailed such certificates in the United States mail, addressed
to the participant, at the participant's last known address on file with the
Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
(d) Trading Policy Restrictions. Option exercises and other Awards under
the Plan shall be subject to such Company's insider-trading-policy-related
restrictions, terms and conditions as may be established by the Committee, or in
accordance with policies set by the Committee, from time to time.
(e) Headings. The Article and Section headings in this Plan are inserted
for convenience of reference only, and shall not affect the interpretation of
this Plan.
SECTION 17. CHANGE OF CONTROL PROVISIONS
Upon the occurrence of a Change of Control as defined in this Section 17
after the Initial Public Offering:
(a) Except as otherwise provided in the applicable Award agreement, each
outstanding Stock Option shall automatically become fully exercisable and each
other outstanding Award shall become fully vested.
(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Act (other than the Company, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its Subsidiaries),
together with all "affiliates" and "associates" (as such terms are defined
in Rule 12b-2 under the Act) of such person, shall become the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 40 percent or more
of the combined voting power of the Company's then outstanding securities
having the right to vote in an election of the Company's Board of
Directors ("Voting Securities") (in such case other than as a result of an
acquisition of securities directly from the Company); or
(ii) persons who, as of the effective date of the Initial Public
Offering, constitute the Company's Board of Directors (the "Incumbent
Directors") cease for any
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reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of the
Company subsequent to the effective date of the Initial Public Offering
(excluding, for this purpose (A) any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of members of the Board of
Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors,
including by reason of agreement intended to avoid or settle any such
actual or threatened contest or solicitation, and (B) any individual whose
initial assumption of office is in connection with a reorganization,
merger or consolidation, involving an unrelated entity) shall be
considered an Incumbent Director if such person's election was approved by
or such person was nominated for election by either (1) a vote of at least
a majority of the Incumbent Directors or (2) a vote of at least a majority
of the Incumbent Directors who are members of a nominating committee
comprised, in the majority, of Incumbent Directors; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate more than 50 percent of the voting
shares of the corporation issuing cash or securities in the consolidation
or merger (or of its ultimate parent corporation, if any), (B) any sale,
lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of
all or substantially all of the assets of the Company or (C) any plan or
proposal for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed
to have occurred for purposes of the foregoing clause (i) solely as the result
of an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person to 40 percent or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company), then a "Change of Control" shall be deemed to have occurred for
purposes of the foregoing clause (i).
SECTION 18. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the holders of a
majority of the votes cast at a meeting of stockholders at which a quorum is
present or by a unanimous written consent of stockholders. Subject to such
approval by the stockholders and to the requirement
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that no Stock may be issued hereunder prior to such approval, Stock Options and
other Awards may be granted hereunder on and after adoption of this Plan by the
Board.
SECTION 19. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, the laws of the State of Maryland, applied
without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: March 17, 1998
DATE APPROVED BY STOCKHOLDERS: March 17, 1998
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Exhibit 10.4
INDEMNITY AGREEMENT
AGREEMENT, as of March 13, 1998 (the "Agreement"), between Beacon Capital
Partners, Inc., a Maryland corporation (the "Company") and Alan M. Leventhal
(the "Indemnitee").
WHEREAS, it is essential to the success of the Company to retain and
attract as directors and officers the most capable persons available;
WHEREAS, Indemnitee has agreed to serve as a director of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors and officers of
public companies in today's environment;
WHEREAS, the Bylaws (the "Bylaws") and the Articles of Incorporation (the
"Articles") of the Company require the Company to indemnify and advance expenses
to its directors and officers to the fullest extent provided by law, and the
Indemnitee has agreed to serve as a director of the Company in part in reliance
on such provisions in the Bylaws and Articles;
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's continued service to
the Company in an effective manner and Indemnitee's reliance on the foregoing
provisions in the Bylaws and Articles, and in part to provide Indemnitee with
specific contractual protections in addition to those protections promised
Indemnitee in the Bylaws and Articles and with specific contractual assurance
that the protection promised by such provisions in the Bylaws and Articles will
be available to Indemnitee (regardless of, among other things, any amendment to
or revocation of such provisions in the Bylaws or Articles or any change in the
composition of the Company's Board of Directors or any acquisition transaction
relating to the Company), the Company wishes to provide in this Agreement for
the indemnification of and the advancing of expenses to Indemnitee to the
fullest extent permitted by law, in addition to any other right to
indemnification to which Indemnitee may be entitled, and as set forth in this
Agreement and, to the extent insurance is maintained, for the continued coverage
of Indemnitee under the Company's directors' and officers' liability insurance
policies;
NOW THEREFORE, in consideration of the premises and of the Indemnitee
agreeing to serve as a director of the Company and intending to be legally bound
hereby, the parties agree as follows:
1. Certain Definitions:
(a) Change in Control: shall be deemed to have occurred upon any of
the following events:
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(i) The acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the "1934 Act")) of
"Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) of twenty percent (20%) or more of the combined
voting power of the Company's then outstanding voting securities
(the "Voting Securities"), provided, however, that for purposes of
this Section l(a)(i), the Voting Securities acquired directly from
the Company by any Person shall be excluded from the determination
of such Person's Beneficial Ownership of voting securities (but such
Voting Securities shall be included in the calculation of the total
number of Voting Securities then outstanding); or
(ii) The individuals who, as of March 20, 1998, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at
least two-thirds of the Board; provided, however, that if the
election, or nomination for election by the Company's shareholders,
of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board; or
(iii) Approval by shareholders of the Company of (A) a merger or
consolidation involving the Company if the shareholders of the
Company immediately before such merger or consolidation do not own,
directly or indirectly immediately following such merger or
consolidation, more than eighty percent (80%) of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger or consolidation in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger or consolidation or (B) a complete
liquidation or dissolution of the Company or an agreement for the
sale or other disposition of all or substantially all of the assets
of the Company.
(iv) Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because twenty percent (20%) or more of the
then outstanding Voting Securities is acquired by (i) a trustee or
other fiduciary holding securities under one or more employee
benefit plans maintained by the Company or any of its subsidiaries
or (ii) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the shareholders of
the Company in the same proportion as their ownership of stock in
the Company immediately prior to such acquisition. Nor shall a
Change in Control be deemed to occur solely because any Person (the
"Subject Person") acquired Beneficial
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Ownership of 20% or more of the outstanding Voting Securities as a
result of the subsequent acquisition of Voting Securities by the
Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change
in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities
which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change
in Control shall occur.
(b) Claim: any threatened, pending or completed action, suit or
proceeding, or any inquiry or investigation, whether threatened, commenced
or conducted by the Company or any other party, that Indemnitee in good
faith believes might lead to the institution of any such action, suit or
proceeding, whether civil, criminal, administrative, investigative or
other.
(c) Expenses: consist of attorneys' fees and all other costs, charges and
expenses paid or incurred in connection with investigating, defending,
settling, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating
to any Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to the fact that
Indemnitee is, was or has agreed to become a director, officer, employee,
agent or fiduciary of the Company, or is, is deemed to be, or was serving
or has agreed to serve in any capacity, at the request of the Company, in
any other corporation, partnership, joint venture, employee benefit plan,
trust or other enterprise, or by reason of anything done or not done by
Indemnitee in any such capacity.
(e) Potential Change in Control: shall be deemed to have occurred if (i)
the Company enters into an agreement or arrangement, the consummation of
which would result in the occurrence of a Change in Control; (ii) any
person (including the Company) publicly announces an intention to take or
to begins taking actions which if completed would constitute a Change in
Control; or (iii) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(f) Voting Securities: any securities of the Company which vote generally
in the election of directors.
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2. Indemnification; Expenses; Procedure:
(a) Basic Indemnification Agreement. In the event Indemnitee was, is
or becomes a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant in,
a Claim by reason of (or arising in part out of) an Indemnifiable
Event, the Company shall indemnify Indemnitee (without regard to the
negligence or other fault of the Indemnitee) to the fullest extent
permitted by applicable law, as soon as practicable but in no event
later than thirty days after written demand is presented to the
Company, against any and all Expenses, judgments, fines, penalties,
excise taxes and amounts paid or to be paid in settlement (including
all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines,
penalties, excise taxes or amounts paid or to be paid in settlement)
of or in connection with such Claim, provided, however, that the
Company shall not be required to indemnify Indemnitee for amounts
paid or to be paid in settlement unless such settlement is approved
in advance by the Company, which approval shall not be unreasonably
withheld, or subsequently deemed reasonable by the Company, a court
of appropriate jurisdiction, or an independent legal counsel chosen
and approved by both the Company and Indemnitee. The Company's
obligation to indemnify Indemnitee under this paragraph shall be
deemed mandatory in all cases without regard to the fault or
negligence of Indemnitee unless it is determined, by final
adjudication, that the liability imposed upon Indemnitee was the
result of Indemnitee's active and deliberate dishonesty to the
Company, or of Indemnitee's actual improper receipt of a personal
benefit or profit, in which case the Company shall be relieved of
its obligation to indemnify Indemnitee only to the extent of the
actual value of the benefit or profit received. The Company shall
indemnify Indemnitee's spouse (whether by statute or at common law
and without regard to the location of the governing jurisdiction)
and children to the same extent and subject to the same limitations
applicable to Indemnitee hereunder for claims arising out of the
status of such person as a spouse or child of Indemnitee, including
claims seeking damages from marital property (including community
property) or property held by such Indemnitee and such spouse or
child or property transferred to such spouse or child but such
indemnity shall not otherwise extend to protect the spouse or child
against liabilities caused by the spouse's or child's own acts. If
Indemnitee makes a request to be indemnified under this Agreement
(which request need not be made prior to the incurrence of any
indemnifiable Expenses), the Board of Directors (acting by majority
vote of a quorum consisting of directors who are not parties to the
Claim with respect to the Indemnifiable Event or by majority vote of
a committee of two or more directors who are duly designated to act
on the matter by the full Board, or, if such a quorum is not
obtainable and no such committee has been designated, acting upon an
opinion in writing of special independent legal counsel selected by
majority vote of the full Board of Directors ("Board Action"))
shall, as soon
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as practicable but in no event later than thirty days after such
request, authorize such indemnification. Notwithstanding anything in
the Articles, the Bylaws or this Agreement to the contrary,
following a Change in Control, Indemnitee shall, unless prohibited
by law, be entitled to indemnification pursuant to this Agreement in
connection with any Claim initiated by Indemnitee.
(b) Advancement of Expenses. Notwithstanding anything in the
Articles, the Bylaws or this Agreement to the contrary, if so
requested by Indemnitee, the Company shall advance (within ten
business days of such request) any and all Expenses relating to a
Claim to Indemnitee (an "Expense Advance"), upon the receipt of a
written undertaking by or on behalf of Indemnitee to repay such
Expense Advance if a judgment or other final adjudication adverse to
Indemnitee establishes that Indemnitee, with respect to such Claim,
is not eligible for indemnification, without regard to any
determination of Indemnitee's financial ability to repay such
Expense Advance.
(c) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable
of any Claim made against Indemnitee for which indemnification will
or could be sought under this Agreement. Such notice shall contain
the written affirmation of the Indemnitee that the standard of
conduct necessary for indemnification hereunder has been satisfied.
Notice to the Company shall be directed to the Secretary of the
Company in the manner provided in Section 19 hereof. Indemnitee
shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power. A
delay or defect in the notice under this Section 2(c) shall not
invalidate the Indemnitee's right to indemnity under this Agreement
unless, and only to the extent that, such delay or defect materially
prejudices the defense of the claim or the availability to the
Company of insurance coverage for such claim. Failure to give notice
under this paragraph shall not be a defense if the Company has
actual notice of the Indemnitee's claim for indemnification.
(d) Notice to Insurers. If, at the time of the receipt of a notice
of a Claim pursuant to Section 2(c) hereof, the Company has director
and officer liability insurance in effect, the Company shall give
prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective
policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the
Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated under Section 2(b) hereof to pay the Expenses of any
proceeding against Indemnitee,
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<PAGE>
the Company, unless the Indemnitee determines that a conflict of
interest exists between the Indemnitee and the Company with respect
to a particular Claim, shall be entitled to assume the defense of
such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld and which shall be granted to a
choice of counsel selected by the insurance company which provided
director and officer liability insurance for the Company, upon the
delivery to Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the
Company will be not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect
to the same proceeding, provided that (i) Indemnitee shall have the
right to employ his own separate counsel in any such proceeding in
addition to or in place of any counsel retained by the Company on
behalf of Indemnitee at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized
by the Company, (B) Indemnitee shall have concluded that there may
be a conflict of interest between the Company and Indemnitee in the
conduct of any such defense or (C) the Company shall not, in fact,
have employed counsel to assume the defense of such proceeding, then
the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
(f) Litigation Concerning Right to Indemnification. If there has
been no Board Action or Arbitration (as defined in Section 3), or if
Board Action determines that Indemnitee would not be permitted to be
indemnified, in any respect, in whole or in part, in accordance with
Section 2(a) of this Agreement, Indemnitee shall have the right to
commence litigation in the court which is hearing the action or
proceeding relating to the Claim for which indemnification is sought
or in any court having subject matter jurisdiction thereof and in
which venue is proper seeking an initial determination by the court
or challenging any Board Action or any aspect thereof, and the
Company hereby consents to service of process and to appear in any
such proceeding. Notwithstanding anything in the Articles, the
Bylaws or this Agreement to the contrary, if Indemnitee has
commenced legal proceedings in a court of competent jurisdiction or
Arbitration to secure a determination that Indemnitee should be
indemnified under this Agreement, the Articles, the Bylaws or
applicable law, any Board Action that Indemnitee would not be
permitted to be indemnified in accordance with Section 2(a) of this
Agreement shall not be binding in the event that such legal
proceedings are finally adjudicated. Any Board Action not followed
by such litigation or Arbitration shall be conclusive and binding on
the Company and Indemnitee.
3. Change in Control. The Company agrees that if there is a Change in
Control, Indemnitee, by giving written notice to the Company and the American
Arbitration Association (the "Notice"), may require that any controversy or
claim arising out of or relating to this
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<PAGE>
Agreement, or the breach thereof, shall be settled by arbitration (the
"Arbitration") in Boston, Massachusetts in accordance with the Rules of the
American Arbitration Association (the "Rules"). The Arbitration shall be
conducted by a panel of three arbitrators selected in accordance with the Rules
within thirty days of delivery of the Notice. The decision of the panel shall be
made as soon as practicable after the panel has been selected, and the parties
agree to use their reasonable efforts to cause the panel to deliver its decision
within ninety days of its selection. The Company shall pay all fees and expenses
of the Arbitration. The Arbitration shall be conclusive and binding on the
Company and Indemnitee and the Company or Indemnitee may cause judgment upon the
award rendered by the arbitrators to be entered in any court having jurisdiction
thereof.
4. Establishment of Trust. In the event of a Potential Change in Control
or a Change in Control, the Company shall, promptly upon written request by
Indemnitee, create a Trust for the benefit of Indemnitee and from time to time,
upon written request of Indemnitee to the Company, shall fund such Trust in an
amount, as set forth in such request, sufficient to satisfy any and all Expenses
reasonably anticipated at the time of each such request to be incurred in
connection with investigating, preparing for and defending any Claim relating to
an Indemnifiable Event, and any and all judgments, fines, penalties and
settlement amounts of any and all Claims relating to an Indemnifiable Event from
time to time actually paid or claimed, reasonably anticipated or proposed to be
paid. The terms of the Trust shall provide that upon a Change in Control (i) the
Trust shall not be revoked or the principal thereof invaded, without the written
consent of Indemnitee; (ii) the Trustee shall advance, within ten business days
of a request by Indemnitee, any and all Expenses to Indemnitee, not advanced
directly by the Company to Indemnitee (and Indemnitee hereby agrees to reimburse
the Trust under the circumstances under which Indemnitee would be required to
reimburse the Company under Section 2 (b) of this Agreement); (iii) the Trust
shall continue to be funded by the Company in accordance with the funding
obligation set forth above; (iv) the Trustee shall promptly pay to Indemnitee
all amounts for which Indemnitee shall be entitled to indemnification pursuant
to this Agreement or otherwise; and (v) all unexpended funds in such Trust shall
revert to the Company upon a final determination by Board Action or Arbitration
or a court of competent jurisdiction, as the case may be, that Indemnitee has
been fully indemnified under the terms of this Agreement. The Trustee shall be
an independent third party chosen by Indemnitee. Nothing in this Section 4 shall
relieve the Company of any of its obligations under this Agreement.
5. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all expenses (including without limitation attorneys'
fees, subject to Section 20 hereof) and, if requested by Indemnitee, shall
(within ten business days of such request) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any claim asserted by or
action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under law, this Agreement, or any other agreement or
Bylaw of the Company now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by
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the Company, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, advance expense payment or insurance recovery,
as the case may be.
6. Partial Indemnity, Etc. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties, excise taxes and amounts paid or to be
paid in settlement of a Claim but not, however, for all of the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled. Moreover, notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise in defense of any or all Claims relating in whole or
in part to an Indemnifiable Event or in defense of any issue or matter therein,
including, without limitation, dismissal without prejudice, Indemnitee shall be
presumed to be entitled to indemnification against any and all Expenses,
judgments, fines, penalties, excise taxes and amounts paid or to be paid in
settlement of such Claim in connection with any determination by Board Action,
Arbitration or a court of competent jurisdiction that Indemnitee is not entitled
to be indemnified hereunder and the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
7. No Presumption. For purposes of this Agreement, the termination of any
claim, action, suit or proceeding, by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law or this
Agreement.
8. Contribution. In the event that the indemnification provided for in
this Agreement is unavailable to Indemnitee for any reason whatsoever, the
Company, in lieu of indemnifying Indemnitee, shall contribute to the amount
incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes,
amounts paid or to be paid in settlement and/or for Expenses, in connection with
any Claim relating to an Indemnifiable Event, in such proportion as is deemed
fair and reasonable in light of all of the circumstances of such action by Board
Action or Arbitration or by the court before which such action was brought in
order to reflect (i) the relative benefits received by the Company and
Indemnitee as a result of the event (s) and/or transaction (s) giving cause to
such action; and/or (ii) the relative fault of the Company (and its other
directors, officers, employees and agents) and Indemnitee in connection with
such event(s) and/or transaction(s). Indemnitee's right to contribution under
this Section 8 shall be determined in accordance with, pursuant to and in the
same manner as, the provisions in Sections 2 and 3 hereof relating to
Indemnitee's right to indemnification under this Agreement.
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9. Notice to the Company by Indemnitee. Indemnitee agrees to promptly
notify the Company in writing upon being served with or having actual knowledge
of any citation, summons, compliant, indictment or any other similar document
relating to any action which may result in a claim of indemnification or
contribution hereunder.
10. Non-exclusivity, Etc. The rights of the Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Articles or Bylaws
or applicable law, and nothing herein shall be deemed to diminish or otherwise
restrict Indemnitee's right to indemnification under any such other provision.
To the extent applicable law or the Articles or the Bylaws of Company, as in
effect on the date hereof or at any time in the future, permit greater
indemnification than as provided for in this Agreement, the parties hereto agree
that Indemnitee shall enjoy by this Agreement the greater benefits so afforded
by such law or provision of the Articles or Bylaws and this Agreement shall be
deemed amended without any further action by the Company or Indemnitee to grant
such greater benefits. Indemnitee may elect to have Indemnitee's rights
hereunder interpreted on the basis of applicable law in affect at the time of
execution of this Agreement, at the time of the occurrence of the Indemnifiable
Event giving rise to a claim or at the time indemnification is sought.
11. Liability Insurance.
(a) To the extent the Company maintains at any time an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any other
Company director or officer under such insurance policy. The purchase and
maintenance of such insurance shall not in any way limit or affect the rights
and obligations of the parties hereto, and the execution and delivery of this
Agreement shall not in any way be construed to limit or affect the rights and
obligations of the Company and/or of the other parties under any such insurance
policy.
(b) For seven years after the Indemnitee no longer serves as a
director or officer of the Company, the Company (or its successor or successors)
shall continue to provide directors' and officers' liability insurance for
events occurring during his service with the Company on terms no less favorable
in terms of coverage and amount than such insurance maintained by the Company at
the date of the Indemnitee's separation from the Company. In the event such
coverage is not available, the maximum available coverage shall be maintained
pursuant to this covenant.
12. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or on behalf of the Company or any affiliate of
the Company against Indemnitee, Indemnitee's spouse, heirs, executors or
personal or legal representatives after the expiration of two years from the
date of accrual of such cause of action, and any claim or cause of action of the
Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two-year period;
provided, however,
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that if any shorter period of limitations is otherwise applicable to any such
cause of action such shorter period shall govern.
13. Amendments, Etc. Except as provided in Section 10 hereof, no
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver.
14. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery with respect to such payment of Indemnitee, who shall execute all
papers required and shall do everything that may be necessary to secure such
rights, including the execution of such documents necessary to enable the
Company effectively to bring suit to enforce such rights.
15. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Bylaw or otherwise) of the amounts otherwise
indemnifiable hereunder.
16. Binding Effect, Etc. This Agreement shall be binding upon and inure to
the benefit of and be enforceable against and by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company), spouses, heirs and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to Indemnitee,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place, but the absence of any such writing shall not be a
defense to any claim for indemnity made hereunder. This Agreement shall continue
in effect regardless of whether Indemnitee continues to serve as a director
and/or officer of the Company or of any other enterprise at the Company's
request.
17. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
18. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee in the following circumstances:
10
<PAGE>
(a) Insured Claims. The Company shall not be obligated to indemnify
Indemnitee for expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) to the extent that Indemnitee has otherwise
actually received payment, or payments have been made on behalf of
Indemnitee, with respect to such expense or liability (under any insurance
policy, provision of the Company's Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws, or otherwise) of amounts
otherwise indemnifiable hereunder; or
(b) Claims Under Section 16(b). The Company shall not be obligated
to indemnify Indemnitee for expenses and the payment of profits arising
from the purchase and sale by Indemnitee of securities in violation of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
similar successor statute.
19. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or when mailed by certified registered
mail, return receipt requested, with postage prepaid:
A. If to Indemnitee, to:
Alan M. Leventhal
c/o Beacon Capital Partners, Inc.
50 Rowes Wharf
Boston, MA 20109
or to such other person or address which Indemnitee shall furnish to the Company
in writing pursuant to the above.
B. If to the Company, to:
Beacon Capital Partners, Inc.
50 Rowes Wharf
Boston, Massachusetts 02110
ATTN: Secretary
or to such person or address as the Company shall furnish to Indemnitee in
writing pursuant to the above.
20. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for
11
<PAGE>
such action were not made in good faith or were frivolous. In the event of an
action instituted by or in the name of the Company under this Agreement or to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be paid all court costs and expenses, including attorneys' fees,
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
21. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Maryland, which laws are
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
22. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute a single agreement.
23. Election to Proceed Under Prior Agreements. In the event that this
Agreement, or any portion thereof, is determined to be invalid or unenforceable
for any reason, Indemnitee may elect to enforce Indemnitee's rights to
indemnification either under the surviving portions of this Agreement or under
any prior agreement of indemnification between Indemnitee and the Company, but
not both agreements. Indemnitee's rights under this paragraph shall not be
deemed to limit Indemnitee's rights to indemnification under the Articles,
Bylaws or any applicable law.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the 13th day of March, 1998.
BEACON CAPITAL PARTNERS, INC.
By: /s/ William A. Bonn
--------------------------------
Name: William A. Bonn
Title: General Counsel
INDEMNITEE
/s/ Alan M. Leventhal
-----------------------------------
Name: Alan M. Leventhal
13
<PAGE>
Exhibit 10.5
PURCHASE AND SALE CONTRACT
BETWEEN
EASTERN PROPERTIES MASTER, LLC
AND
BEACON CAPITAL PARTNERS, INC.
AS OF MARCH 9, 1998
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1.
Description of Property....................................................................1
ARTICLE 2.
Sale Subject to Leases and Loan............................................................2
ARTICLE 3.
Purchase Price and Payment.................................................................3
ARTICLE 4.
Form of Conveyance.........................................................................4
ARTICLE 5.
Closing ..................................................................................4
ARTICLE 6.
Approvals and Conditions to Buyer's Obligations............................................8
ARTICLE 7.
Conditions to Closing.....................................................................14
ARTICLE 8.
Default .................................................................................15
ARTICLE 9.
Condition at Closing and Extensions.......................................................16
ARTICLE 10.
Entire Agreement Herein...................................................................16
ARTICLE 11.
Damage or Destruction: Condemnation.......................................................17
ARTICLE 12.
Representations and Warranties of Seller..................................................18
ARTICLE 13.
Maintenance; New Leases...................................................................21
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 14.
Apportionment of Taxes and Other Charges..................................................22
ARTICLE 15.
Broker .................................................................................24
ARTICLE 16.
Continuation and Survival of Representations, Warranties, Indemnifications and
Covenants........................................................................25
ARTICLE 17.
Recording.................................................................................26
ARTICLE 18.
Notices .................................................................................26
ARTICLE 19.
Captions .................................................................................26
ARTICLE 20.
Successors and Assigns....................................................................26
ARTICLE 21.
Closing Costs.............................................................................27
ARTICLE 22.
Governing Law.............................................................................27
ARTICLE 23.
Multiple Counterparts.....................................................................27
ARTICLE 24.
Representations and Warranties of Buyer...................................................27
ARTICLE 25.
Post-Closing Obligations..................................................................28
ARTICLE 26.
Duties and Responsibilities of Escrow Agent...............................................28
ARTICLE 27.
Disclosure; Audit Right...................................................................29
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
Exhibit A Description of Real Property
Exhibit A-1 Permitted Encumbrances
Exhibit B Personal Property
Exhibit C Leases
Exhibit C-1 Schedule of Leasing Commissions
Exhibit D Form of Deed
Exhibit E Form of Bill of Sale
Exhibit F Form of Assignment and Assumption Agreement re: Leases
Exhibit G Form of Assignment and Assumption Agreement re: Contracts
Exhibit H Form of FIRPTA Affidavit
Exhibit I Operating Contracts
Exhibit J Intentionally Deleted
Exhibit K Intentionally Deleted
Exhibit L Intentionally Deleted
Exhibit M Rent Schedule
Exhibit O Section 6045 Designation
Exhibit P Form of Estoppel Certificate
Exhibit P-1 List of Mandatory Estoppels
Exhibit P-2 Form of Seller's Estoppel Certificate
Exhibit Q List of Environmental Reports
Exhibit R Work in Progress
Exhibit S Seller's Title Insurance Policies
Exhibit T Violations of Law
Exhibit U Identity of Prospective Tenants
Exhibit V Form of Post-Closing Escrow Agreement
</TABLE>
iv
<PAGE>
PURCHASE AND SALE CONTRACT
THIS AGREEMENT (the "Contract") is made as of the 9th day of March,
1998, by and between EASTERN PROPERTIES MASTER, LLC having an office c/o The
Athenaeum Group, 215 First Street, Cambridge, Massachusetts 02139
(hereinafter referred to as "Seller"), and BEACON CAPITAL PARTNERS, INC., a
Massachusetts corporation having its principal place of business at 50 Rowes
Wharf, Boston, Massachusetts 02110 (hereinafter referred to as "Buyer").
WITNESSETH THAT, various entities owned in part and controlled by
Seller own the land described on EXHIBIT A hereto together with the buildings
and improvements thereon and appurtenances thereto, located on approximately
10.25 acres in Cambridge, Middlesex County, Massachusetts and commonly known
as One Kendall Square and The Athenaeum House (the "Realty"). Old Cambridge
Property LLC, Old Kendall Property LLC, Athenaeum Property LLC, JONA
Property, LLC, State Street Bank and Trust Company as Trustee under Trust
Indenture and Agreement made by and among Calusa, N.V., Massachusetts Mutual
Life Insurance Company and Trustee dated as of December 29, 1995, Robert A.
Jones and K. George Najarian, as Trustees of Old Portland Realty Trust, and
Michael Reardon as Trustee of Escape Realty Trust, each an owner of a portion
of the Property (as hereinafter defined), are individually and together
hereinafter referred to as "Seller's Affiliates." Where the context of this
Contract so suggests, the term Seller shall mean and include each of Seller's
Affiliates.
WITNESSETH FURTHER THAT, Seller's Affiliates desire to sell and
Buyer desires to purchase the Property on the terms and subject to the
conditions set forth herein.
WITNESSETH FURTHER THAT, for the consideration hereinafter named,
and for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged hereby, the parties do hereby agree as follows:
ARTICLE 1. DESCRIPTION OF PROPERTY: Seller agrees to cause
Seller's Affiliates to sell and Buyer agrees to buy upon the terms and
conditions hereinafter set forth:
(i) The Realty together with all right, title and interest of
Seller's Affiliates in and to any land lying in the bed of any street (opened
or proposed) adjacent to or abutting or adjoining such premises, together
with all rights, privileges, rights of way and easements appurtenant to such
premises, including, without limitation, all minerals, oil or gas on or under
such premises, development rights, air rights, water rights and any
easements, rights of way or other interests in, on, or under any land,
highway, alley, street or right of way abutting or adjoining such premises
(all of the foregoing, the "Real Property"), (ii) all buildings and other
improvements located thereon (the "Improvements", and, together with the Real
Property, the
<PAGE>
"Premises"), (iii) all items of personal property owned by Seller's
Affiliates and located on the Premises or used in connection with the
ownership or operation of the Premises, described in EXHIBIT B attached
hereto and incorporated herein by reference, including, without implied
limitation, whether or not listed on EXHIBIT B, all furniture, fixtures,
equipment, machines, apparatus, appliances, supplies and personal property of
every nature and description and all replacements thereof, the trade names
"One Kendall Square" and "The Athenaeum House" (collectively, the "Trade
Name"); provided, however, the Seller shall continue to retain the right to
use the name "The Athenaeum Group," "TAG" and similar names, (collectively,
the "Personal Property"), (iv) any intangible and other property now or
hereafter owned by Seller's Affiliates and currently used in the ownership or
operation of the Premises including, without limitation, all plans and
specifications, surveys, catalogs, booklets, manuals, files, logs, records,
correspondence, tenant lists, tenant prospect lists and other mailing lists,
sales brochures and materials, leasing brochures and materials, advertising
materials and other similar items, and all title inspections, studies and
reports, market studies and similar inspections with respect to the sale,
management, leasing, promotion, ownership, maintenance, use, occupancy and
operation of the Premises, permits, licenses, approvals, guaranties,
warranties, contracts, lease agreements, utility contracts or other rights
relating to the ownership, use or operation of the Premises (excluding
attorney and accountant work product) (collectively, the "Intangibles") and
(v) all right, title and interest of Seller's Affiliates as Lessee under a
certain Management Agreement dated May 1, 1997, as amended, by and between
the Trustees of Com/Energy Research Park Realty, as Lessor, and Seller, as
Lessee (the "Com/Energy Research Park Realty Lease"). All items referred to
in clauses (i), (ii), (iii), (iv) and (v) are herein sometimes collectively
referred to as the "Property".
ARTICLE 2. SALE SUBJECT TO LEASES AND LOAN: Subject to the
provisions of Article 4 hereof, the Property will be conveyed subject to (a)
certain leases together with any amendments, renewals, modifications, and
extensions thereto and guarantees thereof (hereinafter called the "Leases")
described in EXHIBIT C attached hereto and incorporated herein by reference,
or as hereafter entered into by Seller with Buyer's consent pursuant to the
provisions of Article 13 hereof, and (b) a loan made by Nomura Asset Capital
Corporation ("Nomura") in the original principal amount of $69,700,000 (the
"Loan"). Prior to the Closing, Seller and Buyer shall use good faith efforts
to obtain the approval of the servicer of the Loan (the "Servicer") to the
transfer of the Property to Buyer subject to the Loan. Any and all costs and
expenses incurred in connection with the assumption of the Loan, including
any assumption fee, shall be borne by Seller; provided, however, that Buyer
understands and agrees that the Servicer of the Loan will require Buyer to
deliver various documents and financial information to Servicer for review
and approval prior to approving Buyer's assumption of the Loan. Buyer
understands that Servicer is likely to require Buyer to establish a special
purpose bankruptcy remote entity to acquire title to the Property and assume
the Loan. Buyer agrees to establish such an entity and provide all such
information reasonably required of Buyer or Buyer's affiliates by Servicer or
Seller in connection with such assumption at the sole cost and expense of
Buyer. Notwithstanding the prior sentence to the
2
<PAGE>
contrary, if Seller and Buyer have not obtained the Servicer's approval to
the assumption of the Loan by Buyer or Buyer's nominee, on or before April 7,
1998, then either party may, by written notice to the other, extend the
Closing Date for up to thirty (30) days to allow Seller to obtain such
approval prior to the Closing. In the event approval for the assumption of
the Loan is not obtained prior to the Closing (as such date may be extended),
Buyer or Seller may terminate this Agreement by written notice given to the
other on or before the Closing Date (as extended), whereupon the Deposit
shall be returned to Buyer and this Agreement shall terminate without further
recourse to either party, provided, however, that Buyer's obligations under
Article 6(d), 6(g) and 27(a) shall nevertheless remain in effect.
ARTICLE 3. PURCHASE PRICE AND PAYMENT: (a) The total purchase price
(the "Purchase Price") for the Property is One Hundred Ninety-Five Million
and 00/100 Dollars ($195,000,000.00), which, minus the principal balance of
the Loan on the Closing Date, shall be payable at the Closing, as hereinafter
defined, in lawful currency of the United States of America in immediately
available Boston Clearing House funds by certified check, or by wire transfer
to an account designated by Seller not less than one (1) day prior to the
Closing. The allocation of the Purchase Price between the various components
of the Property shall be mutually agreed upon by Buyer and Seller during the
Due Diligence Period. Notwithstanding anything herein to the contrary, Buyer
and Seller hereby agree to allocate the Purchase Price to the various
components of the Property as follows:
(i) Phase I ($34,500,000);
(ii) Phase II ($55,500,000);
(iii) 195 and 215 First Street ($42,000,000);
(iv) Kendall Square Garage and Building 1400 ($51,000,000);
(vi) One Kendall Square Phase III ($5,500,000); and
(vii) Kendall Square Cinema ($6,500,000).
(b) As security for Buyer's performance hereunder, a deposit of
Three Million and 00/100 Dollars ($3,000,000.00) has been paid by Buyer to
Commonwealth Land Title Insurance Company ("Escrow Agent"). The amount
deposited with Escrow Agent, together with all interest earned thereon, is
hereinafter referred to as the "Deposit." The Deposit shall be deposited in a
federally insured interest-bearing money market account at BankBoston, N.A.
and disbursed according to the terms of this Contract. At the Closing, the
Deposit shall be paid to Seller and applied in reduction of the Purchase
Price payable at the Closing.
3
<PAGE>
ARTICLE 4. FORM OF CONVEYANCE: (a) The Property shall be conveyed in
fee simple absolute, by one or more good and sufficient quitclaim deeds (the
"Deed") in substantially the form attached hereto as EXHIBIT D, running to
Buyer or, subject to the provisions of Article 20 hereof, to such assignee as
Buyer designates by notice to Seller at least three (3) business days prior
to the Closing. The Deed shall convey a good and clear record and marketable
title to the Property, free from all liens, encumbrances and encroachments
from or on the Property except (i) the "Permitted Title Exceptions" (as
hereinafter defined) and (ii) the Leases. The Deed shall be in proper form
for recording and shall be duly executed, acknowledged and delivered by
Seller at the Closing. If the Deed refers to a plan necessary for recording,
Seller shall deliver the same at Closing in recordable form.
(b) The Personal Property shall be conveyed free of all encumbrances
by one or more bills of sale (the "Bill of Sale") in substantially the form
attached hereto as EXHIBIT E to be delivered by Seller to Buyer at Closing.
ARTICLE 5. CLOSING: (a) Unless extended pursuant to the terms of
this Contract, the closing of the transactions contemplated hereunder (the
"Closing") shall take place at 10:00 a.m. April 7, 1998 (such date, as the
same may be extended pursuant to the terms of this Contract, the "Closing
Date"), at the offices of Goulston & Storrs, P.C., 400 Atlantic Avenue,
Boston, Massachusetts, or at such other location in Boston, Massachusetts as
Buyer shall designate by five (5) business days prior written notice to
Seller. If the Closing Date shall fall on Saturday, Sunday or holiday, the
Closing Date shall automatically be extended to the next business day.
(b) At the Closing, Seller shall deliver the following documents,
reasonably satisfactory in form and substance to Buyer and Buyer's counsel
properly executed and acknowledged as required:
(i) The Deed;
(ii) The Bill of Sale;
(iii) An original of an Assignment and Assumption Agreement
relating to the Leases and Security Deposits
(hereinafter defined) in the form attached hereto as
EXHIBIT F (the "Lease Assignment");
(iv) Originals of all Leases, any renewals thereof, all
amendments thereto, all guarantees thereof and copies
of all records and correspondence relating thereto;
(v) Originals of the Com/Energy Research Park Realty
Lease, and all amendments thereto, all guarantees
thereof;
4
<PAGE>
(vi) Originals of all documents evidencing or securing the
Loan (the "Loan Documents");
(vii) An original of an Assignment and Assumption Agreement
in the form attached hereto as EXHIBIT G relating to
those Operating Contracts (as hereinafter defined),
if any, which Buyer elects to assume in accordance
with the provisions of Article 12(a) (vi) hereof (the
"Contract Assignment") and originals of those
Operating Contracts so assigned;
(viii) Originals or copies in Seller's possession or control
of all unexpired warranties, guaranties and operating
manuals, if any, with respect to the Property or
Leases, including without limitation, any from any
contractors, subcontractors, suppliers or materialmen
in connection with any construction, repair or
alteration of the Improvements, systems or any tenant
improvements;
(ix) Originals or copies of all land use, environmental,
traffic and building permits, licenses, variances and
the like relating to the Property in Seller's
possession or control and all certificates of
occupancy for all of the Improvements which form a
part of the Property and all space included within
such buildings;
(x) A certification of non-foreign status in the form
attached hereto as EXHIBIT H;
(xi) Evidence satisfactory to Buyer and to Buyer's
title insurance company (the "Title Company") that
all necessary approvals and/or consents by Seller,
Seller's Affiliates and any constituent person of
Seller or Seller's Affiliates otherwise required
under Seller's or Seller's Affiliates' organizational
documents, have been delivered and such other
evidence reasonably satisfactory to Buyer and the
Title Company of Seller's and Seller's Affiliates
authority and the authority of the signatory on
behalf of Seller and Seller's Affiliates to convey
the Property pursuant to this Contract;
(xii) Evidence of termination of all Operating Contracts
not being assumed by Buyer;
(xiii) Affidavits reasonably sufficient for the Title
Company to delete any exceptions for parties in
possession (other than tenants under the Leases, as
tenants only) and mechanics' or materialmen's liens
from the owner's title insurance policy (the "Title
Insurance");
5
<PAGE>
(xiv) A certificate restating as of the Closing Date all of
Seller's representations and warranties contained
herein or to the extent that such representations and
warranties are no longer true and correct, a
certificate setting forth all exclusions and
exceptions to such representations and warranties
then known to Seller;
(xv) A rent roll certified by Seller as being true and
accurate as of the Closing Date to Seller's
knowledge;
(xvi) An original of a closing statement setting forth the
Purchase Price and the closing adjustments and
prorations (the "Closing Statement") in form
reasonably satisfactory to Buyer and Seller;
(xvii) Original tenant notification letters (notifying
tenants of the transfer of the Property to Buyer) for
each tenant under a Lease or other occupant of any
portion of the Property, and original notification
letters to all parties to operating and other
contracts assigned to Buyer, each in form reasonably
satisfactory to Buyer;
(xviii) A Designation of Person Responsible for Tax Reporting
under Internal Revenue Code Section 6045 in the form
of EXHIBIT O annexed hereto designating Seller's
attorney as the party responsible for making the
returns required under Internal Revenue Code Section
6045;
(xix) Evidence of payment to all real estate brokers
entitled to a fee or commission as a result of the
transaction contemplated by this Agreement;
(xx) Keys to all locks at the Property in Seller's
possession or control;
(xxi) Original Estoppel Certificates from tenants of the
Property dated no earlier than thirty (30) days
prior to the Closing Date ("Tenant Estoppels")
substantially in the form attached as EXHIBIT P
hereto from (i) all tenant's identified on EXHIBIT
P-1 hereto as "Mandatory Estoppels" (which term
shall include, without limitation, all restaurant
tenants and all tenants occupying 20,000 s.f. or
more) and (ii) sufficient additional Tenant
Estoppels so as to represent, when added to the
aggregate square footage demised to the tenants from
whom Tenant Estoppels are obtained as required by
clause (i) of this paragraph, ninety percent (90%)
of the space demised under the Leases. Seller shall
use diligent efforts to obtain Tenant Estoppels from
all tenants. Seller shall provide Buyer with all
executed Tenant Estoppels and a list of the missing
Tenant
6
<PAGE>
Estoppels at the Closing. To the extent Tenant
Estoppels are received for less than ninety percent
(90%) of the space demised under the Leases, Seller
may, at its election, provide to the extent factually
true, a Seller's Estoppel Certificate in the form
attached as EXHIBIT P-2 for tenants to the extent
necessary to achieve the ninety percent (90%)
threshold (but Seller shall not be permitted to
provide Estoppel Certificates representing more than
twenty percent (20%) of the demised space. In no
event shall Seller's Estoppel Certificates be
substituted for Mandatory Estoppels. If Seller is
unable to deliver such Seller's Estoppel Certificates
because the required information is untrue in a
material respect (such as a tenant being in default),
Buyer shall have the right to terminate this Contract
by written notice to Seller delivered on the Closing
Date, obtain a return of the Deposit and neither
party shall have further rights or remedies, except
as otherwise provided hereunder. Seller's liability
with respect to the Seller's Estoppel Certificates
shall be non-recourse except as set forth in Article
16 hereof;
(xxii) An original Consent and Estoppel Certificate from the
Servicer consenting to the transfer of the Property
subject to the Loan;
(xxiii) (a) An Assignment and Assumption of Seller's
interest in the Com/Energy Research Park Realty
Lease (the "Com/Energy Research Park Realty Lease
Assignment") in form and substance reasonably
satisfactory by Buyer, and (b) an original Estoppel
Certificate from Com/Energy Research Park Realty in
form and substance reasonably satisfactory to Buyer,
confirming that to Com/Energy Research Park Realty's
knowledge Seller is not in default under the terms
of the Com/Energy Research Park Realty Lease and to
the extent required by the Lease, consenting to the
transfer to Buyer. Buyer understands and agrees
that Seller's obligation with respect to providing
the Assignment and Assumption of Seller's interest
in the Com/Energy Research Park Realty Lease shall
be limited to Seller's use of reasonable efforts.
In the event that despite the use of reasonable
efforts, Seller fails to provide an Assignment and
Assumption, it shall not be a default by Seller
hereunder, nor shall Buyer have the right to
terminate this Contract solely as a result thereof;
(xxiv) Documents required of Seller in connection with the
assumption of the Loan as described in Article 2
hereof; and
(xxv) Such other instruments as Buyer may reasonably
request consistent with the terms of this Contract.
7
<PAGE>
(c) At the Closing, Buyer shall deliver, or cause to be delivered,
the following payment and documents, reasonably satisfactory in form and
substance to Seller and Seller's counsel properly executed and acknowledged
as required:
(i) The Purchase Price adjusted in accordance with the terms
hereof;
(ii) An original of the Lease Assignment;
(iii) An original of the Contract Assignment;
(iv) An original of the Closing Statement;
(v) An original of the Com/Energy Research Park Realty Lease
Assignment; provided, however, if Buyer uses its reasonable
efforts to obtain the Com/Energy Research Park Realty Lease
Assignment and Assumption and nevertheless fails to obtain
such assignment, then such failure shall not constitute a
default by Seller hereunder, nor shall Buyer be entitled to
terminate this Contract solely as a result thereof; and
(vi) Documents and materials required in connection with the
assumption of the Loan as described in Article 2 hereof.
(d) The Closing shall not be deemed to be completed until all
documents and payments as aforesaid have been properly delivered (and
recorded where appropriate) to the satisfaction of all parties; provided,
however, that upon acceptance and recording of the Deed, Seller shall be
deemed to have satisfied all of its obligations hereunder, except such
obligations as by the terms hereof, or by the terms of an agreement executed
by Buyer and Seller at the Closing, are to be performed by Seller after the
Closing Date.
ARTICLE 6. APPROVALS AND CONDITIONS TO BUYER'S OBLIGATIONS:
(a) Seller acknowledges the Buyer intends to conduct an investigation
of the Property. In order to facilitate Buyer's investigations, Seller shall
deliver or make available to Buyer within three (3) business days from the date
hereof or, as soon thereafter as is reasonably practicable, copies of the
following (collectively, the "Due Diligence Items"):
(i) The Leases;
(ii) The Operating Contracts;
(iii) Income, expense and other operating statements for
the Property for calendar years 1995, 1996 and 1997,
and January, 1998 and a budget
8
<PAGE>
reflecting estimated income and expenses for the
Property for calendar year 1998 (provided, however,
that Buyer understands and agrees that such budget is
to be provided for informational purposes only and
Seller makes no representation or warranty with
respect to the accuracy or completeness of such
budget);
(iv) To the extent in Seller's possession or control, all
unexpired warranties with respect to the Premises and
final as-built plans and specifications for the
Premises;
(v) To the extent in Seller's possession or control,
Seller's Affiliates' owner's title insurance
policies;
(vi) To the extent in Seller's possession or control, all
licenses and permits of a material nature required
for the use and operation of the Property (the
"Licenses and Permits"), including occupancy
permits/certificates;
(vii) All surveys of the Premises or any part thereof in
Seller's possession or control;
(viii) A copy of any and all structural, mechanical and
physical inspection reports, traffic studies,
engineering reports, soil borings tests and reports,
and reports relating to toxic and/or hazardous
materials or substances including without limitation
asbestos, asbestos containing materials, lead paint,
radon gas, petroleum products, urea-formaldehyde
and other similar or dissimilar chemical or
materials relating to the Premises and prepared by
or on behalf of Seller or its affiliates, within
Seller's possession or control;
(ix) Any written reports or other materials within
Seller's possession or control relating to capital
expenditures previously incurred with respect to the
Loan or anticipated to be incurred at the Property;
(x) Copies of all invoices to tenants for operating
expenses, taxes, insurance and other "pass-throughs"
for the period January 1, 1996 through December 31,
1997 and a schedule of monthly billings and
collections for the period January 1, 1997 through
January 31, 1998;
(xi) Any and all documents, studies and reports in
Seller's possession relating to any proposed further
development of the Property;
9
<PAGE>
(xii) Copies of bills for all real estate taxes and
assessments of the Property for the eighteen (18)
month period prior to the date hereof;
(xiii) To the extent they are in Seller's possession or
control, copies of all statements of gross sales for
any tenants required to pay percentage rent and for
all tenants who provide such information to Seller
for the past three (3) calendar years;
(xiv) To the extent they are in Seller's possession or
control, a list of all written tenant complaints and
work orders for the previous twelve (12) months;
(xv) True, complete and correct copies of the Loan
Documents; and
(xvi) A true, correct and complete copy of the Com/Energy
Research Park Realty Lease.
(b) Commencing on the date hereof, Buyer shall have the right to
perform and conduct such examinations and investigations of the Property as
Buyer may desire, which may include, without limitation, examination of all
structural and mechanical aspects thereof, review of any and all
documentation with respect to the Property including without limitation its
income and expenses, all Leases and tenant files, records of repairs and
capital improvements, examination of the title to the Property, conducting
tests to determine the presence or absence of hazardous waste, asbestos, lead
paint, radon and other similar materials and substances, reviewing a current
as-built survey thereof, and determining the compliance of the Property with
all applicable laws, rules, codes and regulations, and determining whether,
and the extent to which, additional improvements may be constructed on the
Real Property. In connection with such examination, Seller shall make
available (at reasonable times and places) for Buyer's review Seller's books
and records relating to the Property. If the expiration of the Due Diligence
Period shall fall on Saturday, Sunday or holiday, the Due Diligence Period
shall automatically be extended to the next business day. Notwithstanding
anything herein to the contrary, nothing herein shall authorize Buyer, nor
shall Buyer be permitted to conduct, any subsurface or groundwater
environmental testing on or relating to the Property without Seller's prior
written consent, which consent may be withheld or denied for any or no reason.
(c) The "Due Diligence Period" shall mean the twenty-one (21) day
period commencing on March 2, 1998 and ending on March 23, 1998 at 5:00 p.m.;
provided, however, that Buyer may at its sole election by written notice
delivered to Seller on or before March 23, 1998 at 5:00 pm extend the Due
Diligence Period until April 14, 1998, provided that simultaneous with the
delivery of such notice, Buyer delivers an additional $1,000,000 to Escrow
Agent to be added to, and thereafter included in the "Deposit."
Notwithstanding
10
<PAGE>
anything to the contrary contained in this Contract, Seller acknowledges the
Buyer shall have the right in its sole and absolute discretion, either based
upon its disapproval of any of the information it receives, for any other
reason whatsoever or for no reason, to terminate this Contract by written
notice delivered to Seller on or before March 23, 1998, or if the Due
Diligence Period is extended pursuant to the prior sentence, April 14, 1998.
In the event Buyer notifies Seller prior to the expiration of the Due
Diligence Period that it elects to terminate this Contract, this Contract
shall IPSO FACTO be deemed to have been terminated, in which event the
Deposit, shall be returned to Buyer forthwith and all obligations (other than
the obligations of Buyer under Article 6(d), Article 6(g), and Article 27(a)
of the parties hereto shall cease and this Contract shall be terminated and
the parties shall be without further recourse or remedy hereunder.
(d) Seller shall, upon reasonable notice and at reasonable times,
make the Property available to Buyer and its agents, consultants and
engineers for such inspections and tests as Buyer deems appropriate,
including for Buyer's engineering inspection(s), environmental compliance
inspections (but excluding Phase II hazardous materials inspections), site
evaluations, and such other inspections and tests as Buyer deems appropriate.
Buyer hereby agrees to indemnify and hold Seller harmless from and against
any and all loss, cost or damage to the Property (but not any loss or
diminution in value arising from any condition discovered by Buyer) arising
out of damage to persons or property resulting from actions taken by Buyer or
its agents, engineers or consultants. Buyer shall promptly repair all damage
to the Property arising from any such inspections or tests and shall restore
the Property to the same condition existing immediately prior to such
inspections and tests. In performing any such inspections or tests, Buyer
shall not unreasonably interfere with the activities on the Property of any
tenant under the Leases. The indemnification, repair and restoration
obligations of Buyer under this Article 6(d) shall survive the termination of
this Agreement.
(e) Buyer shall obtain each of the following at its own cost and
expense on or before the expiration of the Due Diligence Period: (i) a
current ALTA Survey of the Property (the "Survey") certified to Seller, Buyer
and Commonwealth Land Title Insurance Company or First American Title
Insurance Company (the "Title Company"); and (ii) a title insurance
commitment (or specimen policy) for the Property issued by the Title Company
(the "Title Commitment"), containing such endorsements, affirmative coverages
and reinsurance agreements as Buyer shall require, and specifying the Title
Company's requirements relating to the issuance of such title policy (the
"Title Requirements"). On or before the expiration of the Due Diligence
Period, Buyer shall give Seller notice ("Buyer's Title Notice") of Buyer's
disapproval of any of the title exceptions contained in the Title Commitment
(or of any matter disclosed on the Survey) and specifying those Title
Requirements, if any, contained in the Title Commitment which are to be
performed by or on behalf of Seller. Seller, by written notice to Buyer
("Seller's Title Notice") given within five (5) business days of receipt of
Buyer's Title Notice, shall notify Buyer of the Title Requirements and other
title objections which Seller agrees to use its reasonably efforts to satisfy
or cure. If Seller does not agree to cure or satisfy
11
<PAGE>
all such matters identified in Buyer's Title Notice, Buyer may terminate this
Contract by written notice to Seller given within three (3) business days of
receipt of Seller's Title Notice or waive any matter Seller has not agreed to
use its reasonable efforts to cure or satisfy. If Seller does not respond to
Buyer's Title Notice as provided above, Seller shall be deemed not to have
agreed to satisfy or cure the matters set forth therein. Buyer shall be
deemed to have accepted those matters appearing as exceptions in Buyer's
Title Commitment and those matters appearing on the Survey to which Buyer has
not objected in Buyer's Title Notice (or which Buyer has waived), and each
such matter shall be deemed a "Permitted Title Exception". Likewise, nothing
herein shall obligate Seller to deliver the Property to Buyer at the Closing
free and clear of the encumbrances, restrictions, easements and other matters
identified on the existing owner's title insurance policies of Seller's
Affiliates identified on EXHIBIT S attached hereto and incorporated herein by
reference. Each of such encumbrances, easements, restrictions and matters
being hereinafter also included as a "Permitted Title Exception." In the
event this Contract is terminated under this Section 6(e), all obligations,
liabilities and rights of the parties under this Contract shall terminate
(other than Buyer's obligations under Article 6(d), Article 6(g) and Article
27 hereof, which shall remain in effect), and the Deposit shall be returned
to Buyer. If Seller has elected to cure any matter or to satisfy any Title
Requirement, such matter shall be cured or satisfied by Seller prior to the
Closing Date, and Buyer shall be given a reasonable opportunity to verify
that such matter has been cured or satisfied to Buyer's reasonable
satisfaction. Notwithstanding the foregoing, Seller shall cause to be
released any mortgages or other voluntary encumbrances which Seller has
caused to be recorded against the Property (except for the Loan Documents).
(f) Except for the representations and warranties expressly
contained in Article 12 herein, Buyer acknowledges and agrees that Buyer is
acquiring the Property strictly on an "as is", "where is" and "with all
defects" basis and without representation or warranty, express, implied or
statutory, of any kind, including, without limitation, representation or
warranty as to title, condition (structural, mechanical or otherwise),
construction, development, income, compliance with law, habitability,
tenancies, merchantability or fitness for any purpose, all of which are
hereby disclaimed and which Buyer hereby waives. By accepting and recording
the Deed, Buyer hereby releases and forever discharges Seller, Seller's
Affiliates, and their partners, beneficial owners, officers, directors,
employees and agents from any and all claims, acts, debts, demands, actions,
causes of action, suits, sums of money, guaranties, bonds, covenants,
contracts, accounts, agreements, promises, representations, restitutions,
omissions, variances, damages, obligations, costs, response actions, fees
(including, without limitation, attorneys, consultants and experts fees) and
liabilities of every name and nature whatsoever, both at law and in equity
(collectively, "Claims"), which Buyer and its successors and assigns may now
or hereafter have against Seller, Seller's Affiliates or their partners,
beneficial owners, officers, directors, employees or agents, arising in
connection with any and all liabilities or obligations relating to
environmental matters, (including, without limitation, all liabilities and
obligations relating to Hazardous Materials located at, on, in or under the
Property or migrating from the Property), regardless of whether such
Hazardous Materials are
12
<PAGE>
located on, under or in the Property prior to, or after the date hereof. In
addition, Buyer and its successors and assigns covenant and agree and hereby
release, defend, indemnify and hold harmless Seller, Seller's Affiliates and
their partners, beneficial owners, officers, directors, employees and agents
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses of whatever kind or nature, known or
unknown, existing and future, contingent or otherwise, including any action
or proceeding, brought or threatened, or ordered by governmental authorities,
relating to any Hazardous Materials which may be placed, located or released
on the Property after the date hereof. Notwithstanding anything herein to the
contrary, Buyer's indemnity set forth in the immediately preceding sentence
shall not require Buyer, or its successors or assigns, to indemnify and hold
harmless Seller, Seller's Affiliates, or their partners, beneficial owners,
officers, directors, employees or agents from Claims arising out of or
related to any lawsuit commenced against Seller, Seller's Affiliates or their
partners, beneficial owners, officers, directors, employees or agents by a
third party (including, without limitation, any government agency) which
lawsuit is based on the existence of any Hazardous Materials located at or
migrating from the Premises on or before the Closing Date. For the purposes
hereof, the following terms shall have the meanings set forth below:
(i) the term "Environmental Laws" means all federal, state, or
local laws, rules or regulations (whether now existing or
hereafter enacted or promulgated) and any judicial or
administrative interpretation thereof, including any
judicial or administrative orders or judgements, relating to
the protection of human health, safety and the environment;
(ii) the term "Hazardous Materials" includes any substance,
chemical, compound, product, solid, gas, liquid, waste,
byproduct, pollutant, contaminant or material which is
hazardous, toxic, ignitable, corrosive, carcinogenic or
otherwise dangerous to human, plant or animal life or the
environment or which are defined, determined or identified
as such in any Environmental Laws or which are regulated or
subject to clean-up authority under any Environmental Laws,
including, but not limited to materials defined as (A)
"hazardous waste" under the Federal Resource Conservation
and Recovery Act (B) "hazardous substances" under the
Federal Comprehensive Environmental Response, Compensation
and Liability Act; (C) "pollutants" under the Federal Clean
Water Act; (D) "toxic substances" under the Toxic Substances
Control Act; and (E) "oil or hazardous materials" under
state law, including, without limitation, M.G.L. ch. 21E and
the Massachusetts Contingency Plan (310 C.M.R. 40.0000).
(g) In the event that Buyer elects to terminate this Contract as
provided in Article 6, then Buyer shall promptly deliver to Seller all
written reports, surveys, title commitments or
13
<PAGE>
other materials, prepared by third parties for Buyer relating to the Property
and in connection therewith (excluding any proprietary development or
marketing materials), Buyer hereby assigns, without representation or
recourse, all of Buyer's right, title and interest in and to such reports,
surveys, commitments and matters.
ARTICLE 7. CONDITIONS TO CLOSING:
Without limiting any other conditions to Buyer's obligations to
close set forth in this Contract, the obligations of Buyer under this
Contract are subject to the satisfaction at the time of Closing of each of
the following conditions (any of which may be waived in whole or in part by
Buyer at or prior to Closing):
(i) The Leases and the Com/Energy Research Park Realty Lease
shall be in full force and effect with no defaults
thereunder, with the exception of minor defaults under
Leases (or rental defaults which have continued for a period
of less than thirty (30) days at the time of Closing);
(ii) All of the representations by Seller set forth in this
Contract or any Exhibit attached hereto shall be true and
correct in all material respects. With respect to any
representation made to the best of Seller's knowledge, the
condition to Closing shall be not only that such
representation still be true to the best of Seller's
knowledge, but that the specific fact or condition that was
the subject of the representation also be true. Seller shall
not be deemed in violation hereof if there has been a
violation of law or litigation has been commenced, which
violation or litigation do not materially and adversely
affect the Property or operation thereof in any material
respect.
(iii) Seller shall have performed, observed, and complied in all
material respects with all covenants and agreements required
by this Contract to be performed by Seller at or prior to
Closing;
(iv) There shall not have been instituted and be pending any
litigation (1) brought by any tenants alleging defaults by
Seller under any Leases of over 2,500 square feet at the
Property, (2) alleging that the Property may not be used as
commercial office, laboratory, theatre and retail buildings,
(3) alleging material defects (defects which cost more than
$50,000 to remedy) in the physical condition of the
Improvements or (4) that would impair, in any material
respect, Seller's right to sell the Property in accordance
with the terms of this Contract;
14
<PAGE>
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of (i) our report dated June 3, 1998, with respect to the
consolidated financial statements of Beacon Capital Partners, Inc., (ii) our
report dated May 22, 1998, with respect to the combined historical summary of
gross income and direct operating expenses of The Athenaeum Portfolio, and
(iii) our report dated May 22, 1998, with respect to the historical summary
of gross income and direct operating expenses of Technology Square and The
Draper Building, all included in the Registration Statement (Form S-11) and
related Prospectus of Beacon Capital Partners, Inc. for the registration of
20,394,843 shares of its common stock.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
June 10, 1998
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